AFTA: Turning the ASEANDream Into Reality AFTA 2002 Symposium Jakarta, Indonesia January 31, 2002 John Parker President, ASEAN Operations Ford Motor Company
Sustained Investment Growth High Value-added Jobs and Strong Export Growth ASEANunder AFTA AFTA The Automotive Industry Imperative The foundation of sustainability in the auto industryis global competitiveness, which is a functionof continued liberalization Product DesignAnd Development IntegratedManufacturing ASEANToday Low Value-added Limited Exports Low Technology CKD National Regional Global Stages of Liberalization
ASEAN Auto Growth… A Strong Recovery • Strong Recovery after Crisis, but lags China in overall size. • ASEAN Industry Size Only Competitive if Viewed as One Region
COUNTRY 2001 2002 2003 2004 2005 2006 2007 2008 Thailand 20 15 5 Philippines 20 20 5 Indonesia 15 5 Malaysia N/A N/A N/A N/A 20 15 10 5 Vietnam N/A N/A 20 15 10 5 Auto Manufacturers Have Invested Heavily in ASEAN since 1995… Millions US ($) BUT…
THAILAND Ford Ranger Mazda Fighter Chevrolet Zafira Toyota Altis Honda Fit Ford Ranger Mazda Fighter Volvo S80 Chevrolet Zafira Honda Accord Nissan Sunny Toyota Altis Ford Laser Ford Escape Mazda Protégé Mazda Tribute Ford Laser Ford Escape Mazda Protégé Mazda Tribute Honda Stream Honda CR-V Nissan X-Trail Toyota Vitz Honda Stream Honda CR-V Toyota Vitz PHILIPPINES INDONESIA MALAYSIA ? Manufacturing Rationalization starts in 2003:Is it “AFTA” or the “Thai-Phil-Indo FTA?” VIETNAM ? Source: Press Reports
When Will Malaysia Join AFTA? Uncertainty Jeopardizes Regional Integration • Largest Mid-size Car Market in ASEAN (Represents 35% of ASEAN Vehicle Market). • 5% AFTA Duty for CBU Deferred Until 2008 (5 years later than Thailand and Philippines and 6 years later than Indonesia). • Malaysia Could Be Integral Part of Regional Production • But investment decisions for 2005 are being made today. • Damages Investor Confidence in All of ASEAN • Gives Economies of Scale Leadership to China
CBU AICO: A Great Example of Forward Thinking Delivering Investment into ASEAN Ford Thailand Ford Philippines PARTS BENEFITS • Eliminates Duplicative Vehicle Assembly and Supply Bases. • Major (Multimillion Dollar) Investment in Both Countries for New Products, possible because of Greater Economies of Scale. • “Sneak Preview” into AFTA – product complementation, plant rationalization, economies of scale.
Reality: China’s Diverting Investment Dollars From ASEAN 38% ofAsia FDI 61% ofAsia FDI Source: United Nations(Jan. 2002) 18% ofAsia FDI 9% ofAsia FDI • Consider: • China took 15% of Automotive FDI in 1990 but that number increased to 64% in 2000. • Globally, FDI dropped almost 50% in 2001. • According to JETRO, 8% of Japanese MNCs will relocate from ASEAN to China in 2002 because of WTO accession.
With WTO Accession, China Will Increase Exportsto Member Countries Source:UBS Warburg Unless AFTA is implemented for the auto industry on time in all countries, China will continue to attract more automotive FDI and will soon start to EXPORT.
What ASEAN Should do to Position for Future Growth • AFTA is key – Regional Tariffs Must Come Down • Most Critical Aspect of Growing Volume. • Malaysia’s Delay Closes the Largest Passenger Car Market in ASEAN to Regional Integration Until 2008. • Meet WTO TRIMs Obligations Now • Continuing TRIMs in Malaysia and Philippines Slows Down Global Competitiveness in Component Manufacturers and Prevents Regional Sourcing Integration for Components and Parts. • Harmonize Vehicle Emissions/Safety Standards • Harmonize “External” MFN Tariffs • Will Result in Lower Cost CKD Imports – China Drops to 10% in 2006! • Modernize Vehicle Tax Policies • Current Structures Actively Suppress and Distort What Consumers Want.