Timor car to be built in S. Korea

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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