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)