• Madani Sahari

Local car industry should be ready for AEC formation

Ten Asean member countries have cemented their agreements to commence the formation of the "Asean Economic Community (AEC)" on December 31 this year.

It is certain the outcomes of AEC formation would significantly impact the economic activities in all the Asean nations and one of which is the promise of bigger market opportunities for businesses.

Four primary objectives of AEC are - to create a single market and production base, competitive economic Asean region, equitable economic development among member nations and Asean integration into the global economy.

There exist both skepticism and optimism among communities within the various business sectors as to the possibility of further delay in the launching of the AEC.

However, the primary concern is the readiness of the business community to adapt to the new business landscape of the AEC, irrespective of "when" it is implemented, but "if" it is implemented on the target date.

AEC will create a vibrant and competitive single market with more than 600 million people with a gross domestic product (GDP) in excess of RM7.5 trillion, transforming the region with free movement of goods, services, investment, skilled labor and freer flow of capital.

Henceforth, business communities in all sectors must be concerned with the free movement of goods that will present both market and production opportunities as well as threats to their businesses.

Eleven priority sectors were selected for the initiation on the AEC set to achieve the four primary objectives prescribed above, and automotive is one of them.

The basis for their selection are based on their comparative advantages in natural resources, labor skill and cost competitiveness and their value-added contribution to the economy of Asean.

Local automotive community, especially the vendors, may derive the opportunities of bigger demands for parts and components by automotive original equipment manufacturers (OEMs) within the AEC.

On the other hand, they may face direct competition from vendors in other member countries for similar parts and components required locally.

Lower tier manufacturer supplying specialized or half-finished parts and components to local assembling companies may have better business opportunities as the companies are expanding their markets to other member countries.

In all quality produce and lower cost is the key parameters for the local automotive businesses to participate or to survive in the promising markets to be offered by the AEC launching.

Hence, the focus set in the National Automotive Policy 2014 to enhance the competitive advantage, both efficiency and productivity, of local vendors and OEMs were a strategic endeavor to ensure their ability to participate and to compete in the future AEC market irrespective when it is implemented.

Supply of quality and highly skilled manpower is vital to achieve high level of efficiency and productivity among the local vendors.

Towards this end, under full support of Ministry of International Trade and Industry, Malaysia Automotive Institute in the couple of years was aggressively implementing on-the-job training programmes for young graduates and school leavers to develop their careers in automotive professions.

Apart from developing local talent in automotive arena, the initiatives are viewed to safeguard the possible diminishing of employment opportunities for the local workforce to the skilled and talented workers moving into the country due to free movement of labors among member countries under the AEC agreement.

Local automotive industries now have less than a year, should the target date hold promise, to review and to take cognizance of the coming AEC launching.

Survival of the nation automotive sector will largely dependent on strategic preparation by the vendors and the local OEMs alike.

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