Japan automakers promise to aid its local partners

JAKARTA (JP): Japanese giant automakers grouped in the Japan Automobile Manufacturers Association (JAMA) promised on Thursday to help their Indonesian partners in gearing up to face the stiffer competition expected to result from the full implementation of the ASEAN Free Trade Area (AFTA) agreement in 2003.

They said Indonesian vehicle assemblers would survive the competition if they were able to upgrade the competitive advantages of their products and improve business efficiency.

Fumio Yoshimi, general manager of Mitsubishi Motors Corporation's international vehicle operations in Southeast Asia, said the company would help strengthen the local production of auto components to enable its Indonesian partner face the competition.

"We'll continue production and use more local materials. And we also have to encourage the export of components to other ASEAN countries. That's our strategy," he told a media gathering.

Almost all of Japan's major automotive companies such as Toyota, Mitsubishi, Honda, Suzuki, Nissan and Daihatsu have established assembly plants in cooperation with local partners.

Takashi Hibi, marketing manager of Toyota Motor Corporation's local partner PT Toyota-Astra Motor, said the company was also planning to boost the export of vehicles and parts from Indonesia to other ASEAN countries.

He said Toyota-Astra had so far exported its domestically- manufactured multipurpose van, the Kijang, in complete knock-down units to Vietnam, Malaysia, Taiwan and the Philippines.

"There may be a great opportunity to market our Kijang in Thailand," he said.

In order to maintain their business operations in each ASEAN country during the free trade era, Japanese car makers will likely encourage their partners in each country to strengthen product specialization, he said.

"There'll be a sort of job distribution among production sites in the region," Hibi said.

He said that Toyota, for example, had been implementing an industrial complementing network in its production sites in Thailand, the Philippines, Malaysia and Indonesia.

Under the scheme, each country specializes in producing vital parts thereby reaping benefits of scale, he said.

Indonesia now specializes in the production of the Kijang as well as vital components like gasoline engines, clutches, door locks and radiators, while Thailand focuses on the production of the Hilux and Soluna models in addition to components like diesel engines, stabilizers and exhaust pipes.

Hibi predicted that after the implementation of AFTA, Toyota's partners in Indonesia would likely face strong competition from Thailand, which was expected to export its locally-manufactured Toyota models here.

AFTA is a pact among the 10 member countries of the Association of South East Asian Nations (ASEAN), which groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

Under AFTA, ASEAN countries will see a free flow of automotive products since the tariffs on automotive products will be cut to a maximum 20 percent by the year 2000, and will be cut further to between zero and five percent by 2003.

ASEAN members, however, must use at least 40 percent local or regional content in the manufacturing of their automotive products for sale within the region.

JAMA's members include giant automakers like Toyota Motor Corporation, Mitsubishi Motors Corporation, Honda Motor Co., Ltd., Nissan, Daihatsu, Suzuki and Mazda.

Last year, all the Japanese car makers in Indonesia produced a cumulative 81,000 units at ten production facilities in Indonesia, up from about 44,000 units in 1998.

The figures were much higher in the pre-crisis period with 350,000 units being produced in 1997 and 301,000 units in 1996.

The JAMA delegation is in town to attend the Third ASEAN Auto- Supporting Industries Conference held in Jakarta on July 19 and July 20. (cst)