Auto makers upbeat over Asean prospects

Automotive manufacturers are upbeat over the prospects in Southeast Asia but said the full potential is realizable only if countries in the Association of South East Asian Nations (ASEAN) are able to continue attracting investment funds away from China and not delay the implementation of free trade.

During last week's 15th ASEAN-US Dialogue, US-based automotive giants said they continued to be bullish on ASEAN's economic potential but this was contingent on the full implementation of the ASEAN Free Trade Area (AFTA).

Ford Motor Co. ASEAN president Gerry Kania said in an official statement that US automotive companies and their global suppliers have invested in excess of $2.5 billion in ASEAN since 1995.

According to Kania, the US supported the initiative of ASEAN governments to implement AFTA, but expressed concern over recent moves to delay participation by the automotive sector which he said was always a key driver in attracting significant foreign investment and creating jobs and technology transfer.

"The full potential for the ASEAN countries to become a globally competitive player in this sector will only be realized with the full implementation of AFTA," Kania said.

If ASEAN countries can achieve only five percent of the global purchases of Ford, General Motors and Daimler Chrysler, Kania said exports in excess of $12 billion would result.

"US companies supported the ASEAN local content requirements of 40 percent, but individual country content requirements would not foster the development of local small and medium enterprises and technology transfer on exports which are prerequisites for a globally competitive industry," he said.

ASEAN countries are open to foreign automotive manufacturers but they invariably require that these companies source 40 percent of their parts from local parts manufacturers.

The idea behind this requirement is to spur the development of local automotive parts manufacturers by assuring them of a ready market.

However, automotive manufacturers, who normally have their own parts manufacturing businesses, have been adamant about being able to source all their requirement wherever they please, usually from their own subsidiaries.

Kania added that automotive funds were globally mobile and would normally seek out those regions that offered the most attractive returns.

"The ASEAN must continue to attract investment funds away from China and South America," he said. "Nevertheless, the US companies are very encouraged by the growth in the ASEAN markets and would continue to explore opportunities for investment, exports and SME development."