RI brushes off threats of WTO sanctions

RI brushes off threats of WTO sanctions

JAKARTA (JP): An Indonesian economist says that a new
government policy on the automotive industry cannot be used by
Japan as grounds for complaining to the World Trade Organization.

Sjahrir, the chairman of the Institute for Economics and
Financial Research and a lecturer at the University of
Indonesia's School of Economics, said there is a reasonable
justification for the government's recently-announced policy,
which exempts wholly-owned Indonesian companies from paying
duties on imported components for the production of cars with
domestic brand names. The sales of such cars will also be
exempted from luxury tax.

"People will ask why, after some 20 years, cars assembled in
Indonesia have low proportions of local content. Is it because we
don't have the skills, or is it because the principal companies
won't allow technology transfer to take place?" he said.

Sjahrir was responding to a report in the Monday edition of
the Asia Wall Street Journal which stated that the Japanese
government is presently investigating Indonesia's new "national
car" program to determine if it conflicts with international
rules on fair trade. Japan is also considering a complaint to the
WTO to address its grievance.

The government's new policy, under Presidential Instruction
No. 2/1996 issued last month, grants import duty and luxury sales
tax exemptions to cars which use Indonesian brand names and are
produced by Indonesian companies and developed with domestic
technology, engineering and designs.

PT Timor Putra National -- owned by President Soeharto's
youngest son, Hutomo (Tommy) Mandala Putra -- and its production
of Timor-brand sedans is, according to the government, the only
company in the country that currently meets the policy's terms.

Components for the Timor are imported from South Korea's Kia
Motor company.

Minister of Industry and Trade Tunky Ariwibowo said yesterday
that he would soon give an official explanation of the
government's new policy and Indonesia's plans to expand its
automotive industry to the Japanese ambassador in Jakarta.

Tunky, who was speaking to reporters after installing 277
third-echelon officials at his ministry, said he had heard of the
report only yesterday.

He refused to address accusations of the new policy being a
hidden form of protection which could lead to a monopolized
market.

"The government will explain its overall economic policies,"
he said.

Sjahrir said that Indonesia's position in the WTO is strong
and that Japan would not retaliate by pulling its investments out
of Indonesia.

Sjahrir said it is still debatable whether the new policy is
in line with the government's plan to reduce Indonesia's rising
current account deficit, which is expected to reach close to US$8
billion in the current 1995/1996 fiscal year.

"The Timor sedan requires more imports and this will lead to a
higher current account deficit," he said. "The low prices of the
sedans are not because it is more efficient, but because it is
exempt from taxes," Sjahrir pointed out. (kod/pwn)