Automobile production in the ASEAN-4 countries (Indonesia, Malaysia, the Philippines and
Thailand) reached 1.4 million units in 2002, which was almost the same level as the peak before
the Asian crisis in 1997 (Figure 1b).1 Although the production volume in the ASEAN-4
countries is still much smaller than in other Asian countries like Korea and China (Figure 1a),
the ASEAN region has seen a rapid recovery of their automobile industry and has grown into an
export base for the world’s leading automobile manufacturers since 1998.
A series of deregulation measures in the past few years has led to conspicuous changes in
the business environment for the ASEAN automobile industry: the Asian Industrial Cooperative
(AICO) scheme was implemented in 1996, minimizing tariff dissimilarities and offering
qualified participating companies the immediate benefit of the CEPT (Common Effective
Preferential Tariff) tariff rates in the range of zero to five percent;2 in 1998, the AFTA (ASEAN
Free Trade Agreement) was introduced, as a result of which the CEPT applied to more than 96
percent of all the manufacturing and agricultural products by 2002; Indonesia lowered tariff
rates on CBU (Complete Built-Up) and CKD (Complete Knock-Down) parts produced in
ASEAN to 5 percent in January 2002, followed by Thailand and the Philippines where the tariff
rates were lowered in January 2004;3 moreover, the local content requirements were lifted or
mitigated in the late 1990s in the ASEAN-4 countries.4