ASEAN gives KL more time to cut car tariffs

ASEAN gives KL more time to cut car tariffs

SINGAPORE (Reuters): Southeast Asian governments on Thursday
gave Malaysia a two-year reprieve before it has to cut tariffs on
its struggling car industry as part of a free-trade drive to
sharpen the region's global competitiveness.

Economy ministers of the Association of Southeast Asian
Nations (ASEAN) signed a protocol granting temporary exclusions
from its timetable to slash tariffs on 85 percent of goods
categories to between zero and 5 percent by the end of 2002.

Ministers, anxious not to miss out on the global boom in trade
and investment, insisted that the exemption would not derail
their drive for open markets.

"We have agreed that ASEAN will have to make ourselves more
attractive," Supachai Panitchpakdi, Thailand's deputy prime
minister and commerce minister, told reporters.

"We have to be more persistent with our own free trade
arrangement and with our own domestic macroeconomic policies,"
Supachai, already picked as the next head of the World Trade
Organization (WTO), added.

Ministers were meeting to clear the way for an ASEAN summit
that starts with a working dinner on Thursday.

The 10 leaders of the bloc, many of them mired in political
trouble at home, will be joined on Friday by their opposite
numbers from Japan, China and South Korea.

Malaysia will now have until 2005 to slash tariffs, which can
reach 300 percent on imported cars. Tariffs on imported auto
components range from 42 percent to 70 percent except for the
national carmaker, Perusahaan Otomobil Nasional Bhd., or Proton,
which pays just 13 percent.

Malaysia's move has angered Thailand, where multinational car
makers have invested heavily and are banking on increased exports
to countries such as Malaysia. The two governments will meet next
month to discuss compensation.

Officials fear other countries, still not fully recovered from
a financial crisis in 1997 that plunged wide swathes of Asia deep
into recession, will also take advantage of the exemption clause
to delay opening up sensitive sectors.

As well as Malaysia, ASEAN groups Singapore, the Philippines,
Thailand, Brunei and Indonesia plus four poorer countries that
joined more recently -- Myanmar, Laos, Cambodia and Vietnam.

Although any ASEAN country can apply for a time-out, the
protocol was drafted after Malaysia asked for more time to
prepare Proton for the onslaught of foreign competition.

Tengku Mahaleel Ariff, Proton's chief executive officer, said
last week that the auto maker, which has about 65 percent of its
home market, would find it hard to compete if the high tariff
walls were torn down right away.

Malaysia distrusts the accelerating trend toward integrated
global markets and swam against the tide following the Asian
crisis by imposing capital controls to deter foreign speculators.

But Malaysian officials, while wary of the rush to free
markets, insist they are four-square behind ASEAN's drive for
free trade and investment.

In last month's budget the government said it would permit
foreign equity ownership in Proton and Malaysian Airline System,
another national status symbol.

By and large, Malaysia's neighbors are sympathetic to its plea
for more time.