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)