National car program to use S. Korean parts

JAKARTA (JP): South Korean component suppliers are in town to offer support for Indonesia's "national car" program, but their local partners, who have also pledged to back the program, say they had expected vendors with more advanced technology.

A. Syafiun, chairman of the Federation of Automotive Part Makers, said yesterday he was "disappointed" that the group of Korean component suppliers who met with Federation members and government officials were makers of products already manufactured in Indonesia.

He said, however, that a second group of Korean suppliers, arriving in the near future, would consist of producers of more sophisticated automotive parts which Indonesian manufacturers are still unable to make.

"Cooperation between Korean and Indonesian component suppliers for the national car is aimed at a transfer of technology, so we expect them to bring and transfer to us the technology we have not yet mastered," Syafiun told reporters.

He said many of the vendors in yesterday's group were producers of foot padding, spark plugs and other components which Federation members already produce.

Sixteen South Korean suppliers met with Federation members and were briefed on the "national car" program by officials from the Ministry of Industry and the Trade and the Investment Coordinating Board and by executives from the surveyor firm, PT Sucofindo, and the banking industry.

The meeting sessions were closed to the press.

According to Syafiun, the component vendors were suppliers of the Korea-based automobile company, Kia Motors Corp.

Kia Motors is a shareholder in PT Kia Timor Motor, a company established by PT Timor Putra Nasional -- controlled by President Soeharto's youngest son, Hutomo Mandala Putra -- to manufacture the so-called national car.

Under the program, the government granted Timor Putra the sole right to produce Kia's Sephia sedans -- locally called "Timor" -- with the help of a series of tax breaks, provided that the car's local component content reaches 20 percent by the end of the first year, 40 percent by the end of the second year and 60 percent by the end of the third year.

Syafiun said the technology transfer could either be done by training, factory relocation or new investments in Indonesia.

He refused to elaborate, saying that the terms of cooperation are still being discussed.

In the future, the Federation's members would become the suppliers for Timor Putra's component-manufacturing and procurement unit, PT Timor Industri Komponen, he said.

Japan, the European Commission and the United States have all criticized the car program and accused it of violating the rules of the World Trade Organization (WTO).

After Timor Putra launched its South Korean-made "Timor" sedan earlier this month, Japan threatened to bring the case to the WTO.

Chairman of the Indonesian Automotive Industry Association Herman Z. Latif, when asked to comment on the WTO issue, said it was a government-to-government matter. He refused to make any further comment.

Minister of Investment Sanyoto Sastrowardoyo said last week that his office has approved 22 foreign investors for the automotive component industry. Apart from that, he said, another 53 South Korean investors have pledged to support the car program.

He said the South Korean firms would not only produce parts for the Timor sedan, but would also export their products from Indonesia. (pwn)