KL may be penalized for delaying auti sector opening

KL may be penalized for delaying auti sector opening

KUALA LUMPUR (AFX-ASIA): Malaysia may have to pay "compensation" for putting off the opening of its auto sector under the Asean Free Trade Area (AFTA) regime, in the form of allowing wider access to its markets for other ASEAN countries, Business Times reported.

The report cited unidentified officials in Chiang Mai, Thailand attending the ASEAN economic ministers' meeting.

The compensation "will not be in monetary form. Malaysia will not succumb to such a demand. If the penalty is in terms of market access, we can consider it," a Malaysian official said.

Malaysia has delayed the liberalization of certain segments of its automotive sector to 2005 from 2003.

"All agreed that Malaysia's automotive sector is a special case. The final form of compensation will be decided by the economic ministers," the official said.

Under AFTA, Brunei, Indonesia, Malaysia, Thailand, the Philippines and Singapore will reduce tariffs on most goods to between 0 and 5 percent by 2003 while Vietnam, Myanmar and Cambodia will do so on a staggered basis.

The official said several ASEAN members are using the World Trade Organization (WTO) provisions to put pressure on Malaysia to pay compensation for its decision.

The report also said that Thailand and Indonesia which also have major automotive industries are unhappy that Malaysia has been allowed a two-year delay.

Business Times quoted unidentified sources as saying that Thailand wants Malaysia to step up liberalization of the agriculture sector in exchange for the delay in liberalizing the auto industry.

The report also said Thai Deputy Prime Minister and Commerce Minister Supachai Panitchpakdi will present to Malaysia for negotiation a Cabinet-approved list of alternative products for tariff reduction, which includes rice, sugar and flour.

The report also said that the Philippines is seeking a reduction in "bureaucracy" in the oil and gas sector.