RI also to seek car trade compensation

RI also to seek car trade compensation

KUALA LUMPUR (AFP): Indonesia has joined Thailand in seeking compensation from Malaysia after Kuala Lumpur was allowed to delay the opening up of its auto sector under a regional free trade deal, sources said Wednesday.

Indonesia submitted its claim during a meeting between trade officials in Kuala Lumpur on May 28, according to sources from Malaysia's international trade and industry ministry.

"They have indicated they want market-opening for some of their products but gave no details," a source told AFP.

The source said Indonesia must prove it has the potential to supply cars to Malaysia, noting that it has no national car market and mainly produces vehicles for domestic use.

"We see no potential loss of market for them," the source said.

Under the proposed Association of Southeast Asian Nations (ASEAN) Free Trade Area, the group's six original members must cut tariffs on imports of agreed products to a maximum of five percent by January 1, 2003.

Last year Malaysia won a two-year delay for its heavily- protected auto sector.

Thailand is the first ASEAN member to seek compensation and officials from both countries have held several rounds of talks.

Malaysian ministry sources said negotiations with Thailand have been prolonged as it has yet to prove that its cars meet an ASEAN Free Trade Area (AFTA) condition that at least 40 percent of parts are made in the region.

"We recognize that there is a strong industry in Thailand but we are still not satisfied that the products are in compliance with the local content requirement," the source said.

"Most of them are assemblers. They are not national manufacturers," the source added, saying it was up Thailand to prove its case.

As compensation Thailand wants Malaysia to buy more Thai rice, cut import duties on Thai agricultural and food products and give Bangkok "favorable treatment" for oil and gas purchases, the source said.

Talks with Indonesia and Thailand would continue soon and must be concluded by next month, the source added.

Malaysia filed a formal request January 19 to the ASEAN council to defer opening its auto market and must finalize all negotiations for compensation within six months.

Malaysia, Thailand, Indonesia, Brunei, the Philippines and Singapore are the original six ASEAN members. Newer members Laos, Cambodia, Myanmar and Vietnam have been given longer to cut tariffs under AFTA.