Timor car project won't be rescheduled

JAKARTA (JP): PT Timor Putra Nasional said yesterday it would not reschedule or postpone its US$1 billion car manufacturing project in West Java despite President Soeharto's call for spending retrenchment to help the weakening rupiah.

"This national car project is not included in the projects which will be rescheduled because it will strengthen the long- term foundations of the economy," Hutomo (Tommy) Mandala Putra, President Soeharto's youngest son and Timor Putra's president, said.

A consortium of four state banks and 12 private banks decided last week, at the behest of the government, to disburse $650 million in 10-year loans to Timor Putra for the national car project.

In addition to the $650 million in loans, Bank Dagang Negara (BDN), as the consortium's leader, earlier disbursed $40 million in bridging finance to Timor Putra.

The loans carry an annual interest rate of about 3 percent over three-month-to-six-month deposit rates and mature in 10 years, with a grace period of three years.

BDN's president, Salahuddin Nya'Kaoy, said the four state banks would provide half of the $650 million and private banks would provide the rest.

"I reckon if a project generates added value to the state there is no reason for postponing its implementation," Tommy was quoted by Antara as saying.

President Soeharto, in his National Day Address last Saturday, called on the business community to select projects for implementation carefully in view of the currency upheaval currently confronting the economy.

Soeharto said the government and business should review their investment projects to ascertain which should be given top priority and which should be postponed.

"If our project adds to the government's debt burden, we would meet the request (for postponement). But if the project creates added value, why should it be postponed," Hutomo said.

Optimistic

He said he remained optimistic about achieving annual sales of 40,000 Timor sedans, despite the rise in car prices caused by the rupiah's depreciation.

The government granted Timor Putra exclusive rights to manufacture a so-called national car last year. It is currently cooperating with South Korea's Kia Motors Corp. to produce the cars.

Fully assembled Sephia sedans -- renamed Timor -- are currently imported from South Korea because Timor Putra's production facilities are still being built.

The national car receives import duty and luxury tax exemptions, reducing its cost by 60 percent compared to other cars in the domestic market.

Minister of Industry and Trade Tunky Ariwibowo has said the Timor car project should be completed within two years to preempt any decision of the dispute settlement process at the Geneva- based World Trade Organization (WTO).

Japan, the United States and the European Union are currently contesting the legitimacy of the Indonesian national car policy at the WTO. (vin)