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.