Malaysia's Sapura Motors, which produces automotive components, plans to set up a RM7 million plant in Indonesia this year to take advantage of lower costs there, a report said today.

With lower tariffs under the Association of Southeast Asian NationsFree Trade Area (Afta), Indonesia offers better opportunities and synergies to the group, Sapura managing director Mohamad Shah Hussain was quoted by The Star as saying.

"As far as automotive manufacturing is concerned, Indonesia vis-a-vis Malaysia does provide better raw materials cost savings. This would be advantageous not only in the Asean Free Trade Area but also in terms of cost," he said.

"The initial investment in land and building (for the plant) is seven million ringgit."

Component suppliers

Shah said the expansion was in line with Sapura's drive to boost its business. The group is still finalising plans for the plant which would supply products to both the Indonesian and Malaysian automotive markets, he added.

Sapura supplies components such as transmission and brake systems, suspension parts and steel bars to national carmakers Proton and Perodua. It is also an original equipment manufacturer for among others BMW, Mercedes, Ford, Isuzu and Volvo.

Under Afta, import tariffs for most products in the region were cut to below five percent over the last year.

Malaysia obtained a two-year reprieve for its auto industry until 2005 but it recently said it would further defer reducing duties to the required level until 2008. - AFP