Minister sticks to penalty decision imposed on Timor

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)