Indonesian president under fire for automotive deal with Malaysia

Indonesian President Joko Widodo tours the Proton factory, Malaysia's national car manufacturer, during a state visit, in Shah Alam February 6, 2015. [Photo/Agencies]

JAKARTA - Indonesian President Joko Widodo was strongly criticized at home for his endorsement to Malaysian automotive firm Proton to partake in development and production of the so-called Indonesia's national car, with those who oppose it saying that Indonesia has more capabilities in producing cars.

The endorsement was manifested in the signing of a memorandum of understanding between Malaysia's carmaker Proton and an Indonesian firm PT Adiperkasa Citra Lestari that belongs to Abdullah Mahmud Hendropriyono, an Indonesian former general who is a staunch supporter to President Widodo.

The document was signed on Friday during the president's visit to Kuala Lumpur, witnessed by President Widodo and Malaysian Prime Minister Najib Razak. Malaysian media reported that discussion on plans to develop Indonesia's national car was part of agenda set for President Widodo's visit in Malaysia.

Proton said in a statement that the company and Adiperkasa Citra Lestari will undertake feasibility study regarding the national car project in Indonesia. Should the results are considered feasible, Proton and the Indonesian partner would establish a joint venture company to produce the car.

A legislator at Indonesian parliament Ahmad Muzani regretted the memorandum of understanding endorsed by the president, saying that Indonesia has a more advanced automotive industry that is very capable to design and produce good quality cars.

"It is better not to cooperate in to developing a national car because of the fact that our automotive sector is far stronger ( than Malaysia's)," Muzani said on Sunday.

Production of cars with "national car characteristics" is now underway in several car plants ran by foreign carmakers in Indonesia, providing affordable cars with adequate engine capacities for domestic market.

Indonesia hosts overseas production bases for several Japanese, American and European carmakers in which part of the products were exported to several foreign countries. Some 200,000 cars were exported last year.

Muzani, however, said that despite the profound production capabilities, Indonesia car plants are yet to have sufficient strength and bases in developing a national car.

Another legislator from Commission XI for financial affairs, Wilgo Zainar, said that development of the so-called national car is not an urgent project for the people.

"National car is not what the people want. The government should focus its efforts on prioritizing development in farming infrastructure such as dams, irrigation systems and opening new farming areas," Wilgo said.

Indonesia's Industry Minister Saleh Husin said that the memorandum of understanding signed between Proton and Adiperkasa Citra Lestari was conducted on a B to B (business to business) basis.

The minister guaranteed that joint venture between the two companies would not be financed by Indonesia's state budget.

Efforts to develop national car for domestic market was once attempted by then-president Soeharto by importing completely built up cars from South Korean producer KIA with import tax exemption in 1995.

At that time the national car would be derived from certain type of KIA cars that would eventually be produced in Indonesia by adopting local components at gradual levels of 10 percent in the initial year, 20 percent in the following year and a permanent of 40 percent in the mass production later on.

The national car program was stopped in 1998 after it was protested by Japanese and American car producers through the World Trade Organization for what they claimed as unfair and discriminative trade practices in Indonesia.

President Widodo, during his service as mayor of Surakarta city in Central Java strongly promoted cars produced by technology vocational schools, called Esemka, as a national car. But after his installment as president, the initiative to make Esemka as national car has not been heard since.