IT'S an issue that threatens to snowball into a sticky international row. The global trade order, as set forth in the rules of the World Trade Organisation (WTO), is being challenged by the Timor, Indonesia's controversial Korean-made 'national car'.
The Timor, launched in Jakarta on July 8 to strong consumer interest, is a joint venture owned 70 per cent by Hutumo 'Tommy' Mandela Putra, younger son of President Suharto, and 30 per cent by Kia Motors of South Korea. The cars are being manufactured in Korea by Indonesian workers till the firm commissions its factory in Indonesia. And the first batch of the sedan model will roll out in October.
For at least three years, the Timor will be able to undersell its mostly Japanese competitors because the joint venture, Kia-Timor Motors, has been granted exemption from tariffs and luxury taxes. Timor sedans, designed to appeal to young couples and families, will sell for about $15,000 each, half the cost of similar Japanese sedans whose makers must pay taxes. But critics claim the luxury tax exemption constitutes a breach of WTO rules, as does the special trade treatment for South Korea.
The joint venture, has caused consternation across a wide spectrum, from global trading partners to rival siblings. Tommy's elder brother Bambang Trihatmodjo already owns an auto factory through his firm, Bimantara, in a tie-up with Hyundai.
Understandably, Japan, the Indonesian auto industry's main player, has taken the lead in objecting to the announcement. Japanese firms, primarily Toyota, Mitsubishi and Nissan, control over 90 per cent of the market for cars in Indonesia through joint ventures with local firms, and have successfully resisted the attempts of the big three US auto-makers, General Motors, Ford and Chrysler, to make a dent in Japan's dominance in the Asian...