Malaysia

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Analyzing the effects of Malaysia’s Protectionist Policy involving the automobile industry: AFTA ASEAN Leadership WTO Domestic Consumers Introduction

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Background 1960 - Malaysian automotive industry begins 1984 - Perusahaan Automobil Nasional (PROTON), national car maker is established 1985 - Proton Saga is launched 1992 - Second national car maker PERODUA is established (primary focus on compact cars) Proton Saga Perodua

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Background The Malaysian government has taken a number of precautions to compete with imported cars: National Cars receive 50% reduction in excise tax Import duty: 140 - 300 % on passenger cars Import duty: 5 - 30% on automotive parts & components 10% Sales Tax on all assessed vehicles Import quota on completely built up units (CBU)

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Analysis: Implications Delay Implementation of ASEAN Free Trade Area (AFTA): Malaysia is part of the Association of South East Nations (ASEAN). 4th ASEAN Summit, AFTA was initiated with the objective of creating a free trade area in ASEAN by 2010. Malaysia promised to remove all protection relating to the national car industry by 2003. In 2003, Malaysia asked for an extension till 2005. Malaysia has not removed current taxes and tariffs as of 2006. Retaliation by Thailand: Delay in removing tariffs and taxes on palm oil. Singapore and Thailand have both enacted bilateral Free Trade Agreements with the United States in retaliation.

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ASEAN Leadership: Malaysia, as founding nation needs to lead via example, otherwise it will lose credibility. WTO Membership: WTO requires all member states to dismantle all trade barriers. Domestic Market: Limited choice and poor quality. Analysis: Implications

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Analysis: Case Study Indonesia’s National Car Timor “I made it clear that in our view, this [i.e., tax incentives and tariff exemptions] was a policy that was discriminatory against European car manufacturers and also that it was contrary to the obligations Indonesia has undertaken with the WTO…” ~ European Union Commissioner for External Affairs, Sir Leon Brittan, following an April 23, 1996 meeting with Indonesia President Soeharto 1996 - Launched Timor Indonesia’s National Car industry was exempt from import duty on automobile parts and received preferential treatment 1998 - Project abandoned due to inability to compete and complaints from EU & US to WTO.

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Analysis: Proton

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Analysis: Proton v. Competitors

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Analysis: Proton Projected Growth

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Recommendation: Removal of import duty on imported automobiles and components. Reduction of excise tax on imported automobiles. Removal of excise tax rebates on national automobiles. Government sell off shares in national car producers (i.e. Proton).

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Recommendation: Proton joint partnership growth

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Recommendation: SWOT

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Thank you!! http://classes.maxwell.syr.edu/PSC783/2006/Malaysia/