National car project to start next March

National car project to start next March

JAKARTA (JP): PT Udatin is gearing up construction of an
assembly plant for the national car, to be called Timor, despite
growing criticism against the controversial car project, a
company executive said here yesterday.

Udatin's president, Fritz H. Eman, said that the assembly
plant's construction, which is now underway, is scheduled for
completion early next year.

"We hope to begin the assembly job next March," he told
newsmen, while acknowledging that the operation of the assembly
plant would be several months behind schedule.

Udatin, a subsidiary of the Udatinda Group, is the assembly
division of PT Timor Putra Nasional, which in February received
an exclusive right to develop the national car.

Timor Putra, controlled by President Soeharto's youngest son
Hutomo Mandala Putra, initially planned to market its car at home
in September.

Eman, who has a 35-percent stake in Timor Putra's
manufacturing unit, PT Kia Timor Motor, said that he was not sure
whether the Timor car could be launched in September, even though
two major automotive producers -- the Astra Group and Indomobil
Group -- agreed to temporarily carry out the assembly jobs.

"But I assure you that we will be able to meet the
government's requirement to manufacture at least 60 percent of
the car components at home by the end of the third year of
operations, even though there is a delay in the assembly plant's
operation," he said.

The government granted a pioneer status in February to Timor
Putra to produce a national car with Kia Motors of South Korea,
an exclusive arrangement that will enable the company to receive
a series of tax breaks, including exemptions of import duties and
luxury taxes.

The tax incentives, which will last for three years, will
enable the company to sell its products at half the price of
Japanese makes of the same class (with a 1,600cc engine).

Timor Putra will commence activities by importing all car
components from Kia Motors.

The car's assembly will be handled by Udatin, while the
manufacturing of engines and other car components will be carried
out by Kia Timor Motor.

Udatin is now constructing an assembly plant in Surabaya, East
Java, with an initial production capacity of 36,000 cars per
annum. The company will invest at least US$50 million in the
assembly project

Kia Timor Motor is also constructing a manufacturing plant in
Cikampek, West Java, with an investment of $260 million. Unlike
Udatin, Kia Timor Motor would focus its operations on the
production of engines and other car components.

Kia Timor Motor is 35-percent-owned by Indauda, Udatin's
sister firm, 35 percent by Timor Putra and 30 percent by Kia
Motors.

Illogical

The exclusive rights and tax breaks given to Timor Putra in
developing the national car has been widely criticized.

Major automobile giants from Japan, the United States and
Europe demanded that the Indonesian government review the
national car project, saying that the exclusive treatment given
to Timor Putra is against the free trade principles set by the
World Trade Organization.

In yesterday's meeting, Eman, who is known as an important
person behind the introduction of the national car project,
branded foreign car manufacturers' criticisms as being illogical.

"It is completely unfair and illogical," he said, referring to
the foreign car makers' criticisms.

Eman said it was quite unfair for the foreign companies to
oppose the national project, given their lack of commitment in
developing the country's automotive industry.

"They have been here for over 20 years, but they have never
used their opportunities to develop a full manufacturing program
as proposed by Timor Putra," he said. "So it is quite illogical
if they are now very critical."

Minister of Industry and Trade Tunky Ariwibowo said recently
the national car policy's launch was a breakthrough for the
future of the country's automotive industry.

He noted that the development of the country's car industry,
which started over 20 years ago, has shown no significant
progress.

The minister did not directly blame the industry's slow
progress on Japanese car manufacturers, which now control more
than 80 percent of the Indonesian automobile market. But analysts
said that the slow growth was partly caused by Japanese
car makers' reluctance to share their technology with their local
partners.

Eman said foreign car makers were not only reluctant to
transfer their technology to their local partners, but also to
expand their investments.

"Their investments are, in fact, too small as compared to
their long presence in the country," he said.

Eman said that the main concern of the foreign car makers is
not the establishment of a reliable domestic car industry, but
reaping maximum benefits from the country's huge market.

"That's why it is very important for Indonesia to make a
breakthrough in its car industry before the WTO's free trade
principles are fully applied in 2003," he said.

Kia Motors announced last week that it would begin exporting
its cars to Timor Putra next month, with an initial shipment of
4,000 units. The Korean cars will be exported in the form of
components. (hen)