Tunky dismisses Japan's threat on car project

Tunky dismisses Japan's threat on car project

JAKARTA (JP): Minister of Industry and Trade Tunky Ariwibowo said that the government will go ahead with its controversial national car project despite the Japanese threat to approach the World Trade Organization (WTO) about it.

The Indonesian government will not negotiate with Japan about its plan to manufacture national cars and will, instead, ask for a stronger commitment from South Korea's Kia Motors Corp. to make the project a success,

"In the recent meetings here with Japanese officials, we just informed them of our new automotive policy. We never negotiated with them," he said of his response to Japan's threat.

He was speaking to journalists Wednesday following a meeting with executives of PT Timor Putra Nasional and Kia Motors Corporation.

The minister made it clear that the government will go ahead with the national car project even though Japanese car manufacturers have threatened to take the matter to the WTO.

"We have asked for full support and assurance from Kia to ensure that the national car project will be a success and they agreed with that," Tunky said.

Timor Putra's president, Hutomo Mandala Putra, and Kia's chairman, Kim Sun Hong, submitted a new proposal in the development of the national car project during the meeting with Tunky.

Both Hutomo, more popularly called Tommy, and Kim refused to explain about the proposal. However, sources said that the two companies, which will jointly develop the national car, have asked for more favors from the government for the project.

In February, the government granted pioneer status to Timor Putra to produce a national car with Kia Motors. The pioneer status will allow the company to receive tax breaks, including exemption from import duties and luxury tax sales. The tax incentives will enable the company to sell its cars at half the price of Japanese makes of the same class (1,600 cc engine capacity) in the country.

Sedans are normally subject to 100 percent to 200 percent import duties, and luxury tax rates of 25 percent to 35 percent.

Timor Putra will start operations by importing all car components from South Korea and assembling the cars here.

Tommy, President Soeharto's youngest son, acknowledged that the implementation of the national car project has not been as smooth as expected because Timor Putra's assembling facilities are not ready.

He, however, said that the problem would not affect the production schedule as the cars will be, instead, assembled by the Astra Group and Indomobil Group, the Indonesian partners of Japanese car manufacturers.

The national car is expected to hit the roads in September despite the assembling problem, he said.

Japan's auto industry, which at present dominates the car market in Indonesia, wants to take the issue of the national car project to the WTO.

"We have told Indonesian government officials that the trade issue should be taken to the WTO for a smooth resolution under fair trade rules," the vice president of the Japan Automobile Manufacturers Association (JAMA), Takao Tominaga, was quoted by AFP news agency as saying in Tokyo.

Newly-appointed JAMA chairman Yoshfumi Tsuji, the president of Nissan Motor Corp., called Indonesia's auto policy "a serious problem," but added he had no specific plan to pursue the issue.

Tunky said early this week that the national car policy was launched as a breakthrough for the future of the country's automotive industry.

He noted that the development of the country's car industry, which started over 20 years ago, has shown no significant progress.

The minister did not directly blame the industry's slow progress on Japanese car manufacturers, but analysts said that the slow growth was partly caused by Japanese carmakers' reluctance to share their technology with their local partners.

In addition, the Japanese car principals also impose restrictions on the sales of the cars in overseas markets.

On a separate occasion, Japanese Ambassador to Indonesia Taizo Watanabe did not rule out the possibility of Tokyo's foreign aid decreasing this year, but said this would be prompted by factors other than the current vehicle row.

Japan determines the size of its Overseas Development Assistance (ODA) to Indonesia and other countries on the basis of the recipient countries' macroeconomic management, rather than microeconomic factors, Ambassador Watanabe told a luncheon with the Jakarta Foreign Correspondent Club.

"There are more important factors taken into consideration than what you've just mentioned," Watanabe said responding to a question whether the vehicle row would lead to less Japanese aid this year.

He added that success in managing the economy could also lead to a decline in the size of ODA from Japan, pointing to the smaller amount now given to Malaysia and South Korea as examples.

Tokyo has been Indonesia's largest foreign aid donor. This year's amount of Japanese aid will be determined at the upcoming meeting of the Consultative Group on Indonesia, an international aid consortium led by the World Bank, in Paris in July. Last year, Japan accounted for $2.14 billion of the $5.36 billion pledged by the consortium.

Indonesia is also one of the largest recipients of Japan's ODA.

Watanabe said pressure is growing from Japanese taxpayers to reduce the overall size of aid to developing countries, especially in view of the fact that ODA does not necessarily secure contracts for Japanese companies.

The Japanese government, however, is committed to maintaining the size of its ODA, in spite of the public outcry. "We're now having an uphill battle," he said.

The size of Japan's ODA for Indonesia this year therefore depends on how far Indonesia has developed its economy and also on how much aid is available in Japan, he said. (hen/emb)