Pressure builds on RI's auto policy

Pressure builds on RI's auto policy

By Russell Williamson

THE pressure to reform Indonesia's controversial automotive
policy continues to build, with the European Commission vice
president, Leon Brittan, urging President Soeharto to bring the
policy into line with World Trade Organization (WTO) rules.

According to a report from AFP, Leon said he had personally
told the President that Europe did not believe the policy --
which favors PT Timor Putra Nasional with substantial tax
concessions -- was in line with the WTO trade agreement.

PT Timor -- which is headed by President Soeharto's youngest
son, Hutomo Mandala Putra -- has been given permission to import
completely-built-up and completely-knocked-down vehicles from its
partner, Kia Motors of South Korea, free of all import tax.

Speaking at a World Economic Forum in Hong Kong last week,
Leon said: "We very much hope that a resolution of the matter can
be found, whereby Indonesia brings itself into line with that
agreement."

The call by Leon follows complaints from Europe, Japan and the
United States which were lodged with the WTO last month.

However, Indonesia's Minister of Trade and Industry Tunky
Ariwibowo told the same conference that there were provisions
within the WTO rules to have time "to adjust part of our economic
policy to catch up with the developed world."

But while complaints and accusations of unfairness surround
the policy both on the international and domestic front, the
question remains as to whether the WTO can have any real effect
in changing Indonesia's automotive policy.

According to a spokesman from the WTO secretariat, Indonesia
is legally bound by the decisions of the WTO and the
organization's dispute settlement body (DSB).

Under the rules and procedures governing the settlement of
disputes, the DSB "has the sole authority to establish panels,
adopt panel and appellate reports, maintain surveillance of
implementation of rulings and recommendations, and authorize
retaliatory measures in cases of nonimplementation of
recommendations."

"If the losing country does not change its illegal measure or
negotiate compensation, then the winning country can request the
DSB for retaliatory measures," the spokesman said.

"It will assess how much trade damage the winning country is
suffering as a result of that illegal measure and suspend an
equal amount worth of concessions which it had negotiated," he
said.

However, the spokesman said the strict procedures which needed
to be followed could mean that any resolution to a dispute could
take up to 18 months.

While the most desirable outcome for the complainants in the
Timor-car case would be a reversal of the current policy, or
applying the rules equally among all the carmakers, in Indonesia,
this may be cause for concern on a political front.

In order to "save face", the spokesman said there were other
measures which could be ordered to reduce the political
implications of any WTO ruling.

"Sometimes you may get a case where it goes through all the
processes, the panel and perhaps even the appeal body upholds the
panel report, but the guilty country, perhaps for political
reasons, can't change that illegal measure," he said.

"So, what they do then is the guilty country will negotiate
for compensation," the spokesman said.

With Indonesia a full member of the WTO and subsequently bound
by the agreements which came out of the Uruguay Round of trade
talks in 1993 and 1994, it can only be a matter of time before
the automotive policy is amended.

The hope is that that amendment will be one which allows all
car companies to operate on an even playing field, which would
stimulate the automotive industry back into action and ultimately
provide consumers with a wider range of cheaper cars.