TOKYO: Indonesia says it will maintain the current import tax imposed on Japanese cars despite strong lobbying by the East Asian nation for a revision.
Japanese representatives raised their objections to the tax during a two-day meeting with Indonesian delegates in Tokyo earlier this week. The meeting was aimed at preparing a review of the Indonesia-Japan Economic Partnership Agreement (IJ-EPA), which went into effect in 2008.
The Trade Ministry’s director general for international trade cooperation, Bachrul Chairi, who attended the meeting, said that no change to the current import duties would be made anytime soon. “For Indonesia, the legal basis for modifying the import duties can only be proposed after a general review into all the provisions of the agreement,” he told The Jakarta Post.
Under the IJ-EPA, which was implemented in 2013, Indonesia imposes a 28.1 percent tax on Japanese automobiles with engine capacities of between 1,500 cc and 3,000 cc. The tax will gradually decline to 0 percent by 2023 as stipulated by a Finance Ministry regulation.
The tax-reduction scheme was proposed by Japan after the IJ-EPA went into effect. Later, it was agreed by both parties following intensive talks in October 2012 in Jakarta.
Japan has repeatedly conveyed its objection to this arrangement in response to protests from major car manufacturers. The country even threatened to open a dispute-settlement case at the World Trade Organisation (WTO).
In its latest move, Japan said Indonesia was committed to reducing the import tariff to 20 percent between 2013 and 2015, and to 5 percent starting next year, according to Yomiuri Shimbun. The current tax is believed to significantly affect Japanese automakers, who last year exported cars worth some ¥41.5 billion to Indonesia, according to the newspaper.
During this week’s meeting, both countries began to sketch out criteria for a general review, which Indonesia views as being unfairly beneficial to Japan. Bachrul said Indonesia sought to sell more of its agriculture, fishery and forestry products in Japan; attract more Japanese investment to bring added-value to its industries; and obtain assistance to enhance the capacity of its human resources.
“We want a new emphasis in the agreement with Japan to make Indonesia its production base. We also encourage investment that will improve the composition of our export structure, which is now highly composed of raw materials,” he said.
Meanwhile, Padjadjaran University economist Titik Anas said before performing the review, Indonesia needed to understand the potential gains from enhanced market access. “We must see thoroughly the benefits we can obtain. We don’t want to see Japan’s request as a trade-off that will outweigh the advantages,” she told the Post.
A study by the Centre for Strategic and International Studies (CSIS) in 2013 shows Indonesia has yet to benefit fully from wider market access provided by the deal due to, among other factors, a lack of product diversification.
On the industry front, a joint capacity-building initiative under the Manufacturing Industry Development Center (MIDEC) has also failed to boost the competitiveness of Indonesia’s manufacturing industry in a wide range of sectors, including metalworking, according to industry officials.
