Previously I blogged about Thailand’s refusal to lower import taxes on vehicles from Malaysia down to an AFTA agreed rate of 5%. It wants to maintain it’s 20% current rate as it considers Malaysia’s non-tax barriers non-compliant under the ASEAN Free Trade Agreement (AFTA).

Examples of these non-tax barriers are import regulations like quotas, which allow Thailand to bring in only 50,000 cars annually despite the Malaysian market supporting the sales of 100,000 cars annually.

Of course in the spirit of the AFTA agreement, the two governments are still trying to sort this mess out. Thailand wants Malaysia to relax it’s regulations before it will lower it’s tax rates for incoming Malaysian vehicles. Thailand is of the opinion that there should not be export quotas and strict import regulations in a fair playing ground. 10% of the vehicles imported by Thailand annually comes from Malaysia.

Our Malaysian government is still waiting for full details on the Thai’s auto policy to be submitted for them before taking any further action. Minister of International Trade and Industry Datuk Seri Rafidah Aziz says there has not been any official communication on the details yet, and so far she has only read what she knows from the newspapers.

Thailand – which does not have any national carmakers of it’s own – has achieved immense success in carving out an automotive industry for itself through foreign investments. It is currently Toyota’s 2nd largest export production center after Japan itself, and is the world’s 2nd largest manufacturer of pick-up trucks after the United States. There are currently 15 auto assembly plants in Thailand, mostly Japanese, with a 16th (a larger facility owned by Toyota) due for completion in January 2007.

Total investment from Toyota alone amounts up to USD$900 million. Toyota’s total production is predicted to reach 550,000 vehicles by next year. It’s facilities there can currently churn out a maximum 650,000 vehicles a year. 90% of parts and materials are sourced locally, creating a lucrative supplier business for the locals there.

Let’s hope Malaysia can move forward the same way with the NAP!