Joining the Trans-Pacific Partnership (TPP) agreement will be a positive move for Malaysia’s automotive sector, according to consulting firm Frost & Sullivan. As Bernama reports, the company says that being part of the 12-nation trade pact will allow the country to have a competitive advantage as an export hub for auto parts in the ASEAN region.
Speaking to the news agency, Frost & Sullivan’s vice president of mobility Vivek Vaidya said that while Thailand was ahead of Malaysia on free trade agreements (FTAs), with several of these working well for it, the TPP is a ticket for Malaysia to gain back ground.
The TPP would help Malaysian companies gain market access, create opportunities for skills, transfer technology as well as promote transparency and clarity to the industry, he said. The trade pact will enable industry players to enter into countries under the TPP – which account for 40% of global gross domestic product (GDP) – without being subjected to tax or custom barriers.
“These players will find that they have an edge over Thailand,” he said, but added that a change in mindset was also needed. “Local players need to adapt to the ways in which other markets work. They need to be competitive. They cannot just carry on business as usual, they need to change,” Vivek explained.
He added that brands like Mercedes-Benz, Honda and other original equipment manufacturers (OEMs) and component manufacturers that have production or manufacturing plants in Malaysia will gain by operating from here. “When Malaysia is part of TPP, the strategic attractiveness of Malaysia actually enhances because of market access to TPP member states,” he said.
The results won’t be seen immediately though – Vivek said the agreement, which is expected to be signed in February, will not have any impact on the auto market this year or even the next. “It kicks in after 2018, but for the automotive sector, the tax reduction and excise duty elimination will only start from 2020,” he said.
He added that another regional player that has an advantage from the TPP’s automotive point of view is Vietnam. “Vietnam is likely to benefit the most because it is more competitive in terms of labour rates,” he stated.
Last November, it was reported that the TPP and other FTAs would bring about cheaper cars in the next few years, but some parties had cautioned against raising such high hopes, at least in the immediate future. In December, an economic study released by General Motors said that the removal of non-tariff measures in the automotive industry that prevent free trade within ASEAN would create up to 500,000 new jobs as well as increase economic output.