Tokyo reconsiders taking car dispute to WTO

JAKARTA (JP): Japan's Minister of Trade and Industry Shunpei Tsukahara confirmed yesterday that the Japanese government is considering taking Indonesia to the World Trade Organization (WTO) over its controversial car policy.

"At this time, we are discussing the problem and will continue to talk over the issue under a bilateral basis," Tsukahara told reporters following a meeting with President Soeharto at Merdeka Palace.

Tsukahara, who was here to attend the fifth meeting between Japan and the Association of Southeast Asian Nations, said that Indonesia's national car policy breached WTO free trade principles.

However, he said the chance for Indonesia to solve the issue under a bilateral arrangement was still open, even if his government decided to take the dispute to the WTO.

"I emphasize that all approaches are possible and it depends on us," said Tsukahara, who arrived here Thursday evening for the one-day meeting.

Tsukahara said in Tokyo last week that Japan intended to take Indonesia to the WTO as soon as it confirmed that the Timor cars, South Korean-made sedans deemed to be Indonesia's national cars, had received preferential tariff treatment.

Japan, which controls about 90 percent of the Indonesian car market, together with the United States and Europe, opposes Indonesia's national car policy.

Under the policy, producers of a "national car" are granted exemption on import duties and luxury taxes, which add about 60 percent to the prices of cars in Indonesia.

PT Timor Putra Nasional, controlled by President Soeharto's son Hutomo Mandala Putra, is the only company qualified to produce the so-called national car and to receive the tax break.

The company, which will produce the car in cooperation with South Korea's Kia Motors, is allowed to import the cars from Kia until its own production factory becomes operational in 1998.

More than 4,000 of the so-called national cars arrived here last week.

Minister of Industry and Trade Tunky Ariwibowo, who accompanied his Japanese counterpart in yesterday's meeting with Soeharto, said that the government's policy to grant the special incentives to Timor Putra would not be changed even though there was opposition from the Japanese government.

"We are insistent that other automotive companies will be allowed to produce national cars only after three years," he said.

Asked about Soeharto's reaction to the Japanese minister's criticism, Tunky said that the President considered the car dispute as a minor problem and that it should not affect the two countries' good bilateral relations.

Tunky said Soeharto told his guest that the national car policy was introduced to enable Indonesia to master the technology involved in producing cars rather than to end the dominance of Japanese cars in the domestic market.

"Indonesia's car market is big and growing ... there is still much room for the Japanese car makers to expand their market shares," the President was quoted by Tunky as saying.

Tunky said that if the Japanese government opposes the car policy and is not satisfied with the result of the bilateral talks, it is their right to take the car issue to the WTO's Dispute Settlement Body.

"Every member has a problem with other members and they are free to take their problems to the settlement body," he said. (hen)