Timor car project won't be rescheduled

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)