Minister sticks to penalty decision imposed on Timor

JAKARTA (JP): Minister of Trade and Industry Rahardi Ramelan on Friday stood by his decision to impose a harsh penalty on controversial carmaker PT Timor Putra Nasional despite the company's efforts to fight back.

Rahardi said on Friday that Timor, controlled by former president Soeharto's youngest son Hutomo Mandala Putra, had clearly violated the 1996 ministerial decree which required the company to meet local content targets.

"Timor might have followed the decree, but it was at least two months behind the targeted deadline," Rahardi told reporters at the ministry.

Timor executives, including spokesman Mochamad Ircham, were not available for comment on Friday but the company said in a media statement the day before that it had thus far abided by the ministry's decree.

The company also demanded the government cancel the penalty.

"We have sent a letter to the Ministry of Trade and Industry to settle the problem regarding its decision to penalize us," company president Moedjiono said in the statement.

Timor also calmed its buyers who had bought the cars at the tax-exempted price, saying the sanction would not be passed on to them.

Rahardi told legislators on Wednesday that Timor had been ordered to repay the import duty and luxury tax exemption it received on all the 39,000 cars imported from South Korea since 1996, both the 25,000 sold and 14,000 still in stock.

Rahardi said the state auditor PT Sucofindo found that Timor had failed to meet the ministry's requirement to conduct counter trade with its ailing Korean partner PT Kia Motors Corporation, and to achieve the local content targets in Timor cars.

Soeharto appointed Timor, controlled by Hutomo, as the only producer of the so-called national car in mid 1996, which exempted the company from paying import duty and luxury sales tax, helping reduce production costs by 60 percent.

The company was supposed to increase its local content by 20 percent annually until it reached 60 percent after the third year of operations, but in the first year it was allowed to import all the cars from Kia free of the import and luxury taxes despite having practically no local content.

The government, under pressure from the International Monetary Fund, removed the facilities in January of this year.

The government also lost a legal dispute earlier this year over the preferential treatment at the World Trade Organization.

Rahardi said on Friday the move to penalize Timor was made in order to settle the many problems currently burdening the government.

"Our burden is not just Timor, we have also so many banks to take care of," he added.

He also implied that the government's measures to help finance Timor might have inflicted troubles on some banks.

Last year the government appointed a consortium of 13 state and private banks to lend $690 million in syndicated loans to finance Timor's manufacturing plant.

Since Soeharto was forced to step down in May, the business empires built by his family and circle of associates with similar preferential treatment had been targeted by the government under severe public pressure. (das)