[Adfunk Auto] Malaysia plans to become regional carmaking hub
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Muhammad
Oct 20, 2005, 3:28:43 PM10/20/05
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PUTRAJAYA, Malaysia - Malaysia unveiled plans on Wednesday to become a Southeast Asian hub for making cars, throwing down a challenge to neighbouring Thailand.
The government will encourage more foreign investment in the sector through incentives such as soft loans and grants and will take away an important tax break from state-controlled carmaker Proton Holdings, a government statement said.
"Priority will be given to manufacturers and assemblers which plan to use Malaysia as a launch pad to tap the regional and international markets," the statement said.
Malaysia is Southeast Asia's largest passenger car market but makes far fewer cars than Thailand, which calls itself the "Detroit of Asia". Critics say state protection of Proton has held up car prices and deterred foreign investment in the sector.
Malaysia and Thailand, Southeast Asia's biggest overall vehicle market, took different tacks.
Thailand decided to develop its industry through an open-door policy, using tax breaks to lure dozens of foreign carmakers and parts manufacturers. Malaysia, under former prime minister Mahathir Mohamad, created its own state carmaker and used protectionist policies to nurture a national champion.
But free-trade pacts have pressured Malaysia to cut protection for Proton in return for greater access to overseas markets for Malaysian-made cars.
Malaysia will cut import duty on ASEAN-made cars to 15 percent from 20 percent this week, in line with an agreement to phase it out by 2008 under a free-trade pact signed by the Association of South East Asian Nations.
Under the new policy, Proton will lose its rebate on excise duty but may benefit substantially from incentives, given the new industry-wide incentives will vary according to investment levels. Proton plans to spend almost 5 billion ringgit on research and development over the next five years.
"Overall the policy is a step in the right direction to open up the car market," said Vincent Khoo, head of research at Hwang-DBS Vickers. But another analyst said Proton's advantage would not be eliminated: "The playing field is still not level but I suspect the pricing advantage will narrow."
Malaysia is also closing the door to imports of car brands not already sold within the country, the statement said. But all the major global brands are already sold in Malaysia.
"We will support Proton but in a manner that will ensure it will compete," a government official said.
Asked if Proton's major domestic rival, Perodua, part-owned by Daihatsu Motor Co, had also received the scrapped excise-duty rebate, the government official declined to comment, saying this was commercially sensitive.
Together, Proton and Perodua command 61 percent of Malaysian passenger car sales, expected to total 520,000 units this year. Proton's share has fallen to around 40 percent from two thirds.
The auto industry is politically sensitive in Malaysia because Proton was created by former premier Mahathir as part of his plan for Malaysia to become a developed nation by 2020.
The firm is still controlled by the state, but minority investors would be happy for the government to sell a strategic stake to joint-venture partner Volkswagen of Germany and surrender management control to Europe's biggest carmaker.
Auto policy is also central to Malaysia's affirmative-action agenda to redistribute wealth to its majority ethnic Malays, who own less than 20 percent of the stock market.
Licences to import cars have been given exclusively to unlisted Malay firms and Malay businessmen, a practice critics say has enriched a tiny elite and opened the way for corruption.
The government said on Wednesday it would phase out the approved-permit system in the long run and extend the issue of permits to listed Malay-run firms like Sime Darby and DRB-Hicom, which both sell imported cars.
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Posted by Muhammad to Adfunk Auto at 10/20/2005 12:22:00 PM
The government will encourage more foreign investment in the sector through incentives such as soft loans and grants and will take away an important tax break from state-controlled carmaker Proton Holdings, a government statement said.
"Priority will be given to manufacturers and assemblers which plan to use Malaysia as a launch pad to tap the regional and international markets," the statement said.
Malaysia is Southeast Asia's largest passenger car market but makes far fewer cars than Thailand, which calls itself the "Detroit of Asia". Critics say state protection of Proton has held up car prices and deterred foreign investment in the sector.
Malaysia and Thailand, Southeast Asia's biggest overall vehicle market, took different tacks.
Thailand decided to develop its industry through an open-door policy, using tax breaks to lure dozens of foreign carmakers and parts manufacturers. Malaysia, under former prime minister Mahathir Mohamad, created its own state carmaker and used protectionist policies to nurture a national champion.
But free-trade pacts have pressured Malaysia to cut protection for Proton in return for greater access to overseas markets for Malaysian-made cars.
Malaysia will cut import duty on ASEAN-made cars to 15 percent from 20 percent this week, in line with an agreement to phase it out by 2008 under a free-trade pact signed by the Association of South East Asian Nations.
Under the new policy, Proton will lose its rebate on excise duty but may benefit substantially from incentives, given the new industry-wide incentives will vary according to investment levels. Proton plans to spend almost 5 billion ringgit on research and development over the next five years.
"Overall the policy is a step in the right direction to open up the car market," said Vincent Khoo, head of research at Hwang-DBS Vickers. But another analyst said Proton's advantage would not be eliminated: "The playing field is still not level but I suspect the pricing advantage will narrow."
Malaysia is also closing the door to imports of car brands not already sold within the country, the statement said. But all the major global brands are already sold in Malaysia.
"We will support Proton but in a manner that will ensure it will compete," a government official said.
Asked if Proton's major domestic rival, Perodua, part-owned by Daihatsu Motor Co, had also received the scrapped excise-duty rebate, the government official declined to comment, saying this was commercially sensitive.
Together, Proton and Perodua command 61 percent of Malaysian passenger car sales, expected to total 520,000 units this year. Proton's share has fallen to around 40 percent from two thirds.
The auto industry is politically sensitive in Malaysia because Proton was created by former premier Mahathir as part of his plan for Malaysia to become a developed nation by 2020.
The firm is still controlled by the state, but minority investors would be happy for the government to sell a strategic stake to joint-venture partner Volkswagen of Germany and surrender management control to Europe's biggest carmaker.
Auto policy is also central to Malaysia's affirmative-action agenda to redistribute wealth to its majority ethnic Malays, who own less than 20 percent of the stock market.
Licences to import cars have been given exclusively to unlisted Malay firms and Malay businessmen, a practice critics say has enriched a tiny elite and opened the way for corruption.
The government said on Wednesday it would phase out the approved-permit system in the long run and extend the issue of permits to listed Malay-run firms like Sime Darby and DRB-Hicom, which both sell imported cars.
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Posted by Muhammad to Adfunk Auto at 10/20/2005 12:22:00 PM
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