RI asked to review car policy

RI asked to review car policy

JAKARTA (JP): The U.S. automotive industry joined Japan and
the European Commission in pressing the Indonesian government to
review its controversial national car policy which they all
consider contradictory to World Trade Organization agreements.

The government, however, has shown no sign of backing down,
with Minister of Industry and Trade Tunky Ariwibowo affirming
yesterday the government's commitment to make the program a
success.

"The policy has already been taken...and we will make it a
success," Tunky announced after meeting with Andrew H. Card, Jr.,
president and chief executive officer of the American Automobile
Manufacturers Association.

The American association groups General Motors Corporation
(GM), Ford Motor Company and Chrysler Corporation, all of which
have an increasing presence in Indonesia.

In a press conference earlier yesterday, Card called for the
Indonesian government to examine its planned national car
program, which he said contradicts free market principles.

"Indonesia has an exemplary record of deregulation and opening
markets," Card said. "Unfortunately, the exemplary record has
been marred by a program that does not reflect free market
principles."

Indonesia announced in February that carmakers wholly owned by
Indonesians, who used Indonesian technology and met local content
requirements, were eligible for tax and tariff breaks.

It then announced that the only company that could meet the
requirements was PT Timor Putra Nasional, controlled by President
Soeharto's youngest son Hutomo Mandala Putra. The company, a
newcomer to the industry, has agreed to develop the national car,
to be called Timor, jointly with Kia Motors Corp. of South Korea.

Card, who served as U.S. secretary of transportation under
George Bush, warned the policy could affect the flow of
investment from the United States and other countries into
Indonesia. He said it might even affect investment flows to other
members of the Association of Southeast Asian Nations (ASEAN).

ASEAN is comprised of Brunei, Indonesia, Malaysia, the
Philippines, Singapore, Thailand and Vietnam.

"It causes people to second guess investment strategy in
Indonesia, and quite possibly the region," Card said.

He said the flawed nature of Indonesia's national car policy
has made GM review plans to expand local production of its right-
hand drive Chevrolet Blazer truck.

Indonesia hosts GM's only right-hand drive Cherokee Blazer
truck production plant.

Modify

Late last month, a senior Ford executive said in Bangkok that
his company will examine and perhaps scrap plans to build a plant
in Indonesia because of the policy.

"If those policies stay, we'll have to modify our plans in
Indonesia," said David Snyder, president of Ford's Thailand
Regional Office.

Card, however, reiterated that GM, Ford and Chrysler will not
totally abandon the Indonesian auto market just because of the
new auto policy.

"I don't want to give impression that GM, Ford and Chrysler
would abandon the Indonesian market. They are in this market and
will be in this market. The question is to what degree," Card
said yesterday, adding it depends if Indonesia becomes a
manufacturing base for its home market and the region.

Card warned that it would be unfortunate if Indonesia
continued to ignore foreign demands as "the world has been
speaking with a very loud and firm voice". Industrial countries
agree that Indonesia's national car program collides with WTO
provisions.

Japan's auto industry and government, as well as the European
Commission, have expressed concern over the policy they consider
a breach of WTO rules.

The Japan Automobile Manufacturers Association, whose makes
dominate the Indonesian market by more than 90 percent, has
threatened to challenge the policy at the WTO.

Neither the Japanese government nor the European Commission,
however, have stated they will bring the issue to the WTO.

Tunky has stressed the Indonesian government believes its
national car policy conforms to WTO provisions. He also said that
the government studied WTO provisions closely before announcing
the policy.

Tunky reiterated yesterday that the government will not
negotiate with Japan or any other country over its plan to
manufacture the Timor. Instead, it will ask for a stronger
commitment from Kia Motors to make the project a success.

Card, however, criticized Kia's appointment, saying that Kia
"has no track record of transferring technology."

Meanwhile, Kia's chairman Sun Hong-kim said in Seoul last week
that technology transfers from Kia to Timor Putra would depend
very much on the seriousness of the latter in developing the
national car.

He promised that Kia would fully support the technology
transfer. As proof, Kia will train 1,000 workers this year to be
employed by Timor Putra.

He added that 30 independent vendors, which currently supply
components to Kia, will visit Indonesia next month to sound out
investment possibilities.

Yong Kun-chong, an adviser at Kia, noted that the company
would ship 4,000 semi-assembled sedans to Timor Putra every
month, starting next month, until its joint venture assembling
plant in Cikampek, West Java, is ready to start production in
1998.

A director of Timor Putra, Suparto Soejatmo, said the company
had already received orders for 33,000 Timor cars. The vehicle
will sell for Rp 35 million (US$15,570), half the price of an
average Japanese car.

Tunky, however, noted yesterday that the government has not
approved Timor Putra's plan to import semi-assembled sedans. He
said his office is still studying the company's progress report
and proposal. (rid)