industry ASEAN-AFTA-AUTO - 11/11/2003 15:51 - AFP

BANGKOK, Nov 11 (AFP) - Southeast Asia is set to become the world's fifth largest automobile market by 2005 but success hinges on implementation of the delayed ASEAN Free Trade Area (AFTA), an industry roundtable heard Tuesday. The 10-member Association of Southeast Asian Nations slashed tariffs on most products in the region to below five percent in January, part of efforts to form a powerful trading bloc to counter China's overwhelming economic clout. "Under AFTA the dream will come true for global carmakers but only if AFTA is implemented," Kour Nam Tiang, director of PT Astra International, told more than 100 industry executives at the eighth Asia-Pacific Automotive Industry Roundtable. Southeast Asia's auto industry has recovered steadily since the financial crisis of 1997-1998 and in the first half of 2003 grew 13 percent compared to zero to one percent for the industry worldwide this year, Kour said, An integrated ASEAN is expected to see 1.6 million vehicle sales in 2005 and 2.3 million by 2010, while the majority of global growth in the auto market from 2004-2010 will be in Asia, mostly in ASEAN, China and India, Ford Motor chief Bill Ford said here last month. Kour warned that Southeast Asia must comply with the AFTA agreements or risk becoming bogged down in excessive costs. "Thailand, Indonesia and the Philippines are the only ones currently following the spirit of AFTA," he said. Malaysia, one of the two biggest car manufacturers in the region along with Thailand, has controversially delayed opening its auto sector until 2005 in order to prepare its state auto manufacturer Proton for competition. "Tariffs have been reduced slowly and in a piecemeal way, and non-tariff barriers are still high," Kour noted. Other potential hurdles remain, including different tax structures that have complicated import-export procedures and a fragmented product make-up which sees pick-up production dominated by Thailand, passenger car production by Malaysia and the Philippines, and utility vehicles and passenger vans by Indonesia. Auto industry analyst Daniel Mitchell also said the region's huge growth, particularly in Thailand, hinged on AFTA's implementation. "There must be a trading bloc with enough critical mass to be able to compete with China," Mitchell told AFP. China's automobile market has been growing at more than 50 percent this year, he said, and global manufacturers are sinking hundreds of millions of dollars into the country to boost capacity and meet domestic demand. Chinese officials in October said the world's most rapidly expanding economy risks overheating and cautioned over potential financial strains, brought on in part by feverish investment in industries such as automobiles and steel. mlm/sls/bmm