RI must take its car opportunity: Kia

By Riyadi

SEOUL (JP): Indonesia's national car program, which involves South Korea's Kia Motors Corporation, has drawn wide criticism both domestically and internationally. The government, however, is determined to continue with the program at all costs.

Kia's chairman, Kim Sun-hong, agrees with the Indonesian government, saying that the government is in the right direction in pursuing the national car program.

Compared with Korea, India and Malaysia, Indonesia is quite late in launching its national car program. However, if not now, it will miss the opportunity, Kim said.

"If they miss the opportunity, Indonesia probably won't have any further opportunity to manufacture its own cars in Indonesia," Kim said in an interview with The Jakarta Post here earlier this week.

He said Indonesia is among 60 developing nations which have very strong desires to develop their own automobiles. Indonesia, the world's fourth largest country in terms of population, has great potential to develop its auto industry.

"We have long established some relationships in Indonesia. We want to transfer the technology to you. We have experienced the difficulty of securing technology from developed nations. Based on that, we will somehow contribute to Indonesia," Kim said.

The opportunity Kia offers to Indonesia is a rare one, considering that acquiring auto technology is not an easy task for developing countries like Indonesia.

In the case of Kia's transfer of auto technology to its Indonesian partner, PT Timor Putra Nasional, Kim compares it to baseball, especially the pitcher and catcher.

"The pitcher throws the ball, the catcher must have the ability to catch the ball. Technology is like the baseball itself. So, in transferring technology from developed nations to developing nations, the latter must be ready to catch that technology," Kim said.

A number of parties question Kia's commitment in transferring auto technology within a three-year time period, as required by the government. However, Kim assured that Kia will manage transferring the technology within the set time frame.

"It is questionable whether Indonesia will receive all the technology within three years, very questionable. But, we will localize everything within three years. It is very reasonable," Kim said.

To materialize its commitment, Kia is dispatching engineers and supervisors to Cikampek, West Java, to expedite the construction of auto manufacturing facilities there. The construction will start later this year and will take up to two years.

The Cikampek manufacturing plant will be owned and operated by PT Kia Timor Motor, a joint venture between Kia and Timor Putra. The latter, which is controlled by President Soeharto's youngest son Hutomo Mandala Putra, is the only firm to get tax and tariff breaks for three years to develop the national car.

"We have four integrated manufacturing plants under Kia. We consider the plant to be built in Cikampek as Kia's fifth integrated manufacturing plant.

"In regards to that, we are dispatching Kia's key engineers and supervisors to Cikampek. They will work together with Indonesia's engineers and supervisors. They will stay there until their Indonesian counterparts fully understand everything, and ensure that the technology transfer is complete," Kim said.

He explained that the Cikampek manufacturing plant will not be heavily automated like Kia's other plants, saying that the plant will still employ a significant number of local workers, which are considered to be cheap.

The degree of automation of certain plants is very closely related with the cost of labor in a certain country. "In other words, we can carefully select areas which should be automated, especially those concerning repetitive work," Kim said.

With the Cikampek plant, Kia will provide support for Timor Putra's Timor car, deemed to be the national car, he said, adding that Kia will encourage Timor Putra to develop its own new brand vehicles.

In that stage, Kim said, Timor Putra can export its own developed cars and Kia will probably import them and market them in other countries.

"We have not made any written commitment in that regard. But it is our desire because in Korea, the cost issue is very difficult, and we hope that in that plant they can produce less- costly and good quality vehicles," Kim said.

Hyundai's challenge

Meanwhile, South Korea's largest auto firm Hyundai Motor Company, in cooperation with the Bimantara Group, is determined to challenge Kia and Timor Putra in the national car project.

Bimantara, which is controlled by Hutomo's elder brother Bambang Trihatmodjo, will launch its "national car program" next month, in conjunction with the launching of its 1,500 cc engine car, called Bimantara Cakra, on July 23.

To support Bimantara's national car program, Hyundai agreed to establish an auto manufacturing plant, also in Cikampek. The construction of the plant will also start later this year and will take up to two years to complete.

Hyundai's executive vice president Baik Hyo-whi told the Post here earlier this week that the company will make Indonesia its base to serve Southeast Asian markets.

To develop its vehicles, Bimantara has been campaigning to get the same facilities as those extended to Timor Putra. The government hinted earlier this week that it may extend special tax protection to a second car company within next three years to develop another national car.

"I just say that is my wishes, give us equal treatment. Just give equal treatment to all manufacturers, either Japanese or European or American carmakers," Baik said.

Even though the government gives equal chances to all manufacturers, there will be only a few companies able to meet government regulations, he added.

Baik expressed his disappointment over the government's appointment of Timor Putra and Kia to develop Indonesia's national car, owing to the fact that Hyundai had made its presence earlier than Kia.

He noted that Hyundai started the idea of building a national car in Indonesia two years ago when its honorary chairman, Chung Se-Yung, made a courtesy call to President Soeharto.

Kia's chairman, however, contended that the relationship between Kia and the Indonesian government dates back to 1991, when the government asked Korea's Jakarta embassy to help select a Korean auto firm to assist develop its national car.

"Officially, we were informed from our ambassador in Indonesia in 1991 that the Indonesian government requested the Korean embassy that they would like to have a Korean process in building the automotive industry, from scratch to the current situation. And the Indonesian government wanted to transfer that history to Indonesia," Kim said.

A number of countries, including Japan, the United States and the European Union have expressed their concerns over Indonesia's national car program, which they said is contradictory to free market principles set out by the World Trade Organization.

Baik indicated that, unless the government modifies its policy and gives equal treatment to all auto manufacturers, Indonesia will continue being the target of international criticism.

Responding to the current situation, Kia's chairman suggested that Indonesia continue maintaining its position.

"Indonesia has been in the automotive industry for over 25 years. I believe that they know the recipe very well on what they require," Kim said.

He noted that Indonesia's national car program is a very similar with Malaysia's car project, which resulted in Proton cars.

"So, I think the Indonesian government has carefully studied what has happened in Malaysia and made a case out of Malaysia's story," Kim said.