Malaysia facing pressure to reform car import policy<\/p>\n
Eileen NG, Associated Press, Kuala Lumpur, Malaysia<\/p>\n
For decades, Malaysia's policy of giving Malay auto dealers
\nthe exclusive right to import foreign cars at the expense of
\nminority Chinese and Indians has been like a dark family secret -
\nyou know it but you don't talk about it. After all, it hinged on
\nthe country's most sensitive nerve ending: racial inequality.<\/p>\n
But a severe tongue lashing last week against the system by
\nformer Prime Minister Mahathir Mohamad has triggered a vigorous
\npublic debate in the country over the opaque cornerstone of
\nMalaysia's auto policy, with many industry players and analysts
\ndemanding its abolition.<\/p>\n
The controversy comes at a time when Malaysia is being forced
\nto liberalize its heavily protected car market under a regional
\nfree trade agreement and hopes to become a regional auto
\nmanufacturing hub that would rival neighboring Thailand, the
\n\"Detroit of the East.\"<\/p>\n
\"The government must phase out the policy if it is serious in
\nwanting to create an open competitive delivery system,\" said
\nRamon Navaratnam, a former senior Finance Ministry official who
\nis now a corporate adviser.<\/p>\n
As part of an affirmative action program to help uplift poor
\nMalays, the government issues \"approved permits,\" or licenses to
\nMalay-owned companies to import foreign cars and sell them here.<\/p>\n
But the government is not obliged to reveal the names of the
\nrecipients of the permits, leaving itself open to accusations
\nthat the licenses are being given to rich Malays with connections
\nto the government. Many of the permits are sold to others at
\nhefty profits.<\/p>\n
The permit \"in its present form, is nothing more than a tool
\nfor the distribution of patronage to those who have influence,\"
\nwrote P. Gunasegaram, the group executive editor of The Edge
\nfinancial weekly, in a daring editorial on Monday.<\/p>\n
After Mahathir's criticism, Uttusan Malaysia, a daily known to
\nbe close to the former leader, published an expose claiming that
\nmany permit holders are under-declaring the value of their
\nimported cars to avoid customs payments. The country lost 1
\nbillion ringgit (US$263 million) from the scam last year, it
\nsaid.<\/p>\n
Prime Minister Abdullah Ahmad Badawi was forced to acknowledge
\nthat the government was aware of the racket, and said an
\ninvestigation is being conducted. But he insisted the permit
\nsystem will not be abolished.<\/p>\n
The Association of Malay Vehicle Importers and Traders
\nsupports the system, but admits tighter rules are needed to curb
\nabuses.<\/p>\n
\"The intention is good but some people who have the permits
\nare misusing it and that makes a mockery of the government,\"
\nassociation Chairman Abdul Hamid Ibrahim said.<\/p>\n
Ironically, Mahathir's anger against the system is not because
\nhe or other Malay leaders see it as discriminatory against
\nminority Chinese and Indians.<\/p>\n
He says the unbridled distribution of permits has led to a
\nflood of imported cars in the country, hurting the national car
\nmaker, Proton, of which he is now the chief adviser.<\/p>\n
Proton was started by Mahathir in 1983 as a pet project to
\ndemonstrate Malaysia's ability to nurture heavy industry.
\nHowever, it was shielded from competition because the government
\nimposed heavy tariffs on foreign cars - both fully built vehicles
\nimported under the permit system and locally assembled foreign
\nmodels.<\/p>\n
Proton, which once enjoyed a virtual monopoly on the roads,
\nsaw its market share slip to 44 percent last year with the
\ntariffs being dismantled slowly under a free trade agreement
\nreached by the Association of Southeast Asian Nations.<\/p>\n
The Malaysian government, obliged to liberalize the sector
\nfurther under the agreement, has warned Proton that it should be
\nready for competition. Still, it has been slow in shedding the
\nbarriers against foreign cars. It announced a cut in import
\nduties in January, but nullified it by imposing higher excise
\nduties.<\/p>\n
A new auto policy - a blueprint for the Malaysian auto
\nindustry's overhaul - is expected to be unveiled this month, with
\nindustry watchers waiting to see if the excise duties will be
\neased.<\/p>\n
Some carmakers have put expansion plans for Malaysia on hold
\npending the new policy, analysts say.<\/p>\n
This auto policy \"should address incentives leading to greater
\nforeign presence, local content requirements and tax relief for
\nresearch and development,\" MIDF-Sisma Securities said in a
\nreport.<\/p>",
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