1. K PRU Parliamentary Lecture FTAs and the Automotive Industry in Thailand and Malaysia Date: 29th October 2010 (Friday) Time: 2.30 pm to 3.30pm Venue: Bilik Jawatankuasa 1, Parliament, KL Speaker: Dr. Kitti Prasirtsuk

2. FTAs and the Automotive Industry in Thailand and Malaysia Dr. Kitti Prasirtsuk Thammasat University October 29, 2010

3. Talk Overview The Development of the Automotive Industry The Impact of FTAs - Australia - Japan - AFTA

4. The Development of the Auto Industry in Thailand and Malaysia 1960s first domestic auto assembly plants (for import substitution) 1970s local content policy 1980s National Car vs. working with MNCs - 1987 Thailand offered various incentives for FDI following the 1985 Plaza Accord

5. Different approaches since 1980s -Malaysia: National Car Project -Thailand: working with MNCs (J/V) Nissan – Pornprapa Family Mitsubishi – Pannachet Family Isuzu – Bunsoong Family Honda – Sarasin Family Toyota – SCG * Thai partners more involved in sales

6. Since 1990s Thailand: more liberal on auto, esp. during PM Anand (1991-92) - 1991 reduced tariffs  more care imports  impetus for competition - 1992 AFTA - reduced local content 2002 more Western auto FDI Detroit of Asia (2004) vs. NAP (2006)

7. Turning Points for Thai Auto Industry Turning Point 1 : The 1997 Asian Financial Crisis  from J/V to foreign ownership  exports Turning Point 2 : FTAs (2005 onwards)  even more exports

8. Thailand’s Strength Pick-up truck (1 ton): -the 2 nd largest market in the world, only next to the U.S., since the 1990’s -now export bases to all over the world (except North America) for Isuzu, Toyota, Mitsubishi Small passenger cars: Toyota Vios, Yaris; Honda City, Jazz; Nissan March R&D Centers (Toyota and Honda) Clusters of suppliers Now 14 th largest car producer in the world “economies of scale”

9. World Ranking: Automobile Production by Country (2007)

11. The Impacts of FTAs Thailand-Australia FTA - Since January 2005 - windfall gains for the Thai auto industry - exports of both CBU and parts

12. Thai Exports to Australia 65.47%109.72%

13. Thai Production Volume (units)

14. Auto Sales in Thailand

15. The Impact of JTEPA Cheaper parts imports from Japan (esp. core components)  cheaper car prices in domestic market  more competitiveness on exports

16. The Impact of AFTA Auto duty (HS: 8703) became 0% since Jan. 2010 Thai auto exports were soaring during Jan.- Jun. 2010. To ASEAN US$ 1.49 billion (24% share) Indonesia, Philippines, Malaysia To Australia US$ 1.67 billion

17. 2010 Thai Production & Exports Jan.-Aug. 2010 Auto production 1.05 million Units (+93%) - domestic sale 0.49 + exports 0.58 million units Exports Value 518 billion baht (+60%) - cars 270 + parts 235 billion baht

18. Negative Impacts Thailand: FTAs force closures of auto-parts firms Local auto-parts manufacturers are being forced out of business by increased competition from free-trade agreements including the Asean Free Trade Area. Fewer than 10% of first-tier parts suppliers are wholly owned Thai companies at present compared with 80% a decade ago, according to the Thai Auto- Parts Manufacturers Association. 'The only advantage of the Thai auto-parts industry is skilled labour; the country lacks raw materials and technological know-how. (Bangkok Post, 11 March 2010)

19. Conclusion Liberal policies on the auto industry and FTAs benefit Thailand Yet, auto prices in Thailand remain high. More room for more liberal policies to reduce prices for the benefits of consumers.