In one of the first signs of a crack in the high tariff barriers to automotive trade in Southeast Asia, Toyota Motor Corp. has received permission to ship parts between Thailand and Malaysia at preferential duty rates.
The long-delayed approvals also show that the Asian economic crisis is prompting nations to rethink their former protectionist stances, one analyst said.
Besides Toyota, a number of vehicle and parts makers have applied for preferential tariff treatment, including AB Volvo's local units and Japan's Denso Corp. Ford Motor Co. expects to apply as well, once it has set in place a parts network in the region, said Bangkok-based Ford spokesman Ken Brown.
The members of the Association of South East Asian Nations long have advocated the promotion of regional trade. ASEAN includes Thailand, Indonesia, Malaysia, the Philippines, Singapore, Vietnam, Brunei, Laos, and Myanmar. In reality, though, each nation sought to build up its own industrial base by using high tariffs to keep out imports.
SLOW AND DAUNTING
The ASEAN Industrial Cooperation Scheme has been in place for years, in theory allowing companies that trade components between two ASEAN nations to pay sharply lower tariff rates of 0 to 5 percent on imported parts. Typically, countries charge duties of 65 percent or more on imported auto parts.
In practice, getting the necessary approvals has been a slow and daunting process.
Toyota's local units applied for the special treatment in January 1997. Toyota received approval from Malaysia in March 1998 and from Thailand in May.
'The willingness to approve the plans is much greater than before,' said John Bonnell, director of Southeast Asian operations at Auto-motive Resources Asia Ltd., a consulting firm based in Bangkok.
He noted that in the past, no country would approve an ASEAN Industrial Cooperation Scheme application until at least four ASEAN member states were willing to go along. Now a bilateral accord is sufficient for approval.
The fallout from the Asian economic crisis, which has slashed foreign investment in the region and hurt manufacturers that are solely dependent on one nation's market, has encouraged countries to rethink their former protectionist attitudes, Bonnell said.
'I think they're looking around and asking, 'How can we save what we have so far?' ' he said.
'One of the answers is to build volume' through more regional trade, he added.
With the approvals, Toyota will ship 54 parts between the two nations at duties in the 0 to 5 percent range.
Toyota will ship steering link assemblies and engine controls from Malaysia and diesel engine assemblies and body panels from Thai-land.
Toyota's ASEAN Industrial Cooperation Scheme applications with other nations are still pending.