Wed, 28 Jun 2000

Local carmakers want delay in implementation of AFTA

JAKARTA (JP): Indonesian car manufacturers have called on the government to delay the implementation of the ASEAN Free Trade Agreement (AFTA) to give the local automotive industry more time to enter the free competition era.

Chairman of the Association of Indonesian Automotive Industries (Gaikindo) Bambang Trisulo said here on Tuesday that the government should first allow the local car industry to recover from the country's worst ever crisis before fully opening up the market.

"Compared with the other ASEAN members, we've been the most hard hit by the regional crisis. From this point of view, it would be too risky for Indonesia to fully join the AFTA," he said on the sidelines of a seminar on the prospects for Indonesia's automotive industry.

Automotive expert Suhari Sargo backed Bambang's view, saying that the country's prolonged volatile political climate had further hampered the recovery of Indonesia's car industry, making it more difficult to prepare itself for the fiercer competition that would result from the AFTA.

"Considering our industry's lack of preparation, I suggest the government consider asking for an exemption until 2005, just like Malaysia did, or call the other ASEAN members to reschedule the date to a certain period which we all agree on," he said.

Bambang, however, said he was skeptical that the Indonesian government would agree to backtrack from the AFTA.

The government had always shown a strong commitment to the AFTA pact, although it acknowledged the poor condition of the country's car industry, especially in the engineering infrastructure, he said.

According to the AFTA, agreed on by the Association of South East Asian Nations (ASEAN), which groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam, import rates of automotive products will be lowered to a maximum of 20 percent by the year 2000, and further cut to between 0 percent and 5 percent by 2003.

But Malaysia has made a special request to be allowed to maintain protective rates on automobile imports until 2005 to protect its national car projects.

ASEAN economic ministers meeting in Yangon earlier in May agreed to consider Malaysia's request and will take a decision on the matter in October.

Secretary-general of The ASEAN Automotive Federation Gunadi Sindhuwinata, who also spoke at the seminar, said Indonesia had a good reason to ask other ASEAN members to delay AFTA's realization of the car industry because a harmonized settlement for the car component sector in the planned liberalization of car industry under AFTA had not been achieved by the members.

Under the existing AFTA agreement, ASEAN members must use at least 40 percent of regional contents in the making of their automotive products to be sold within the region.

"Since there are some loopholes in the settlement, it can be easily manipulated. A certain country may claim that its products contain 40 percent local content, while in fact they do not. Many of us are still depending on imported goods for car components," he said.

Indonesia imposes rates of between 65 percent and 80 percent on the imports of completely built-up cars.

According to Bambang, Indonesia has great potential to export its minivans to neighboring countries, but the country must be aware of competition from car products from Thailand.

Bambang expected the country's automotive market to gradually recover, with sales predicted to reach 200,000 units this year, 250,000 in 2001 and 300,000 units in 2002. (cst)