Guest Blogger: Clara Suong Tran
editing by mike smitka
A sensible policy for a developing country is to import used cars. That ends up using less foreign exchange than importing knocked-down (KD) parts kits. However, it doesn't create the highly visible jobs of a car plant. It also is subject to false invoicing, since it's hard to find an objective standard to make sure importers aren't evading taxes or using artificially high prices to surreptitiously transfer funds overseas. (Many developing countries have foreign exchange controls and a black market for foreign currency.)
Japan has long exported used cars, as domestic regulations encouraged owners to scrap vehicles by their 10th year, even if they were low mileage. That's one reason their brands are well-known in Southeast Asia, and why jeepney makers in the Philippines favor Japanese engines – the lack of a good used car market in Japan makes good used engines cheap. Now the "sha-ken" regulations eased circa 1994, but the used car market remains "thin" so plenty still get exported.