THE IMPACT OF JAPAN'S EPA ON AUTOMOTIVE INDUSTRY IN MALAYSIA, THAILAND AND INDONESIA

In some ASEAN countries governments have been protecting the local automotive industry to various degrees by implementing several measures. The situation has changed after these countries jumped into the free trade agreement (FTA) bandwagon in early 1990s. This paper examines the impact of Japan's economic partnership agreement (EPA) on the automotive industry with a comparison among Malaysia, Thailand and Indonesia. Japan has designed not only a regular FTA with trade in goods but also an agreement that includes intellectual property, trade in services, dispute settlement, cooperation and many more. Japan has forged a very close economic relationship with ASEAN countries since 1960s and has been playing a significant role in the industrial development process of each country. It is well known that many Japanese automotive manufacturers have set up their subsidiaries and factories in Malaysia, Thailand and Indonesia, and have attained among the top shares in automobiles sales and exports. This study aims to investigate the relationship between Japan and ASEAN's top three producers and markets in automobiles and automotive parts: Thailand Malaysia and Indonesia. The paper is organized as follows: (1) review on the background and current development of automotive industry in Malaysia, Thailand and Indonesia; (2) determine the impact of Japan's EPA on the local automotive industry in these three countries from various aspects; (3) explain the prospects and challenges of the automotive industries in Malaysia, Thailand and Indonesia.