Malaysia curbed import duties on cars from Southeast Asian neighbors Thursday in a long-awaited plan to reduce protection of the Malaysian automobile industry, but also introduced new excise taxes on the imported cars.
The two changes, taken together, will not significantly lower the prices that Malaysians pay for cars fully built in other Southeast Asian countries.
Easing import duties is part of a free trade agreement among the 10 members of the Association of Southeast Asian Nations. Other ASEAN members have cut their car import duties to between zero and 5 percent over the last year to comply with the agreement.
But Malaysia has successfully argued for special treatment for its government-controlled Proton and Perodua carmakers -- which have taken two decades to develop -- saying it needs time to prepare the region's main homegrown auto industry for competition. It secured an extension until at least 2005 to lower duties to the levels of neighboring ASEAN countries.
Proton and Perodua compete with US, European and Japanese producers who assemble cars in Southeast Asian nations.
In a statement late Wednesday, the government said import duties on vehicles fully built in Southeast Asian countries would be curbed to a range of 70 percent to 190 percent on Thursday, from the current 42 percent to 300 percent.
It said import duties on knocked-down passenger vehicles -- cars imported in parts for assembly in Malaysia -- will fall to 25 percent from the current range of 42 percent to 80 percent.
To compensate for lost revenue from lower import duties, the government said it will impose excise duties on all car imports of 60 percent to 100 percent.
Excise duties are currently only levied on locally manufactured products, though Proton and Perodua cars enjoy a 50 percent rebate on excise duties.
It wasn't immediately clear whether that rebate would be perceived as a trade barrier by other ASEAN members.
Import duties on cars from outside Southeast Asia will be lowered to 35 percent for knocked-down models, and to 80 percent to 200 percent on fully built models, the government said.
In a decision likely to displease some competitors, Malaysia said it would wait until 2008 to further reduce motor vehicle import duties, to the required range of zero percent to 5 percent.
Malaysia argues that the extension it secured from fellow ASEAN members means it can begin winding back duties starting in 2005. However, some members interpreted the extension as meaning that Malaysia must adopt the zero-to-5 percent import duty target in 2005.
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