KIEV - Daewoo Motor Co. is holding up its investment in a Ukraine assembly plant in an attempt to get the country to impose a $5,000 import duty on used cars. Such a tax would help Daewoo sell more new cars.
Daewoo has a preliminary agreement on joint production with Ukrainian automaker AvtoZAZ, but the final agreement has been postponed.
'The delay applies to the issue of custom duties on second-hand cars, which the Korean side is insisting on,' said deputy industrial policy minister Vadym Lyashchov.
Daewoo plans to invest $1.3 billion in AvtoZAZ by 2005. It would be the largest investment in Ukraine since it split from the Soviet Union in 1991.
Daewoo wants Ukraine to collect a $5,000 customs duty on used cars more than five years old.
The ministry for industry, which is trying to attract investors to Ukraine, supports Daewoo. The ministry for the economy is resisting. Officials argue the duty should apply to cars older than eight years.
The Ukrainian economy is not robust, and many Ukrainians buy used cars elsewhere in Europe and pay $1,000-$3,000 in duties now.
Another consideration: A higher duty might discourage so many imports that much less revenue would be collected by the state.
Prime Minister Valery Pustov-oitenko is being pressured by industrialists to support the higher tariff as the only way to revive the Ukrainian auto industry.
The Eastern Economist Daily newspaper said production of Tavria and Daewoo models at the AvtoZAZ plant in the eastern industrial city of Zaporizhya will help 200 firms and suppliers of auto parts and accessories.