Timor car to be built in S. Korea

JAKARTA (JP): The government announced yesterday that it is allowing the country's first national car to be manufactured in South Korea and imported with special tax and tariff breaks for one year.

Minister of Industry and Trade Tunky Ariwibowo said that PT Timor Putra Nasional's "Timor" cars will be fully-manufactured at the Kia Motors Corp. assembly plant in South Korea.

He said the cars will contain 20 percent Indonesian components -- valued at about US$100 million -- which will be shipped from Indonesia, and the manufacturing will be done by Indonesian workers.

Timor Putra, he said, will be allowed to produce 45,000 units of its "Timor" sedans in this manner for one year, starting this month.

Tunky said the government stipulated this new policy for the national car through Presidential Decree No. 42/1996, which was issued on Tuesday.

The decree states that cars manufactured overseas by Indonesian personnel, carrying the same amount of local contents as that stipulated in the "national car program", will be granted the same privileges as the national car.

These privileges will be given only once for a maximum of one year.

"This is meant to accelerate and strengthen the national car program to be carried out by PT Timor Putra National... It is also expected to speed up the transfer of technology," Tunky said.

This means that even though "Timor" cars will be manufactured outside Indonesia, they will get the privileges of a national car, as stipulated in the "national car program" of Presidential Instruction No. 2/1996, issued in February.

Tax break

Under the program, the government granted a three-year tax break -- including exemption from import duties and luxury sales tax -- to the national car producer, on the condition that its local components total 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 government has decided that the only car to get the exemptions is the 1,600 cc "Timor" car, to be manufactured by Timor Putra -- controlled by President Soeharto's youngest son Hutomo Mandala Putra -- in cooperation with Kia Motors.

Timor Putra has said the "Timor" car will be available in show rooms by September and sold at Rp 35 million each, or half the price of Japanese sedans of the same type.

Initially, the company had planned to use components "semi- assembled" in Indonesia to produce 4,000 "Timor" sedans a month.

The company however has failed either to appoint existing assemblers to carry out its assembling jobs or set up its own assembly unit.

Last week, two large automotive groups, Indomobil and Astra International, rejected Timor Putra's request to assemble its components.

Asked why the government chose Timor Putra for its "national car program" despite the company's obvious incompetence, Tunky replied: "It is a government policy".

He also refused to explain details about the manufacturing process in South Korea, saying that he didn't want to talk about "technical aspects".

Tunky said the government has also issued Governmental Law No. 36/1996 -- also dated June 4, 1996 -- which exempts locally- manufactured vehicles with engines of 1,600 cc or smaller from luxury sales tax.

Such vehicles include sedans, station-wagons, jeeps, minibuses, vans and pick-ups that have a local content of at least 60 percent.

Previously, the government imposed a 35 percent tax on vehicles which are categorized as luxurious goods.

Meanwhile, businessman Sofyan Wanandi, who controls the Gemala Group, yesterday described the policy as "strange and funny", because he felt that if a product is made overseas, it should be labeled according to the country where it is manufactured.

"This means that such a product cannot be categorized as a national product, even if some of its components are shipped from Indonesia," he said.

Sofyan also considered the policy "illogical".

"If they want to import built-up cars, why don't they just go ahead and do it. Don't use regulations and laws to justify it," he said. (pwn/hen)

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