Minister again defends national automotive policy

Minister again defends national automotive policy

JAKARTA (JP): Minister of Trade and Industry Tunky Ariwibowo has again defended the controversial "national car" policy, saying that the pioneer status given to PT Timor Putra National is a breakthrough for the future of the automotive industry.

Tunky said that the pioneer status, which will provide special tax incentives to Timor Putra, was introduced to revitalize the stagnant domestic automotive industry.

"The automotive industry has been developed for more than 20 years here. But as you see, the progress has not been satisfactory," he said in replying to a question raised at The Indonesia Summit yesterday.

He said that certain local companies might have met the criteria to receive the pioneer status: "but for the time being we would see only one company.

"This policy will remain for three years because we want to see the progress of this company (Timor Putra), how it is responding to this policy and how it is making progress," he said.

Tunky said that the three-year special treatment is also needed to find out if there any problems arise during the implantation of the new car policy.

In February, the government granted pioneer status to Timor Putra, owned by President Soeharto's youngest son Hutomo Mandala Putra, to produce the so-called national car with Kia Motors of South Korea.

The pioneer status would allow Timor Putra to receive a series of tax breaks including the exemption from import duties and the luxury tax sales. The tax incentives will enable the company to sell its cars at half the price of Japanese cars of the same class (with 1,600 cc engine).

Sedans are normally subject to 100 to 200 percent import duties and luxury tax rates of 25 to 35 percent.

According to the new automotive policy, local components used by automobile companies which have been granted pioneer status must be at 20 percent of the whole car by the end of the first year of production, 40 percent by the end of the second year and 60 percent by the end of the third years.

The Japanese auto industry has urged Indonesia to reconsider its policy on the national car project, describing it as an "international concern". (hen)