National interest is more important, says Tommy

JAKARTA (JP): President Soeharto's youngest son, Hutomo Mandala Putra, said yesterday he fully accepted the government's decision to scrap the tax breaks awarded to his national car project.

"The national interest is more important than the interests of a project," Hutomo, better known as Tommy, said yesterday.

Tommy was briefing reporters hours after Soeharto signed a letter of intent containing Indonesia's agreement to abide by the IMF's strict economic reform program.

The program includes immediate elimination of all special tax, customs and credit privileges for the Timor car, often referred to as the national car.

Despite his positive response, Tommy however hinted that the IMF reforms might have been "politically motivated" as an effort to cleanse the economy of "first family-dominated industries".

"It had previously been agreed that the national car project would await the decision of the World Trade Organization, but maybe, at this time, the government is in desperate need of funds from the IMF and the World Bank, and maybe because it was politically motivated," he said.

But he dismissed suggestions that the reforms would hurt the businesses run by the first family, who control many sectors in the country's economy.

"This is no setback for us, we are not in it just for the money, we do not need to expand businesses if it is not to create jobs," he said.

That Tommy is not afraid to show off his wealth was demonstrated by him arriving at the press conference, held at the main Timor showroom in Jakarta, in a sparkling royal blue Rolls Royce.

Last year, as part of the reform to strengthen the banking industry, the government shut 16 ailing private banks, one of which belonged to Tommy's brother, Bambang Trihatmodjo, and another to Soeharto's half brother, Probosutedjo.

Asked whether he thought that the IMF-supported program was a form of new colonialism, Tommy gave a muddled answer: "You can guess."

Tommy said he was optimistic his automotive company, PT Timor Putra Nasional, would continue operating despite the elimination of the government's incentives.

"Businesses must be ready to endure low and high tides, this does not mean we are finished," he said.

"We are strong enough to continue without facilities and incentives... and ready to face the worst," he said.

The widely disputed Timor car is the sole recipient of import duty and luxury tax exemptions, helping make the production costs 60 percent less than those for other cars in Indonesia.

Under the initial program, the national car project, in cooperation with South Korea's ailing Kia Motors Corp., was to begin full manufacturing when its local manufacturing plant was completed in mid 1999.

Assembler

Tommy said the company would continue to import fully- assembled cars from South Korea, but it might end up assembling the Korean-made car and become the car distributor here, he said.

He said the removal of the tax breaks would cause an increase in Timor car prices but did not know when the company would set the new prices.

In the meantime, sales activity would be suspended until the new prices were applied, he said.

Tommy said the company would try to continue the construction of the car-component manufacturing plant although this was not guaranteed if the company could not receive funding from the government.

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

Automotive analyst Suhari Sargo said yesterday the incentive elimination would force Timor to compete by itself in the free market without any government backing.

"Timor will have to review its business concept including revising its market target and postponing its investment plans to establish a manufacturing unit," Suhari said.

He predicted that without the government facilities, Timor's sales would shrink from 2,000 vehicles per month to around 400 per month, a level achieved by its competitors, such as Bimantara and Daewoo.

Tommy said there were about 15,000 Timor cars still in stock. (das/08)