Analyzing the effects of Malaysia

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Introduction

• Analyzing the effects of Malaysias Protectionist
• Policy involving the automobile industry
• AFTA
• ASEAN Leadership
• WTO
• Domestic Consumers

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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

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Analysis Implications
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.
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Analysis Case Study

• Indonesias 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
• Indonesias 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

1. Removal of import duty on imported automobiles
   and components.
2. Reduction of excise tax on imported automobiles.
3. Removal of excise tax rebates on national
   automobiles.
4. 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
Strengths Weakness
Strengthen AFTA and ASEAN Increased competitiveness of automobile industry (Proton merger) versus China (emerging market) Gaining favor in WTO. Short term increased unemployment due to merger layoffs. Short term decrease in GDP.
Opportunities Threats
Increased export of automobiles to African markets. Increased in GDP if automobile industry succeeds Increased in employment Extinction of Malaysias national car. Chinas ASEAN penetration.
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Thank you!!
http//classes.maxwell.syr.edu/PSC783/2006/Malaysi
a/