Thursday October 29, 12:08 AM
Malaysia liberalises struggling auto industry
Malaysia announced plans to kickstart its sluggish auto industry Wednesday, with liberalisation measures that include allowing foreign firms full ownership of ventures producing luxury vehicles.
Trade Minister Mustapa Mohamed also revived the push for national carmaker Proton to team up with a foreign partner, a proposal that has been mooted for several years but never realised.
"It is our policy to promote this strategic partnership. We hope it can be done soon," he said at the unveiling of the new National Automotive Policy.
Prime Minister Najib Razak has urged Proton -- which is suffering from a 50 percent excess production capacity and a reputation for poor quality and unimaginative models -- to ensure its survival by forging a partnership.
There has been renewed speculation recently that Proton is in discussions with Volkswagon. Earlier talks with the German automaker and General Motors collapsed in 2007, reportedly over demands for an ownership stake.
Proton was formed 25 years ago as part of an ambitious national industrialisation plan, but its market share has slumped in recent years as it struggled to compete against Japanese and European carmakers.
Malaysia is the biggest car market in Southeast Asia, but the new plan for the sector is being rolled out as passenger vehicles production from January to September plunged 11.7 percent year on year to 325,644 units.
Mustapa said that under the policy, the government will by 2020 dump the controversial "Approved Permit" import licensing system, which has been criticised as fostering corruption and hampering competition.
Tax breaks will be offered for firms developing electric cars, and foreign carmakers producing luxury vehicles worth over 150,000 ringgit (43,000 dollars) will be allowed 100 percent ownership of new manufacturing operations.
"We would like to develop a more viable (auto) sector," Mustapa said. "We want Malaysia to be a hub. We want to be competitive."
"I know there were shortfalls in the past," he said, referring to neighbouring Thailand's success in attracting major Japanese and US auto players to establish plants there.
Other measures in the policy, which will be effective from January 2010, include a ban on used auto parts from June 2011 and the imposition of annual inspections of cars 15 years or older.
Ahmad Maghfur Usman, an auto industry analyst with OSK Research, greeted the new policy with cautious optimism.
"Malaysia is trying to lure European manufacturers. I think a partnership between Proton and Volkswagon is possible with Malaysia ending a freeze on manufacturing licences," he told AFP.
Ahmad said Proton had the capacity to produce 450,000 cars annually but was only producing about 140-150,000 cars.
"It will put Malaysia on the investor's radar but Thailand is still ahead in terms of incentives," he added.
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