Auto industry upbeat about 2002 AFTA agreement

Auto industry upbeat about 2002 AFTA agreement

Adianto P. Simamora, The Jakarta Post, Jakarta

The country's automotive components' manufacturers expressed
optimism that they would be able to survive regional competition
when trade liberalization is implemented in 2002 under the ASEAN
Free Trade Area (AFTA) agreement.

Chairman of the Indonesian Automotive Parts and Components
Manufacturers Association (GIAMM) A. Safiun said that the local
automotive sector should benefit from the relatively low labor
costs.

"We don't need to worry too much about the implementation of
AFTA," Safiun told The Jakarta Post.

Under AFTA, the six founding members of the Association of
Southeast Asian Nations (ASEAN) -- Indonesia, Singapore,
Malaysia, Thailand, the Philippines and Brunei Darussalam -- will
reduce import duty on automotive parts and supporting component
products to between zero and five percent.

But Malaysia has asked for a delay until 2005 to protect its
national carmaker Perusahaan Nasional Bhd., or Proton.

The new ASEAN member countries of Vietnam, Laos, Cambodia and
Myanmar, meanwhile, are allowed to delay opening up their markets
until between 2006 and 2010.

Safiun, however, admitted that the automotive industry could
not rely on the low labor cost advantage in the long term,
stressing the importance of improvement in human resources to
help boost efficiency.

Safiun noted the main concern of many local automotive parts
and component manufacturers in facing AFTA was how to eliminate
the high illegal levies.

"Manufacturers of automotive parts and components have been
burdened by illegal levies which account for about 30 percent of
their production costs," he said.

The association groups 120 companies producing automotive
parts and components, which employ thousands of workers.

Bambang Trisulo, chairman of the Association of Indonesia
Automotive Manufacturers (Gaikindo) also said that local car
assemblers should be ready to compete in the AFTA era as they had
long been making preparations.

But Bambang said manufacturers of automotive parts and
components must improve efficiency and productivity as well as
product quality to survive the tighter competition.

Meanwhile, Nanang M. Kafhidin, director of automotive
component maker PT Hamoru Fitrahniaga expressed concern over the
relatively low technology.

"Companies producing automotive parts and components are not
yet ready to compete in AFTA due to the lack of technological
development," he said.

Nanang also said in anticipating the market liberalization,
the local companies should have a clear business focus.

"Business focus is important to strengthen our position to
compete with overseas products and to anticipate the influx of
lower-priced products from China," he said.

Ridwan Gunawan, chairman of the Indonesian Motorcycle
Manufacturers Association (AISI) said that the domestic
motorcycle industry was basically ready to compete with ASEAN-
made products as it had been bartering with its peers in the
region.

AISI groups local assemblers and distributors of Japanese
motorcycles including Honda, Yamaha, Suzuki and Kawasaki as well
as Italy's Piaggio Vespa.