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)