Kia to resume Timor national car project after June
Kia to resume Timor national car project after June
JAKARTA (JP): The government said on Thursday that South
Korean car manufacturer Kia Motors Corp. would resume the
Indonesian national car project after June, pending the
restructuring of the project's massive debts.
Minister of Trade and Industry Luhut Pandjaitan said that the
South Korean government had expressed its willingness to resume
the project as soon as possible.
"We have agreed to continue the national car project, for
which we will restructure its debts first," Luhut told reporters
following a meeting here with visiting South Korean Trade
Minister Han Duck-soo.
The government appointed PT Timor Putra Nasional (TPN), which
is owned by Hutomo "Tommy" Mandala Putra, the youngest son of
former president Soeharto, to develop the national car project in
1996.
However, the project fell apart at the peak of the economic
crisis in 1998, and TPN now faces debts amounting to over Rp 3
trillion (US$380 million). The company has since been put under
the control of the Indonesian Bank Restructuring Agency (IBRA).
"We expect to have a debt restructuring agreement by late
June," he said, adding that the restructuring process comprised a
financial audit, a legal audit and due diligence.
Luhut further indicated that the government would bail out
TPN's debts under a debt to equity swap. But he declined to
explain further.
According to Luhut, the Indonesian government and Kia will
form a joint venture to resume the project.
"Tommy will have to leave TPN," Luhut concluded.
The Timor car project has been widely criticized by
international car manufacturers for the special treatment it
received from the government.
TPN was exempted from import duty and luxury tax for three
years on the condition that local content reach at least 20
percent in the first year of the program, 40 percent by the end
of the second year and 60 percent by the end of the third year.
The government earlier said it would not provide special
incentives if the national car project is resumed.
Kia, now owned by South Korean car giant Hyundai Motor Co.,
committed to reviving the Timor car project, following a visit by
President Abdurrahman Wahid to its plant last year.
"The South Korean business people have also expressed interest
in investing in electronics, manufacturing, forestry, insurance
and banking sectors," Luhut told journalists later on the day
following a meeting between the delegation and the President.
He said there was an immediate plan to invest some US$75
million to construct a second Nike shoe factory here, which was
expected to be completed by the end of the year.
Luhut said that in the forestry sector, South Korea would help
in the rehabilitation of some 10,000 hectares of tropical rain
forest and assist in the resettlement of nomadic farmers.
He said the South Koreans enterprises would also relocate some
of their production facilities to Indonesia.
"South Korea will also help us in the fishery sector to curb
the theft of our fishery resources," Luhut said.
According to data provided by the Ministry of Trade and
Industry, the balance of trade between Indonesia and South Korea
in 1999 amounted to US$4.65 billion, or a 13.53 percent increase
from the level in 1998. However, it was below the $5.78 billion
in 1997.
Indonesia's exports to South Korea during the year totaled
$3.32 billion, while imports were $1.33 billion.
South Korea is the country's fourth largest export market.
It is also Indonesia's seventh largest foreign investor, with
total approved investment plans of $10.66 billion as of March
2000. (bkm/rei/prb)