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Thailand-Japan pact could damage auto-parts industry

Bangkok Post | 26 February 2007

Thailand-Japan pact could damage auto-parts industry

Less local appeal with zero import-tariff rate


A free trade agreement between Japan and Thailand could damage the attractiveness of the kingdom as an investment destination for high-technology auto-parts manufacturers from Japan with the introduction of a zero import-tariff rate, according to the Thai Auto-parts Manufacturers Association (Tapma).

Thavorn Chalassathien, the secretary-general of Tapma, said the association was concerned that there would be fewer technology transfers from Japanese advanced auto-parts manufacturers as Thailand would lose some of its appeal as a production base.

’’Why would they have to invest in the country when their products can enjoy import-tariff exemptions in the future?’’ asked Mr Thavorn.

Additionally, the FTA would not significantly benefit imports of general auto parts from Japan because prices of foreign parts were still not competitive compared to those of local products, said Mr Thavorn.

’’Parts would continue to be imported because they cannot be made domestically, or they are destined for niche markets. However, prices of imported parts from Japan would be lower as a result of the free trade agreement,’’ he said.

He said the cost of imported auto parts from Japan accounted for 25-30% of the value of parts made locally for Japanese cars in Thailand.

Mr Thavorn added that an FTA would not increase export opportunities for locally-made parts to the Japanese market because Japan was not a major export market for Thai auto-parts exporters. Malaysia was the priority market, he added.

Samart Deebhijarn, president for the Cluster of Thai Automotive Parts, said local manufacturers of high-technology auto parts, such as sensor systems, brake systems and engines, would lose business if clients opted to import entire systems from Japan at reduced prices.

In addition, Thai manufacturers of stamped-steel parts would suffer from the influx of parts from Japan once the current import tariff of between 10% and 30% was eliminated, he said.

’’Personally, I see no advantage for local auto-parts manufacturers from the free trade agreement between Thailand and Japan,’’ said Mr Samart.

However, Vallop Tiasiri, president of the Thailand Automotive Institute, said the FTA would not have a great impact on local parts manufacturers as advanced parts were already taxed at rates lower than 20%.

Under the free trade agreement, any parts for which tariff rates were higher than 20% would be cut instantly to 20% until 2011, while import tariffs below 20% would be reduced on a graduated basis, according to Mr Vallop.

Ninnart Chaithirapinyo, the vice-chairman of Toyota Motor Thailand, said local car manufacturers could buy imported auto parts at lower prices as a result of the agreement.

 source: Bangkok Post