RI must take its car opportunity: Kia

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.