Proton unable to compete in AFTA

Proton unable to compete in AFTA

Agence France Presse, Kuala Lumpur

Malaysia's national carmaker Proton may not be able to compete
if a local content rule under the ASEAN Free Trade Area (AFTA) is
not reviewed, Prime Minister Mahathir Mohamad said Monday.

Mahathir said the 40 percent local content requirement for
companies to take advantage of tariff cuts under AFTA would put
products with higher local content at a disadvantage.

"Malaysia finds that our national car, for example, which has
90 percent local content, may not be able to compete with cars
assembled in other countries that has only 40 percent local
content," he told reporters.

"That is why we have to give some due consideration for
products with higher local content."

However Mahathir said Malaysia's auto sector "should become
more efficient and cost-effective" by 2005.

The premier was elaborating on his comments earlier to the
Pacific Basin Economic Council meeting where he called for a
review of certain aspects in AFTA which comes into force next
year.

"Some of the things in AFTA need to be relooked at... by and
large, Malaysia subscribes to AFTA and we will honour our
commitments," he said.

Under AFTA, most members must cut tariffs on imports for
agreed products to a maximum of five percent. Malaysia has
obtained a two-year reprieve for its auto industry until 2005.

Mahathir said the 40 percent local content rule would also
affect rice farmers in Malaysia, whose production costs were
double that of those in neighbouring rice-producing countries.

"These problems had not surfaced when we signed the
agreement... our farmers are concerned (that) they all will have
to close shop unless the government subsidises them," he said.

Asked if Malaysia would seek a review of the local content
rule under AFTA, he added: "I would like to keep an open mind on
this."

On the same occassion, Mahathir Mohamad took a swipe at
unbridled globalization Monday and said that nations should break
free from economic straitjackets to deal with problems in their
own way.

The Malaysian leader has long spoken against what he sees as
powerful nations - particularly the United States - establishing
economic control over poor countries through institutions like
the IMF.

Mahathir has taken pride in Malaysia's rapid rebound from the
financial crisis five years ago compared to neighbors like
Thailand and Indonesia, who followed painful IMF restructuring
programs and have never fully recovered.

The move was criticized but has proven successful. Malaysia's
economy dipped into recession in 2001, reflecting the U.S.
downturn, but is expected to grow 4.5 percent this year.

"Today, only those who are blind refuse to acknowledge that we
have recovered better and faster than those who applied the
recommended formula," Mahathir said.

Mahathir said that governments and businesses should not be
constrained by systems or ideology but should trust their own
judgment.

Malaysia is not against globalization, Mahathir said, adding
that foreign investments and free trade have contributed to
national growth.

But the benefits of globalization should be shared fairly, he
said. Trade rules should be strengthened to provide "a
predictable, fair and stable multilateral trading system."