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Malaysia opens up car sector to attract foreigners
October 29, 2009
By Eileen Ng Kuala Lumpur
Malaysia yesterday unveiled plans to open up its motor sector, allowing 100 percent foreign ownership and offering a 10-year tax break for production of green vehicles as it seeks to catch up with Thailand as a regional automotive hub.
The Trade Ministry said yesterday it would end a three-year freeze on manufacturing licences for luxury cars with engine capacity of 1.8 litres and above and priced at no less than 150 000 ringgit (R336 600) as well as for hybrid, electric and commercial vehicles.
It also ended rules requiring part of the equity to be allocated to ethnic Malays in these areas, allowing foreigners to now hold 100 percent ownership in a move to lure investors.
The measures are part of a new automotive policy taking effect in January to make the sector more competitive as Malaysia strives to compete with neighbouring Thailand.
"It is true that Thailand has done a lot better than us... we would like Malaysia to be more competitive. We want Malaysia to be a hub for the auto industry," Trade Minister Mustapa Mohamed told a conference.
Malaysia is southeast Asia's largest passenger vehicle market, with about half a million vehicles sold each year.
But its policy to protect national players such as Proton and compact car maker Perodua through ownership constraints and high taxes put it at a disadvantage against Thailand, which has gained a reputation as the "Detroit of the East". Thailand has no domestic car makers and has emerged as a regional base for General Motors and Toyota Motor.
Mustapa said the government wanted state-controlled Proton to tie up with a global player to ensure its survival. He said talks were ongoing.
"We know there have been many discussions... we hope it will be finalised very soon."
Proton has been hunting for a foreign partner but the government's insistence on maintaining control over a national icon has made it difficult to seal a meaningful partnership.
Volkswagen ended alliance talks with Proton in 2007 but recently revived negotiations.
Mustapa said Malaysia would focus on niche sectors including hybrid and electric cars, which have large untapped potential in the region. It would also draw up plans to develop infrastructure for electric vehicles, he said.
Car makers and analysts cheered the news.
Ahmad Maghfur, an analyst at OSK Research, said Malaysia hoped to woo European car makers to set up base in the country by liberalising the luxury car segment. - Sapa-AP
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