WTO ruling has no effect on Timor car, analyst says
WTO ruling has no effect on Timor car, analyst says
JAKARTA (JP): The United States' legal victory in a dispute
over Indonesia's national car program is basically immaterial to
PT Timor Putra Nasional, the sole beneficiary of the project, an
automobile analyst said yesterday.
Although the World Trade Organization on Thursday ruled in
favor of the U.S. charge that the project violated international
trade rules, Suhari Sargo said tax privileges given PT Timor
Putra had already been scrapped under the reform package agreed
to with the International Monetary Fund (IMF).
"It is but a legitimization of the IMF's decision. Besides it
was widely anticipated beforehand that Timor would lose," Suhari
told The Jakarta Post.
The U.S. initiated the dispute settlement proceedings at the
WTO in October 1996.
Following Thursday's ruling, Indonesia will be required to
cease any discriminatory practices, but a final statement will be
announced by April. Indonesia could then appeal to the WTO.
The European Union joined the United States in its approach to
the WTO two years ago. In April 1997, Japan also asked the WTO to
form a dispute settlement panel to examine similar complaints
against Indonesia.
Suhari said Indonesia would be unlikely to appeal the
decision, as it would be in violation of the IMF's January reform
program, which specifically targeted Timor's facilities.
Under a presidential decree issued in 1996, companies which
are fully Indonesian-owned and use Indonesian trademarks and
technology in vehicle production could import auto parts tariff-
free. They could also sell these "national cars" exempt of luxury
taxes.
PT Timor Nasional, controlled by President Soeharto's youngest
son Hutomo Mandala Putra, is the only company which qualified for
the privileges.
PT Timor was authorized to import up to 45,000 cars from
South Korea's KIA Motors before its own car factory started
production.
It is estimated there are still about 15,000 Timor cars in
stock. The unsold cars still receive tax facilities from the
government although the company has effectively lost the
privileges.
In January, the government agreed to end the facilities as
part of the US$43 billion IMF bailout package for the country's
ailing economy.
Suhari said Timor would thus have to compete with other car
producers in the country using its own capacity.
He said there would be little chance that other car companies
would join with Timor unless the move was politically motivated.
"What would a company gain from taking over or merging with
Timor if it doesn't offer any facilities anymore?" (das)