U.S. agrees to stall on national car policy issue

By Riyadi

MONTREAL (JP): The United States has agreed to continue bilateral talks with Indonesia concerning the latter's controversial national car policy.

But the U.S. government would probably abolish the generalized system of preference (GSP) facilities.

"We have agreed to continue bilateral talks on our auto policy," Tunky told Indonesian journalists, following a meeting with U.S. Trade Representative Charlene Barshefsky at a sideline of the Asia Pacific Economic Cooperation (APEC) ministerial trade meeting here Friday.

Barshefsky refused to comment.

Late last month, Japan asked the World Trade Organization (WTO) Dispute Settlement Body to form a panel to review Indonesia's national car policy, which it said had breached international trade rules.

Indonesia blocked Japan's move. But Japan is almost certain to reiterate its request to the WTO body to form a panel in its next meeting later this month. This time, Indonesia will not be allowed to block it.

Halidah Miljani, one of Indonesia's negotiators in Geneva, said that the WTO's decision about the national car could be decided by the end of next year. But even if Indonesia loses, it will still be given one year to bring its policy in line with WTO rules.

In February 1996, the government announced a preferential car policy which exempted producers of a national car from import duty and luxury tax.

The government then said PT Timor Putra Nasional -- a company controlled by President Soeharto's youngest son Hutomo Mandala Putra -- was the only company that qualified for the national policy.

Timor Putra is cooperating with Kia Motors Corp of South Korea to produce national sedans under the brand name Timor.

The government said the program would last for three years, starting last October, on condition that the car has at least 20 percent local components 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.

Timor is allowed to import the cars from South Korean Kia until its own factory becomes operational in 1998.

Tunky said the government would provide any assistance Timor Putra needed to expedite the program.

The government has ordered three state banks and 10 large private banks to lend US$1.3 billion to Timor Putra.

Tunky said the funds would be used to construct assembling, machining and stamping facilities for Timor sedans.

Indonesia's national car policy has been protested by Japan, the U.S. and the European Union.

GSP

The U.S. is likely to abolish its generalized system of preference (GSP) for Indonesia's products entering its markets. It is now reviewing import-tariff waiving policies for Indonesia that will end by the end of this month.

The U.S. government has repeatedly threatened to end facilities given to Indonesia because of the latter's handling of independent union leader Muchtar Pakpahan and what it describes as weak protection of intellectual property rights.

Recently the U.S. government kept Indonesia on its priority watch list over what it said to be rampant violations of intellectual property rights.

Tunky said he had asked Barshefsky's help to downgrade Indonesia's listing on the priority watch list, arguing that it had taken significant steps to protect property rights in the country.

Tunky also asked Barshefsky to maintain GSP facilities for Indonesia, arguing that some of Indonesia's products -- especially electronics -- still needed such facilities to enter the U.S. market.

Director General of International Trade Joko Mulyono said currently $1.4 billion worth of exports, or almost four percent of Indonesia's total exports, enter the U.S. with GSP facilities, which is equal to $58 million.