RI won't offer concessions to Japan, EU over car dispute

RI won't offer concessions to Japan, EU over car dispute

JAKARTA (JP): Minister of Industry and Trade Tunky Ariwibowo
said yesterday that Indonesia will not offer any concessions to
Japan or the European Union (EU) to settle their disputes over
Jakarta's national car policy.

Tunky told journalists after a hearing with House Commission
VI for industry and mines that Indonesia will only present
arguments on its national car policy during formal consultations
with Japan and the EU under the auspices of the World Trade
Organization (WTO).

"No, we will not offer anything," Tunky said when queried
about Indonesia's efforts to settle the disputes. "To begin with
we will only present our arguments and not concede anything."

The EU delivered its formal request for bilateral
consultations with Indonesia to the latter's Geneva mission last
Thursday, and Japan followed suit a day later.

The United States reportedly plans to send its formal request
for bilateral consultations with Indonesia to the WTO some time
this week.

The complaints were filed after President Soeharto ruled in
February that producers of a "national car" would be exempted
from import duties and luxury taxes, which add about 60 percent
to the price of cars in Indonesia.

The exempted cars are made by South Korea's Kia Motors Corp.
for Indonesia's PT Timor Putra Nasional, a company controlled by
Soeharto's youngest son, Hutomo Mandala Putra.

Tunky reiterated yesterday that Indonesia is ready and
prepared to have consultations with the EU, Japan and quite
possibly the United States over its car policy.

Economist Mari E. Pangestu suggested over the weekend that the
Indonesian government should offer compensation to Japan and the
EU to settle their disputes during the consultation stage,
considering Indonesia's weak arguments under WTO rules, thus
avoiding a potentially damaging examination by a WTO panel.

Under WTO rules, complaints are examined by a WTO panel only
if talks fail. The WTO Dispute Settlement Body clears up any
further differences.

Tunky, however, disagreed with Mari's contention, saying that
Indonesia has very strong arguments to maintain its national car
policy, including WTO clauses related to infant industries and
developing countries.

As a developing country, Tunky argued, Indonesia still has
until the year 2000 to adjust its trade, industrial and economic
policies to comply with WTO provisions.

After all, Japan, according to Yasuhisa Kawamura, the economic
counselor at the Japanese Embassy in Jakarta, is not seeking
compensation from or pursuing possible sanctions against
Indonesia. What it is contesting, through the WTO, is the
consistency of Indonesia's national car policy within WTO rules.

Sanctions

"Sanctions? They are not amony our options," Kawamura said
last week. "And the inclusion of Japanese auto firms in the
current national car policy might not solve the problem either
because what we are contesting is the consistency of the national
car policy within WTO rules."

Meanwhile, a number of the commission's legislators expressed
their dissatisfaction yesterday over the government's explanation
of the on-the-road prices of Timor cars, made by Kia Motors but
deemed to be Indonesia's national car.

Duty- and luxury tax-free Timor cars sell in Indonesia from Rp
35.75 million (US$15,277) each.

The commission asked the government for an explanation on why
the Timor, which is identical to Kia's Sephia model, is sold here
for more than $15,000, while Kia's Sephia is sold for just
US$8,000 in the United Sates.

The government explained that the imported Timor cars are
still burdened with 10 percent value added tax, 2.5 percent
import tax as well as insurance, on top of freight costs and the
company's margin.

"It's strange because in the United States, which also imposes
a number of taxes on the sales of imported cars, the price of the
Sephia is only $8,000, but Timor here is Rp 35 million. I don't
understand this. By our calculation, the Timor should sell for
around Rp 20 million to Rp 25 million," said legislator
Djamaludin Waly, of the United Development Party (PPP).

Yusuf Rizal Tjokroaminoto, Royani Haminullah and Soenaryo
Haddade, Commission VI legislators from the PPP, Indonesian
Democratic Party and Golkar factions respectively, all expressed
similar surprise and dissatisfaction during the hearing.

Responding to legislators' questions on the Timor's price,
Tunky said that the government does not set the retail price of
Timor cars. "It is Timor Putra's right, not the government's, to
decide it," he said. (rid)