RI to offer Japan a deal to solve car dispute

JAKARTA (JP): Indonesia has tried to make commercial approaches in its bilateral negotiations with the United States and Japan on the national car policy, an official said yesterday.

The Director General of International Trade, Anang Fuad Rivai, said although recent discussions with U.S. and Japanese officials had not been finalized Indonesia would try to make "commercial approaches that will benefit both sides".

"We are still figuring out what steps we can take to reach a solution," Anang said.

He said the negotiations were part of a legal process.

"But since we are talking about a trade issue, we must try to make those legal steps parallel with the trade concerns of both sides," he said.

Anang heads the negotiation team which returned Sunday from a week-long trip to the U.S. and Japan during which he discussed Indonesia's national car policy.

He refused to explain the commercial approaches tried by Indonesia because a concrete form was still being discussed.

He said any commercial approaches would exclusively involve the automotive industry.

The national car policy, introduced by the government last year, gave import duty and luxury tax breaks to makers of a so- called national car. The car should have a local component content of 20 percent by the end of the first year, 40 percent by the end of the second year and 60 percent by the end of the third year.

The tax breaks were granted solely to PT Timor Putra Nasional -- controlled by President Soeharto's youngest son Hutomo Mandala Putra -- which makes Timor sedans.

The sedans are made by Timor Putra with South Korea's Kia Motors Corp. Timor Putra now imports completely built Kia Sephia sedans because it does not yet have its own manufacturing plant.

The national car policy has been criticized by Japan, the U.S. and the European Union.

They say the policy breaches World Trade Organization (WTO) rules.

All three have threatened to take the issue to the WTO's monthly panel in Geneva.

Minister of Industry and Trade Tunky Ariwibowo said Monday he wished to see the issue resolved at a bilateral level without going to the WTO panel.

Until last month, none of the three countries had filed a complaint with the WTO panel.

Economist Mari Pangestu said it would be better if Indonesia could resolve the dispute at a bilateral level.

She said Japan had been ambivalent from the start. Even though Japan said Indonesia's policy breached WTO rules on one hand, it said the policy was in the interest of Indonesia's domestic car market. (pwn)