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Everybody wants an automotive industry

column-Henry J. Schumacher-Asean-EU PerspectiveAs the Association of Southeast Asian Nations (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 the Asean Economic Community (AEC), which formally commenced in January this year. Only with such a harmonization can the creation of a single manufacturing base, as well as free movement of goods, be secured.

The Philippines is getting its act together in becoming one of the automotive production centers in Asean. The Comprehensive Automotive Resurgence Strategy Program launched by the Department of Trade and Industry will hopefully entice some car manufacturers to start making cars here.

It is important to note that all countries in the world that have a strong industrial manufacturing base are involved in automotive production. The Philippines finally made the important decision to develop the automotive industry in a targeted incentives approach. Once the initial production step is made, the supply industry will naturally follow or those already here will stay.

Key recommendations for Asean:

  1. Alignment of automotive products with international 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.

  1. Consolidation of approval and homologation processes

Asean to create a single regulatory regime for 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.

  1. Adoption of higher fuel quality and emission standards

The introduction of higher fuel quality and emission standards is the prerequisite for the introduction of environment-friendly low emission technologies. In order to implement the AEC  and to enable the 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.

  1. 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 2016.

  1. 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.

  1. 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; Technical Education and Skills Development Authority is encouraged to create a public-private sector working group to make the implementation easier.

In addition to serving the regional market, Asean can assume a greater role as a global supplier of automotive vehicles and parts, and is expected to grow in importance due to a competitive production base with strong competencies in certain product ranges in some Asean member-states, for instance Thailand and, potentially, Indonesia and, hopefully, the Philippines.

 

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