Indonesia and Malaysia have signed an agreement to determine a three way partnership to provide ASEAN’s first fully locally produced vehicle for domestic use.
Government officials from each countries signed a memorandum of understanding (MoU) in Jakarta on Friday (10 August) to start cooperation aimed toward streamlining the work of automotive employees and provide chains, with the aim of learning the best way to fully manufacture components within the region and making a recent brand.
Malaysian Minister of International Trade and Industry Darrell Leiking, who signed the MoU on behalf of his country, hailed the choice as a follow-up to the visit of Malaysian Prime Minister Tun Dr Mahathir Mohamad to President Joko “Jokowi” Widodo in June.
“This is a testament that the strong bilateral economic relationship between Indonesia and Malaysia has become a reality,” he said on the signing event. “It shows that Malaysia and Indonesia should not be separated and should remain together in the economic and social development of the ASEAN region.”
Leiking noted that Indonesia is Malaysia’s seventh-largest trading partner and the 2 countries’ automotive industries are mutually dependent.
Indonesia recorded a surplus of US$139 million (RM567 million) in trade with Malaysia from January to May this 12 months, while total trade stood at US$7.65 billion (RM31.2 billion), in response to data from the Ministry of Trade. The surplus marks a reversal from a deficit of US$160 million (RM653 million) recorded throughout the same period last 12 months.
The MoU entrusts the Malaysian Automotive Institute (MAI) and the Indonesian Automotive Institute (IOI) with running the enterprise. The two government-appointed bodies have lined up their automotive component manufacturers to implement the MoU through business-to-business collaboration.
MAI Chief Executive Officer Datuk Mohamad Madani Sahari said that if Indonesia and Malaysia joined forces, they’d have the opportunity to provide vehicles with 90 per cent of the components manufactured locally.
Both countries were also considering the potential of producing biodiesel-powered cars, on condition that Indonesia and Malaysia are the world’s largest producers of palm oil.
During the visit, Dr Mahathir said Indonesia and Malaysia must come together to oppose the European Union’s plan to limit imports of crude palm oil (CPO) and its derivatives.
“IOI and MAI have agreed to further collaboration specifically for this research,” Mohamad said after the event. “We will have more collaboration in research to develop our (capabilities) in creating electric, hybrid vehicles.”
However, he didn’t want to offer a selected date for the completion of the prototype vehicle produced by each countries, saying your entire process would depend upon the companies implementing the agreement.
Director General of Resilience and Development of International Industrial Access on the Indonesian Ministry of Industry, I Gusti Putu Suryawirawan, said that the variety of Indonesian and Malaysian automotive component manufacturers is sort of 2,000 firms, lots of that are small and medium-sized enterprises.
“Another important outcome of this (MoU) is human resource development – we will be able to upgrade the skills of our automotive workers and at the same time exchange knowledge or information,” Putu said.
He stressed that such cooperation is according to the spirit of the ASEAN Economic Community (AEC), which was established by ASEAN in 2015. The community is certain by a Mutual Recognition Arrangement (MRA), which guarantees engineers and specialists from seven other fields privileged access to the labour market in other ASEAN countries.
He added that the agreement goals to create many kinds of vehicles: passenger cars, delivery vehicles and specialist vehicles.
“There are more than 640 million people in ASEAN. They will grow and so will their purchasing power for vehicles,” Putu said. “So we will do everything we can to supply that market.”
IOI president Made Dana M. Tangkas said strong demand from the Malaysian automotive industry lately has led to the import of components and spare parts from Indonesia.
Data from the Indonesian Automobile Manufacturers Association (GIIAS) shows that Indonesia shipped nearly 1.5 million individual components for passenger and industrial vehicles to Malaysia in the primary half of 2018.
“This (MoU) is a warm-up for the establishment of a federation of ASEAN automotive institutes that will focus on the benefits of ASEAN’s own automotive industry,” Made said, adding that the cooperating parties are looking forward to welcoming more ASEAN members, especially Thailand, which is the region’s largest automotive producer.
