Malaysia, south-east Asia's largest car market, reduced import tariffs yesterday on vehicles built in the region but said the planned elimination of duties would be delayed until 2008 to protect the local car industry.
In addition, Malaysia said it would impose excise taxes on imported cars, with the result that prices of foreign models would not be cut significantly.
Malaysia's protectionist stance on imported cars has been a big sticking point in the creation of a free trade area among the 10 members of the Association of South-east Asian Nations (Asean).
Malaysia had already won a two-year extension on car import tariffs to 2005 when the Asean Free Trade Area (Afta) went into effect at the start of 2003.
A further postponement on cutting car duties to the required range of 0-5 per cent is expected to anger other Asean members, particularly Thailand, which has become the centre of car manufacturing in the region.
Malaysia has argued that a gradual reduction of import tariffs is necessary to secure the survival of the two state-owned carmakers, Proton and Perodua, which dominate the local market.
Analysts have said that Proton and Perodua might have problems surviving in the face of increased competition at home, since they do not export many cars. US, European and Japanese carmakers have expanded production in Thailand in response to the Afta accord.
Malaysia said its interpretation of the Afta pact was that it was only required to begin reducing duties by 2005, instead of adopting much lower tariffs by that deadline as some Asean countries have claimed.
Import duties on vehicles fully built in Asean countries were cut yesterday to 70-190 per cent from as much as 300 per cent.
Malaysia argued that its decision to impose excise taxes on imported cars did not amount to a trade barrier as foreign cars were previously exempt from taxes on locally built cars.
Excise taxes on all car imports will amount to between 60 and 100 per cent, but the government did not say whether foreign cars would be entitled to the 50 per cent rebate on excise duties enjoyed by Proton and Perodua.
Import duties on foreign cars assembled in Malaysia from parts made elsewhere in Asean will fall to 25 per cent, with tariffs on cars from outside the region cut to 35 per cent for knocked-down models and 80-200 per cent on fully built models.
Parent site: "Focus on Malaysia"