RI faces no financial obligation at WTO car row

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)