KL duties on car may penalize carmakers

KL duties on car may penalize carmakers

Agence France-Presse, Nusa Dua, Indonesia

Japan is worried Malaysia's plan to impose excise duties on
imported cars despite a regional free trade pact will penalize
its carmakers, a top official said on Wednesday.

Malaysia has not unveiled details of the new tax structure but
there are fears it will discriminate between national and non-
national cars, said Sadahiro Sugita, Japan's trade policy
director for the Asia-Pacific.

"We are worried about plans to introduce excise duties for
imported cars. If it is implemented unfairly between national and
non-national cars, it will be penalizing and discriminatory to
Japanese carmakers," he told AFP on the sidelines of the
Association of Southeast Asian Nations (ASEAN) summit here.

"We want a level playing field."

Tariffs on imported cars in Southeast Asia fell below five
percent in January under the ASEAN Free Trade Area (AFTA) but
Malaysia has delayed opening its car market until 2005.

Veteran Prime Minister Mahathir Mohamad last month said
Malaysia would levy excise duties on imported cars from January
to offset losses in revenues from import tariffs. Critics said
the move was aimed at evading AFTA and protecting national
carmaker Proton, which is already feeling the heat.

Sugita said Japan's trade ministry had voiced its concern to
the Malaysian side during preparatory talks this year on a
bilateral free trade pact.

Negotiations on the Malaysia-Japan Free Trade Area are
expected to begin next month in Kuala Lumpur and the issue of
excise duties on imported cars will be central to the
discussions, he said.

Japan's Honda earlier this year launched its own production
facility in Malaysia to benefit from AFTA but Sugita said "other
Japanese carmakers are still watching closely Malaysia's policy
decision."

Despite the government's reminder that car prices will not
fall under AFTA, sales have dropped in Malaysia as consumers held
back purchases to await details of the tariff adjustment.

But sales of foreign makes rose 19 percent in the first half
of this year at the expense of nationally-built cars, Proton and
Perodua, due to the introduction of new models and the lifting of
price controls by the government in January.

Sugita said giant auto-makers like Toyota and Isuzu have
centered operations in Thailand, which has emerged as ASEAN's
vehicle assembly and export hub due to its efficient supply chain
and liberalized market rules.

Japanese carmakers have a combined market share of 80 percent
in Thailand but have been constrained in Malaysia by tariff
protection for Proton since 1985.

"Malaysia is still not competitive in this sense. It must open
up," he said.

ASEAN's plan to create a single market of 530 million people
by 2020 is a crucial factor for investment by Japanese carmakers.
But the uncertainty in Malaysia made it tough for them to plan
their long-term production strategy, he added.

Malaysia is currently the biggest passenger car producer in
ASEAN but research firm Automotive Resources Asia said it
believed Thailand would take over the number one spot by 2006.

It predicts Thailand will by then have a 48 percent share of
total vehicles produced in ASEAN, with exports of around half a
million.