RI faces no financial obligation at WTO car row

JAKARTA (JP): Indonesia will have no financial obligation toward complainants of the national car policy if, at this stage, the World Trade Organization's (WTO) dispute settlement panel rules in favor of the complainants, a minister says.

Minister of Industry and Trade Tunky Ariwibowo said yesterday that if the WTO panel decided to rule in favor of Japan, the European Union and the United States -- all of whom have lodged complaints against Indonesia's national car policy -- Indonesia would have only to adjust its rules in line with those of the WTO.

"At this stage there will be no financial obligation as a consequence of the panel's decision," he told a hearing of members of House Commission VI for industry, mining and manpower.

But Tunky said that if Indonesia failed to abide by the panel's ruling within 12 months to 15 months from the time it was made, a new complaint could be lodged.

This would require an entirely new dispute settlement process in which complainants might demand some form of financial compensation, he said.

"This means that if we loose, we will have until around the middle of 1999 to adjust our regulations (on the national car policy) with WTO laws," he said.

Most of the legislators yesterday asked about the national car policy.

Japan, the EU and the U.S. have argued that the national car policy -- aimed at boosting Indonesia's domestic car industry but so far only aiding a firm headed by one of President Soeharto's sons -- ran against several WTO accords.

All three have requested a WTO dispute settlement panel be created to resolve the issue.

Tunky said the three panel members had been selected and approved by the parties in dispute but this has yet to be announced to the press. An official announcement would be made next week, he said.

Indonesia denies that import and luxury tax concessions enjoyed by PT Timor Putra Nasional, which currently produces its Timor sedan in South Korea at a plant of South Korean Kia Motors Corp, breach WTO rules.

According to rules of the WTO's dispute settlement body, a panel decision may require a party in breach of WTO trade regulations to either comply with the panel's recommendations or provide compensation to the complainant, if -- after a reasonable period of time -- the party in breach does not comply.

If the party in breach fails to comply and refuses to provide compensation, the complainant may request the dispute settlement body to authorize retaliatory action that could hurt the trade of the former party.

This means the complainant may, for instance, be authorized by the dispute settlement body to raise tariffs on products which it imports from the party in breach. The trade in such products should be approximately equal to that affected by the measures complained about.

Tunky said he was unsure how much state revenue was lost due to the import duty and luxury tax exemptions enjoyed by Timor.

"I have to ask the directorate generals of customs and excise and of taxes about this," he said.

Legislator Iskandar Mandji from the Golkar faction said that uncollectable state revenue in the automotive industry reached Rp 275 billion (US$112.70 million). He did not say how much was a result of the Timor exemptions.

Timor has sold 16,000 cars since it was released on the market last October.

The government has stipulated that by definition, the national car should have a local content of 20 percent by the end of the first year of production, 40 percent by the second and 60 percent by the third. (pwn)