. /.RESTRICTEDWORLD TRADE
ORGANIZATIONG/SCM/Q2/IDN/11
30 April 1998
(98-1749)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
SUBSIDIES
Replies to Questions posed by JAPAN1 Concerning
the Updating Notification of INDONESIA2
The following communication, dated 23 April 1998, has been received from the Permanent
Mission of Indonesia.
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Q.1. The status of the Presidential Instruction No. 2/1996
The Presidential Decree No. 20/1988, while revoking the Presidential Decree No. 42/1996
that dealt with overseas produced National Cars, st ipulates in its Article 2 that "the Presidential
Instruction No. 2/1996 ... is obsolete."  Please  explain the difference between "obsolete" and
"revoked".  Please also explain why the revocat ion of the Presidential Decree No. 42/1996 would
automatically cause the situation where the Pres idential Instruction No. 2/1996 is "obsolete".
Reply
Obsolete means "no longer applicable".  Pr esidential Instruction No. 2/1996, having been
declared "obsolete", no longer has any effect.  This is further confirmed by the 50-Point Memorandum
of Economic and Financial Policies (MEFP) signed by the President of the Republic of Indonesia andthe Managing Director of the International Monetary Fund.  Point 13 of the MEFP states, "The
Government has also decided to discontinue immediately any special tax, customs or credit privileges
granted to the National Car".
Q.2. The termination of the benefits for PT Timor
(i) The treatment of automobiles imported under the June 1996 Programme
Please explain whether PT Timor will be  required to pay customs import duties
and luxury sales taxes for the Korean made "Timors" that have arrived inIndonesia but not yet passed through the customs, when they go through custom
clearance.  As far as Japan knows, Indonesia's position on this issue has not been
consistent, and Japan would like to confirm the final answer.
                                                     
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If PT Timor will not be required to pay customs duties and luxury sales taxes for
such automobiles, please explain the le gal basis on which such a treatment is
allowed, despite the fact that the Presidential Decree No. 42/1996 has been
already revoked.
Reply
However, the Government of Indonesia cannot ignore the large negative impact of the
revocation, announced on 21 January 1998, of the National Car Programme.  Therefore, for national
cars already shipped to Indonesia under the 1996 policy, although not yet released from customs
control, the Government will make an exception and allow the cars to clear customs free of import
duty and luxury tax.  This is a limited, one-time transitional action to enable the TPN to adjust to the
sudden policy change.  This was necessitated, in large part, by the unforeseen severity of the financial
crisis in Indonesia.  The imported cars awaiting customs clearance total 10,965 units, as of
2 February 1998.
(ii) The treatment of automobiles produced under the February 1996 Programme
Please explain whether automobiles already assembled in Indonesia under the
February Programme will be given import duty and luxury tax exemptions.
If the answer is yes, please explain the legal basis on which such a treatment is
allowed, despite the fact that the P residential Instruction No. 2/1996 has been
declared obsolete.
Reply
For the reasons given in the answer to question 2(i), cars already assembled in Indonesia
under the February 1996 programme prior to 2 February 1998 (342 cars), will be given import duty
and luxury tax benefits.
The benefits will not apply to cars assembled in Indonesia after 2 February 1998, the effective
date of the new policy announced on 21 January 1998.
(iii) The effects on the benefits already given to PT Timor
Japan understands that PT Timor failed to meet the requirement under the
June 1996 Programme and the first year requirements under the February 1996Programme.  Please explain whether the Indonesian Government will request
PT Timor to return the benefits already given to it.
Reply
As stated in answer to question 2(i), the unforeseen severity of the financial crisis required
immediate discontinuation of the tax and customs benefits granted to the National Car producer.  Thisaction has placed a heavy and unexpected financial burden on TPN.  In recognition of the severity of
this burden, the Government has decided not to require TPN to return the benefits.
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