New car policy an aid to investment

New car policy an aid to investment

JAKARTA (JP): A senior official yesterday defended the
government's controversial national car policy, saying that it
will not have an adverse effect on the flow of foreign investment
into the country.

The Investment Coordinating Board (BKPM)'s deputy chairman
for industry assessment and licensing, Wardijasa, said that
foreign investment approvals have actually increased since the
policy was introduced in February.

"Our data shows that foreign investment approvals are on the
increase," Wardijasa said after a ceremony for the signing of a
memorandum of understanding on investment cooperation between
BKPM and small and medium-scale South Korean industries.

According to BKPM data, the government approved US$11.2
billion worth of foreign investment projects during the first
three months of this year. Last year saw $39.9 billion worth of
foreign investment projects approved.

Under its national car policy, the government will provide
tariff and tax breaks to PT Timor Putra Nasional. The company,
owned by President Soeharto's youngest son Hutomo Mandala Putra,
will develop a national car under the Indonesian brand name
"Timor" in cooperation with Kia Motors Corp. of South Korea.

Industry analysts fear that the policy, which they view as
inconsistent with other government policies, will slow the flow
of foreign investment into the country.

According to the Econit economic advisory group, Toyota Motors
of Japan and its Indonesian partner have postponed their plans to
invest US$500 million here to boost their vehicle production
capacity. The Indomobil Group, the second largest car assembler
in Indonesia, has also canceled its plan to invest some $100
million.

A number of local car assemblers have expressed their interest
in developing "national" cars to benefit from the tariff and tax
exemptions. They include the Indomobil, Bimantara and Buana
groups.

However, the government has decided that Timor Putra will be
the only firm to get the exemptions, which it will enjoy for a
duration of three years.

Wardijasa said that none of the companies interested in
developing a national car have submitted proposals to his office.

"If there is a new proposal we will study it for sure,"
Wardijasa said. "However, I think it is better to allow this one
(Timor Putra) to grow and develop first."

He said that the new policy, which links the tax and tariff
facilities to local content requirements, will attract more
investment into the automotive component industry.

The government requires Timor Putra to develop its car with a
local component content of 20 percent by the end of the first
year of operation, 40 percent by the end of the second year and
60 percent by the end of the third year.

Wardijasa said that component manufacturers from a number of
countries, including South Korea, Taiwan, Japan, Germany and the
United States, already have made investment commitments.

He declined to mention the value of their investment plans,
saying only that his office "has approved many new investment
projects to produce automotive components".

"When we have our weekly meetings on Tuesdays, we always hear
reports on new component investment projects," Wardijasa said.
(rid)