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It may seem surprising that the entire Indonesian business community, plus a large part of the population of 200 million, has for weeks focused its attention on the future appearance of a small Korean sedan car manufactured by Kia Motors.
Clearly this new addition to the several dozen models already assembled and sold in Indonesia, is no ordinary car. The car is to be called the Timor and will receive special treatment under a new national car project.
It will be granted exemption from import duties and luxury taxes for three years and will therefore be able to sell at Rp25 million (about $10,000) -- half the price of a comparable sedan. The car will be built by a company controlled by Hutomo Mandala Putra (Tommy), the third son of Indonesian president Suharto.
The announcement of the national car project was cheered by Indonesians, delighted at the prospect of a inexpensive new car. But the local motor industry, foreign investors and, especially, the Japanese were outraged. The stock market crashed. Threats of retaliation have been heard.
Adding insult to injury, the government also announced that another Suharto son, Bambang Trihatmoujo, would also receive special treatment -- this time for his Chandra Asri petrochemical centre.
Chandra Asri is a controversial project which, for several years, has been the focus of a battle between its influential promoters and technocrats in the government.
Last year it asked for tariff protection against cheaper imports of propylene and ethylene, which it produces. The request was rejected because it contravened Indonesia's commitment to free trade. But in February, the decision was reversed and a 20% temporary import surcharge was slapped on both products.
Two local companies will be immediately affected: polypropylene maker Tri Polyta -- also controlled by Bambang and his associates, but listed on the New York Stock Exchange -- and Petrokimia Nusantara Interindo, a polyethylene producer whose foreign majority shareholders include British Petroleum and Japanese trading houses Sumitomo and Mitsui.
The cumulative effect of the three decisions suggested a major reversal in policy by Indonesia, which had formerly been perceived as trying to create a level playing field. Assurances by Tunky Aribowo, trade and industry minister, that the two industries were exceptions, and that tariff reductions and deregulation would...