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.