Thai auto industry to stay competitive post AFTA

Thai auto industry to stay competitive post AFTA

Agence France-Presse, Bangkok

Thailand's auto industry will remain competitive despite a Southeast Asian free trade plan that will virtually eliminate tariffs in the region, Industry Minister Suriya Jungrungreangkit said Monday.

The local automotive industry would benefit from tax reforms due to bring Thailand in line with the ASEAN Free Trade Area (AFTA) from the beginning of next year, Suriya said in a report.

"Automobiles assembled locally for domestic and export markets will still be able to compete against the same vehicle models produced in other ASEAN countries, even after the import duty on finished vehicles is reduced to zero to five percent from 30-80 percent at present," the minister was quoted by The Nation as saying.

Under the Association of Southeast Asian Nations (ASEAN) plan, most members must cut tariffs on imports for agreed products to a maximum of five percent by next year.

The local automobile industry would not be damaged by the lower import taxes on finished cars because the duty on some completely knocked down (CKD) parts would also be cut to zero to five percent from 20-33 percent, an official from the government working committee responsible for the tax restructuring reportedly said.

To offset the lower CKD duty, the excise tax on cars would be increased from the present three to 41 percent, Suriya told the newspaper.

However, the reduction of CKD tariffs would be on a selective basis so as not to damage the local auto-parts industry, the official said.

"For parts we cannot produce here, the import tariff will be cut to zero. But for parts we are capable of manufacturing, the duty will remain as a protective measure," the official was quoted as saying.

"The idea is to have a flexible tariff regime where a tax can be changed quickly to respond to changing circumstances."

Suriya said Thailand would not lose its competitiveness due to AFTA as some critics have claimed, the paper reported.

Instead, some auto companies would gain as the country has a strong auto-parts industry compared to other ASEAN countries, he said.

"Companies which might have problems may be ones that have very low volume production and need to import a lot of parts. These are the firms who have expressed concern," the paper quoted the minister as saying.

ASEAN groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam.