AFTA on auto sector moving slowly

AFTA on auto sector moving slowly

Zakki P. Hakim, The Jakarta Post, Jakarta

Little progress has been made to accelerate the liberalization of
the automotive sector through the ASEAN Free Trade Area (AFTA),
with member countries still involved in protracted negotiations,
an official says.

"There have been no concrete developments so far, as each
country has its own interests," Ministry of Industry director
general for transportation Budhi Darmadhi said last week.

ASEAN leaders agreed late last year to accelerate tariff
reductions in 11 priority sectors, including the automotive
industry, by 2007 in a move to boost regional trade. The 10 other
sectors are agriculture, electronics, fisheries, rubber,
textiles, timber, air travel, e-commerce, health care and
tourism.

The acceleration it is hoped would boost trade between ASEAN
countries from 23 percent of the region's total trade in 2003 to
27 percent by the end of 2005.

Less than two years into the schedule however, no significant
progress on the automotive industry has been made. Differences
remain among member nations about tariff and non-tariff issues,
including regulations about suppliers, human resources and goods'
rules of origin.

Budhi said Indonesia was best-placed to become the biggest
auto component supplier in the region given the huge potential of
the local automotive industry.

Car sales in the country were expected to reach 750,000 by
2009, 32 percent of the predicted 2.3 million units sold across
ASEAN in the same year, he said. For this year, the industry
association estimates national car sales will reach 500,000 from
last year's 483,169.

The group, however, has yet to streamline customs procedures
between members and to adopt shared product standards.

Despite the slow pace, Indonesia would keep pursuing the
liberalization drive to try to meet the deadline, he said.

"It is an ongoing process," he said.

Earlier, Indonesia decided to delay liberalizing the country's
automotive industry until 2010, by excluding HOW MANY ROUGHLY
automotive products and their components.

As of last December's ASEAN summit in Vientiane, Laos, each
member country is allowed to exclude no more than 641 groups of
goods, or 15 percent of the total 4,273 tariff lines traded in
the 11 priority sectors.

Budhi said the FTA would strengthen ASEAN as a single market.

The absence of tariff barriers between ASEAN countries by 2007
would encourage them to outsource from each other and synergize
to form a regional production center, he said. However, member
countries were cautious about implementing the AFTA, wary of
tougher competition.

Intra-ASEAN trade has been consistently low since AFTA was
first formulated more than a decade ago, unlike regional trade in
European Union and the Mercosur, which had grown up to 75 percent
and 35 percent respectively in the years leading up to 2003.

Mercosur, a South American economic group, consists of Brazil,
Paraguay, Uruguay, Chile and Bolivia.