With the implementation of the Asean Economic Community (AEC) 2016, the Association of Southeast Asian Nations (Asean) will reach a prominent position to attract foreign investment. As Asean is set to become the world’s sixth-largest automotive market by 2018, it is expected that regional sales will double to nearly 4.7 million vehicles, from 2.4 million last year. Therefore, its 10 member-states continue to facilitate significant investments to flow into this region. A harmonization of standards and regulations has to be seen as essential step to the success of AEC 2016. Only with such a harmonization can the creation of a single manufacturing base, as well as free movement of goods, be secured.

According to the “CEO 360 Degree Perspective of the Automotive Industry in Asean,” Indonesia, Malaysia, Thailand and Vietnam are demonstrating a compound annual growth rate of 10.1 percent. Sales in Thailand and Indonesia have reached over 1 million vehicles each, and a significant increase in production is expected based on local demands, with Thai dominance of nearly 2.5 million vehicles produced last year alone.

In addition to serving the regional market, Asean has assumed a greater role as a global supplier of automotive, and is expected to grow in importance due to a competitive production base with strong competencies in certain product ranges. This will increase substantially not only economic growth, but also employment and technological advancement.

The stakeholders in the Philippine automotive sector, from importers to distributors, from assemblers to parts makers, are getting excited about the challenges and opportunities the integrated Asean market is going to offer. Road maps have been prepared for manufacturing of cars and for car parts. Both are still with the administration to decide which way to go. It seems that manufacturing is a tall order for the Philippines and will require a long-term vision with the willingness to financially support the sector for quite some time. It may be easier to become a parts and components supplier, given the work the Philippines is already doing for gearboxes, wire harness, electronic parts and lighting, etc. The time for the Department of Trade and Industry to make this decision is now.

During a recent stakeholder dialogue, themed “Come Unity, Setting Directions for One Asean,” the need for strong inter-industry and supply-chain linkage was highlighted as keys to enhancing competitiveness. To emerge as winner, the Philippine automotive businesses must align to their strategies to the new rules—wider market, new and diverse customers, and tougher competition. The Philippines will have to foster a level playing field for all players to flourish in the AEC.

European car-parts makers and car companies are positioning themselves for the attractive Asean market, being aware that the middle class is growing and the demand for cars will be rising. However, it will require joint action by the Asean member-countries to create harmonized systems and standards.

Key recommendations for Asean:

1. Alignment of automotive products with international United Nations Economic Commission for Europe (UNECE) standards. Asean to adopt UNECE regulations for automotive products and to work closely with all member-countries in the region to align the 19 priority UNECE standards. Target is to achieve a single regulatory regime in Asean by 2015. Asean should implement identical testing procedures using the same metrology method, standards and application regulations.

2. Consolidation of approval and homologation processes. Asean to create a single regulatory regime for approval and homologation processes to improve time and cost efficiency. The automotive industry in Asean strongly advocates relevant authorities to accept test reports by qualified foreign bodies and align their standards in order to facilitate exports based on UNECE-approved regulations. Implementing such a regime will assist in creating economies of scale in production countries like Thailand and Indonesia and, hopefully, soon in the Philippines.

3. Adoption of higher fuel quality and emission standards. The introduction of higher fuel quality and emission standards is the pre-requisite for the introduction of environment-friendly low-emission technologies. In order to prepare for the AEC 2015 and to enable free movement of goods, Asean will have to implement more stringent fuel quality and emission standards and harmonize those standards across the region. A concrete road map of implementation is urged by automotive manufacturers and the oil companies.

4. Harmonization of the definition on local content requirements. The automotive sector is recommending a harmonization of related implementation procedures for local content and Rules of Origin application as part of the approval and homologation processes in order to become a single manufacturing hub in 2015.

5. Technology-neutral vehicle-taxation scheme. Asean is urged to promote to member-countries the introduction of a technology-neutral emission-based taxation scheme, such that vehicles with low carbon dioxide (CO2) emissions would receive a tax relief whereas high fuel consumption and high CO2 emission vehicles would be taxed higher, independent of their power train technology.

6. Availability and quality of skilled work force. Asean governments are encouraged to facilitate public-private partnerships in engineering and technology training to ensure that the work force meets industrial demand. In the Philippines dual education and apprenticeship need to be revived. The implementation of the Ramos-era legislation is over bureaucratic; the Technical Education and Skills Development Authority (Tesda) is encouraged to create a public-private sector working group to make the implementation easier. The European Chamber of Commerce of the Philippines (ECCP) discussed this with Deputy Director General Irene Isaac of Tesda; the ECCP will form a cooperation along this line with the Philippine Chamber of Commerce and Industry.

Source: Business Mirror, 07 August 2014