KL cuts duties to meet AFTA obligations

KL cuts duties to meet AFTA obligations

Antara/Kyodo,
Kuala Lumpur

Malaysia announced Friday that it will slash import duties on
motorcars from other members of the Association of Southeast
Asian Nations to 20 percent from as much as 190 percent from
January next year in a long-awaited move to conform with the 10-
member regional grouping's free trade plans.

Under pressure from other automakers in the region such as
Thailand and Indonesia, Malaysia's Finance Ministry said it will
bring down the high import taxes, which had been maintained to
protect Malaysia's two national car companies -- Proton Holdings
and Perusahaan Otomobil Nasional Kedua, better known as Perodua.

While other ASEAN members have cut their import duties on
motorcars to between 0 and 5 percent last year under their plans
for an ASEAN Free Trade Area, known as AFTA, Malaysia has
deferred complying until at least next year to give local
carmakers more time to brace for competition from U.S., European
and Japanese carmakers who assemble their cars in other Southeast
Asian countries, mainly Thailand and Indonesia.

The Finance Ministry statement did not mention any plan to
eliminate the 50 percent rebate on excise duties enjoyed by
Malaysian car manufacturers, which has also been criticized by
Thai automakers.

But an official of the ministry said there are plans to
replace the rebate with a less discriminatory system of
incentives next year to help the local car industry improve its
competitiveness, such as offering tax incentives or grants for
training, and research and development.

The ministry statement said the import duty on car components
from other ASEAN members will be brought down to zero from the
current 25 percent from January next year.

But excise duties will be raised steeply for both local and
foreign cars to between 90 percent and 250 percent. Nevertheless,
auto exporters from other ASEAN members can still expect to reap
a net reduction of about 20 percent even after the excise duties
have been factored in.

"The move demonstrates that Malaysia is meeting its AFTA
commitment," the ministry official said. "Thailand and Indonesia
would like to export their cars to us. With this move, ASEAN cars
will have a competitive advantage."

For the time being, local car manufacturers will still be
cushioned by the existing 50 percent excise tax rebate, which
will lessen the pain from the increase in excise tax.

"The government does not expect major price changes in the
cars produced or assembled in Malaysia during 2005,'' the
ministry statement said.

"To ensure the longer term viability of the local automotive
industry as well as to maintain stability of motor vehicle prices
in Malaysia, the government will extend to the local automotive
industry similar fiscal incentives that have been provided to
other sectors of the economy," it said.

The ministry also said the import duty on foreign-made
motorcars from non-ASEAN countries will be cut to a flat rate of
50 percent for most types of vehicles, but after taking into
account the increase in excise duties of up to 250 percent, there
will be no net change overall for such imports.

Malaysia is Southeast Asia's biggest market for passenger
cars.

ASEAN groups Brunei, Cambodia, Indonesia, Laos, Malaysia,
Myanmar, the Philippines, Singapore, Thailand and Vietnam.