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Ireland

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Malaysia's auto industry tool for Government goals for development of bumiputra ... Malaysia (open to free trade in product areas where it can compete), Thailand ... – PowerPoint PPT presentation

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Title: Ireland


1
Ireland
  • Ireland earns dubious honor of being most
    expensive country (with Finland) within the
    Eurozone
  • Price increases across the board groceries,
    clothes, homes
  • Inflation an outcome of Irelands economic growth
    (compare to Singapore)

Source NY Times
2
(No Transcript)
3
Eurozone
  • Rising euro creates worries for Europe
  • Exports Hugo Boss (foreign investment in
    Cleveland offers some protection)
  • Lack of domestic consumer spending can be offset
    by engine of exports
  • Softening dollar (deficits) and pegged Asian
    currencies
  • Possibility of central bank intervention
  • EU enlargement and the Euro
  • New EU citizens unaware of adoption by 2010
  • EU issues regarding fair competition
  • Britain alleges Spain and France block fair
    competition for public contracts

Source New York Times, Financial Times
4
  • Managers of Russian auto company Izhavto shut
    down plant
  • 12,500 workers
  • Issues in transition economies
  • Production increases over past few years
  • Production did not match sales expectations
    producing to stock
  • Marketing and sales functions lack of expertise
  • Learning to operate outside a command economy

Source New York Times
5
Global auto safety standards
  • International auto safety regulation
  • 22 nations involved
  • Co-ordinated under auspices of U.N. committee
  • Regulators benefits to sharing resources,
    skills and development costs
  • Auto industry cheaper to design cars to meet
    one set of regulations

Source New York Times
6
  • Read Do new drugs always have to cost so much,
    NY Times, Nov 13, 2004

7
AFTA and the Malaysian national car project
8
Driving forces behind AFTA
  • ASEAN (1967)
  • Creating a cohesive group comprised of nations
    with different ideologies, colonial ties
  • Search for peace and stability
  • Bargaining power
  • AFTA (1992)
  • Transformation of economies economic growth
    (GDP), changes in sectoral composition of exports
    (exhibit 4), increased exports in Malaysia,
    Thailand, Singapore and Indonesia (realization
    of value of trade) objective to increase
    intra-regional trade (components and
    specialization)
  • Increased inward FDI (exhibit 5) realization of
    value of FDI
  • Changes in flows of investment to ASEAN and China
    - Objective to attract market seeking foreign
    investment by integrating markets (production
    base), dealing with China threat
  • Competition from regional blocs elsewhere

9
Malaysian auto market
  • Malaysias auto industry tool for Government
    goals for development of bumiputra
  • Infant industry with important social goals
    Proton
  • Provides development of ancillary industry
    (again geared towards bumiputra)
  • Encourages reallocation of resources from rich
    minorities to indigenous population
  • Creation of inefficient company whose success
    (domestic and exports) is attributable to
    preferential treatment of Government (infusion of
    money, exemption from tariffs, sales taxes, curb
    competition through quotas, encourage sales to
    bureaucrats)
  • Proton 1985-2000, still inefficient and unable
    to compete critique of infant industry argument

10
Malaysia
  • Contrast with Thailand
  • Free market approach towards trade and investment
    in contrast to Malaysian example of Government
    intervention
  • Ability to attract investment, operate
    efficiently
  • Domestic automobile manufacturing dominated by
    MNCs
  • Indonesia started out with free market approach
    has moved towards Government intervention

11
Challenges
  • Each country looks for its self interest
  • Malaysia (open to free trade in product areas
    where it can compete), Thailand (stands to gain
    by opening automobile with foreign investors who
    have already invested) Thailand and Malaysia
    are 2 large auto markets (followed by Indonesia
    and Philippines)
  • Difficulties in making concessions since economic
    integration has implications for social issues
  • How can Malaysia ensure social stability?
  • Countries are in different positions ability to
    negotiate
  • Malaysia and Singapore have weathered crisis
    better (Thailand has seen some decline in FDI)
  • AFTA is more important for Thailand

12
Challenges to AFTA
  • Position of countries (continued)
  • Limited integration across ASEAN countries (makes
    it harder to push agenda for integration) e.g.
    Malaysias extra-ASEAN exports are approx. 3
    times intra-ASEAN (with double counting through
    Singapore)
  • Consider Singapores response of signing free
    trade pacts with other countries

13
Challenges
  • Economic integration has to contend with
    differences in political environment, cultural
    realities (ethnic groups) and traditional
    alliances
  • Challenges to integration are similar to
    challenges to free trade some constituencies
    will lose in the process
  • National Governments are hesitant to push issues
    that have repercussions for national constituents
    benefits are long term, but repercussions are
    short term
  • Disparity in size, economic power make it an
    agreement between countries that are not equals
    concessions are typically offered by countries
    that are more developed while significant
    benefits flow/ protection is afforded to those
    who are not
  • Reinforcing nature of trade and economic
    integration

14
Malaysian auto market
  • New national auto policy that will lower tariffs
  • Excise duties imposed instead to offset loss of
    Government revenue
  • Continues with licensing system for auto imports
    Approved Permits
  • Started in 1970s when auto distribution was
    dominated by ethnic Chinese
  • Scheme worth more than 340 million annually
  • Thailand has indicated that it may file formal
    complaint with WTO if licensing system continues
  • Malaysia considers possible repercussions for its
    export palm oil

Source Asian Wall Street Journal
15
Proton
  • Proton enters alliance with Volkswagen to
    assemble VW cars for Southeast Asian market
  • Mahathir against selling controlling stake to
    foreign firm
  • By January, Malaysia will reduce tariffs on autos
    and components to 20, and down to 5 by 2008
  • Proton directly employs 10,000 Malaysians
  • Abdullah Badawi takes over as new PM (October
    2003)
  • End to crony capitalism and state sponsorship of
    projects (consistent budget deficits)

Source Far Eastern Economic Review
16
ASEAN today
  • Fulfilled fundamental mission of maintaining
    peace
  • Trade and investment issues
  • Unfair comparison to EU
  • Lambasted as a hopeless grouping that has left a
    long paper trail of declared intents without
    effective follow up

Source Jakarta Post
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