Malaysia’s new policy on auto tariff worries Asean neighbors

The recently-released National Auto Policy of Malaysia is causing concern among ASEAN member-countries due to its continuing bias against automotive imports from Thailand, Indonesia and the Philippines.

While Malaysia has reduced tariffs on imported ASEAN CBU (completely built-up) vehicles to five percent as agreed upon under the ASEAN Free Trade Agreement, it continues to impose certain policies that basically act as non-trade barriers.

For instance, Malaysia requires CBU importers to have at least 70 percent Malaysian government ownership. Malaysia continues to limit CBU importations to just 10 percent of total production volumes.

Malaysia likewise does not use the General Agreement on Tariff and Trade (GATT) valuation methodology and instead uses the values of imported cars for duty computation.

Malaysia also extends support to local large-scale assemblers and exporters in the form of excise tax credits based on the percentage of local content.

Such policies effectively blocks automotive imports from Indonesia, Thailand and the Philippines from accessing the Malaysian automotive market, the second largest auto market in the ASEAN. Malaysia reportedly plans to maintain these policies until Dec. 31, 2010.