Local component firms too weak to back Timor car
Local component firms too weak to back Timor car
JAKARTA (JP): Without further incentives, PT Timor Putra
Nasional, the only car firm to get tax and tariff breaks under
the new national car program, will face a serious challenge to
meet local content requirements set by the government, an
industry executive said yesterday.
Chairman of the Indonesian Automotive Industry Association
Herman Z. Latif told a seminar that the existing local auto-
supporting industries are very weak and will struggle to meet the
demands of vehicle producers.
Additionally, Herman said, most locally-produced components
are designed for the production of commercial vehicles, not for
passenger cars.
"If it (Timor Putra) wants to use the existing local component
firms, they will need further investments to adjust their
production facilities to its necessities," Herman told the
seminar, organized by the Institute for the Studies on Free Flow
of Information.
The government announced last month that it would provide
tariff and tax breaks to Timor Putra, owned by President
Soeharto's youngest son Hutomo Mandala Putra, to develop a sedan
under the Indonesian brand name "Timor" in cooperation with Kia
Motors Corp. of South Korea.
The program gives Timor Putra three years to develop a
national car, which has to contain local components of 20 percent
by the end of the first year of operation, 40 percent by the end
of the second year and 60 percent by the end of the third year.
Minister of Industry and Trade Tunky Ariwibowo said recently
that the government will penalize Timor Putra by requiring it to
pay the exempted duties and luxury sales tax if it fails to meet
the requirements on local content.
The new policy has drawn criticism from various parties,
including existing car assemblers, because they realize that the
new policy will hit them hardest.
Herman contended, however, that it will not be easy for Timor
Putra to reach the target of 20 percent local content by the end
of the first year. Even if all the existing local producers of
components are involved, they will contribute not more than 13
percent of all components.
"It will be far more difficult for Timor Putra to reach the
40-percent local content requirement in the second year," Herman
said.
Supporting Herman's argument, industry analyst Soehari Sargo
said that the government needs to give further incentives for the
expansion of supporting industries to support the development of
the Timor car.
"I hope that the government's policy on the national car will
be followed up by a number of new rulings to encourage the
development of vendor industries," Soehari said.
Herman noted that developing supporting industries is
imperative if Indonesia wants to develop its own national car. In
most other countries, he said, supporting industries contribute
60 to 70 percent of components to their car production.
"From a series of policies already introduced by the
government, I can see a thread there that the government wants to
move our automotive industry from the assembling stage to the
manufacturing level." Herman said.
"However, I see a missing link. When we move from assembling
to manufacturing, we are not building a strong basis in the
supporting industries," he continued.
He acknowledged that the country's automotive industry has
been protected for so long that the industry cannot yet progress
to the manufacturing level. (rid)