Tuesday, 21 April 2015

Industrial nationalism and AEC integration automotive sector


A lot has been said about Malaysia’s protectionist policy with regard to the development of its automotive sector.

The practice of infant industry protection was introduced in the 19th century in Germany to protect the onslaught of British industrialists that began to exploit the European market for their industrial produce.

Similar “economic or industrial nationalism” practice was introduced in Japan as a nationalist response to protect the country from foreign trade dominance during the same period. This industrial nationalism was also widespread among nations of the Third World, Africa and Asia, in their attempt to recover from postcolonial economic dependency.

Despite rapid globalization that has taken place in the last few decades or so, the automotive industry remains as a national industry to most nations, especially in advanced countries despite being highly developed in their international businesses. Automotive still represent their manufacturing industry’s best serving interest of the nations.

The automotive industry relates to a wide range of the other sectors within its ecosystem. Upstream industries producing and supplying raw materials right down to downstream parts and components manufacture, inclusive of supporting industries such as molds and dies, foundries and machining are players within the automotive ecosystem.

In this respect, the automotive industry of a nation is a national industry and as such, industrial nationalism is close to the heart of its car makers. Although internationalized, these carmakers operate their manufacturing businesses tightly connected to their domestic supporters and have high tendency to complement them.

Their competitiveness is closely related to their homeland, especially in the areas of advanced technological development (R&D) and parts and components supply.

Malaysia has envisioned itself of becoming an industrialized nation through the development of its automotive sector.

In the sector’s nascent stages, it has no alternative but to adopt an unpopular protectionist policy to ensure the survival of the industry. The policy has resulted in the establishment of the nation’s automotive ecosystem with its homegrown industry players and entrepreneurs.

Today, some 550000 of the nation’s working population are directly or indirectly involved in automotive related activities and various technological acquisitions and advancements have been achieved through spin-offs from the development of the automotive industry.

Automotive liberalization is rapidly progressing in Malaysia and the formation of the Asean Economic Community (AEC) will further expedite the process. AEC liberalization will eventually open up business opportunities for all and lead to the removal of various protectionist policies. 
Homegrown vendor communities within the region will be vulnerable to stiff competition from well-established global parts and components manufacturers.

The success of the automotive economic integration of the AEC and its sustainability is largely dependent on business strategies of both homegrown and global automotive players. Possible threats to business opportunities among homegrown vendors may lead to unfavorable repercussions for governments and the car makers alike.

In this respect, the global automotive players present within the AEC would have to re-examine their operational strategies in the near future, especially in relation to fair participation of homegrown vendors in the countries they are operating.

Proton and Perodua, the two establishments nurtured as a result of Malaysia’s industrial nationalism, are now playing their vital role of sustaining the local automotive industry. The companies have shared responsibilities to assist the government in ensuring the survival of the vendors and suppliers within the nation’s automotive supply chain and able to participate in coming liberalized automotive EAC agenda.

Similarly, enhancing the capability and economic viability of local vendors are favorably expected from other international players present in the country, putting aside their industrial nationalism to assist Malaysia to successfully participate in the AEC integration in the automotive sector.




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