KL urged to review AFTA auto policy

KL urged to review AFTA auto policy

Agence France-Presse, Kuala Lumpur

U.S. car giant Ford Motor Co. on Thursday urged Malaysia to
review its plan to delay opening up its auto industry by two
years under a regional free trade area agreement.

Under the ASEAN Free Trade Area (AFTA), most countries in the
10-member Association of Southeast Asian Nations (ASEAN) must cut
import tariffs to a maximum of five percent by 2003.

Malaysia has won a reprieve for its auto industry until 2005
to give more time to national carmaker Proton, which is protected
by high tariffs on imported cars, to prepare for liberalization.

Ford Malaysia's corporate affairs director Aishah Ahmad said
Malaysia currently imposed import tariffs of between 42 and 80
percent on passenger cars.

Under AFTA, the tariffs would drop to 20 percent in 2005 and
gradually to five percent only by 2008, she told reporters on the
sidelines of an AFTA conference.

"Free trade in CBU (completely built-up) vehicles only starts
at five percent (tariff), so we would like to request the
Malaysian government to consider a gradual phasing in," Aishah
said.

"If the government is saying 20 percent in 2005, don't just
reduce the duties from 2005 but do it in 2003, do it in 2004 -- a
step-by step slow gradual phase-in to reduce tariffs."

Such an approach would actually benefit Proton by giving it
some experience in dealing with an open market before full
liberalization, Aishah added.

She said she believed Proton, which now commands more than 65
percent of the local market, could survive competition under AFTA
but tying up with a foreign partner "would help the company even
further."

Prime Minister Mahathir Mohamad has told Proton to cut its
production costs to stay competitive ahead of AFTA and said the
government is prepared to authorize the sale of up to 30 percent
of the company.

Aishah said AFTA was the key for ASEAN markets to unlock
regional volumes as many manufacturers were operating below 60
percent of their capacity.

Under AFTA, manufacturers can eliminate duplicated vehicle
assembly and supply bases by focusing production of one model in
just one plant to be exported to the region, she said.

"Vehicles can be specialized in one plant, one country and
traded in ASEAN. This will give higher economies of scale,
reduced cost, reduced complexity and increased quality," she
said.

For example, Aishah said Ford has made Thailand its hub to
produce pickup trucks and Philippines the Laser and Lynx models.

It was keen to produce a Ford model in Malaysia, which is the
third largest car market in the Asia-Pacific after Japan and
South Korea, but has to wait for AFTA to gain a level playing
field, she added.

On a more cautious note, Aishah said AFTA would only work if
there was a "healthy balance of trade" between the ASEAN
countries.

The ASEAN members -- Brunei, Cambodia, Indonesia, Laos,
Malaysia, Myanmar, the Philippines, Singapore, Thailand and
Vietnam -- range widely in wealth and trading prowess.