You are what you drive

Going by the turnout as well as the turnover of the automotive show now still going on at the Jakarta Convention Center, you would not think that Indonesia is still in a state of an economic crisis as often portrayed by most nongovernment economists.

The strong public enthusiasm shown toward the exhibition may even corroborate the government's claim that the economy is well on its way toward a recovery. The rosy statistics used to back such claims can still be challenged, but the placement of orders for hundreds of luxury cars at the exhibition would probably be harder to refute as they also reflect the strength of consumers' confidence as well as their purchasing power.

The Gaikindo Auto Expo 2000 is indeed the largest automotive exhibition staged in Jakarta, not only since the economic crisis hit the nation in 1997, but also the largest ever in terms of the products displayed. Thanks to the government's decision last year to lift a three-decade ban against imports of completely-built-up (CBU) cars, every available make and model produced in the world can technically be imported and sold in Indonesia. This year's expo offers Indonesian car buyers a far larger selection to choose from than they have ever enjoyed anytime in the past.

There are various factors that can be used in explaining the strong turnout and turnover at the auto expo at a time like this.

The phenomena may be a reflection of the consumptive behavior of the Indonesian people, particularly their propensity toward luxury and expensive goods, even when the going is rough. A car is often regarded in this society as reflecting one's social status, and that some people would do just about anything to maintain or elevate their level, even in times of crisis.

The phenomena may also tell you that some people may not have been affected as badly as the rest of the nation by the crisis, or that some may have profited from it, legally or otherwise.

Another possible reason for the phenomena is that rather than reflecting consumers' confidence, it may reflect exactly the opposite. Fearing that the economy would remain uncertain in the years to come, some people found investing in luxury and expensive cars a better option than keeping the money in a bank. We certainly saw some of this at the beginning of the economic crisis, when low confidence in the rupiah and the banking system led to people spending away all or most of their savings. The economic crisis has led to unpredictable consumer behavior which often defied conventional economic theories.

Another explanation for the highly successful automotive expo is that it has given the public a wider range of choices than simply the assembled of a few largely Japanese makes and models that they had to choose from these last 30 years or so. The decision to lift the ban on CBU cars has raised public thirst for makes and models which until recently they could only see in magazines and on TV but never to drive. Automakers from all over the world naturally capitalized on this through the Gaikindo expo. They may also be capitalizing on the inability of local assemblers to offer prompt delivery as the latter were themselves unsure whether the economy has fully recovered to start hiring workers and resuming full production capacity.

In all likelihood, a combination of these factors, rather than a single individual factor, explains the phenomena that we have seen at the automotive show this past week. Rather than debating on whether or not this heralds the consumer-led economic recovery, it would be much more fruitful if we turned the debate on what should be done about this phenomena.

The publicity about the exhibition and the strong turnout at a time like this has offended the sense of justice of some people in this country, especially those who continue to live in dire poverty. The auto expo once again reminds us of how big the disparity is between the wealthy and the poor. Driving expensive and luxury cars may elevate the social status of some people, but it can also sow the seeds of social envy, which as we know, has often triggered unrest in the recent past.

The solution to this problem is not by reimposing a ban on expensive and luxury cars for that would not only deprive consumers of their choices but it would also profit a few conglomerates who happen to control the industry. The only solution to this problem is to impose an even more progressive tax rate on luxury cars. People who can buy expensive and luxury cars must surely be able to spend more on taxes.

A more progressive luxury good tax on luxury cars would address the question of equity, without depriving those who can afford the right to choose the car they want to drive. Expanding on the adage that "you are what you drive", then a car that one drives would not only reflect his social status, but also his taxpayer status.