Malaysia and Japan have sealed the principal accord of a free trade agreement (FTA) that includes the lifting of tariffs on Japanese cars, making them cheaper and more competitive in the local car market.
The premiers of the two countries, Datuk Seri Abdullah Ahmad Badawi and Junichiro Koizumi, signed the agreement in Tokyo yesterday.
The accord, which is part of the Japan-Malaysia Economic Partnership Agreement, is expected to take effect by year's end, if approved by legislators of both countries.
It will also pave the way for Malaysia to formulate a National Motor Policy, expected to be released next month.
Negotiations on the pact were delayed owing to disagreement over tariff issues, with some Japanese vehicle makers lobbying hard for reductions on auto products.
Under the agreement, Malaysia will abolish tariffs on completely-knocked-down (CKD) vehicles and components produced by Japanese carmakers in the country.
Tariffs on auto parts imported from Japan that are not used in CKD vehicles will be reduced to between zero and 5% in 2008 and will be fully eliminated by 2010.
Tariffs on completely-built-up vehicles (CBUs) will be completely abolished by 2015.
Meanwhile, tariffs on vehicles with engine capacities of between 2,000 and 3,000cc, multi-purpose vehicles (MPVs) and trucks of 20 tonnes or more will be gradually abolished in five years.
For vehicles with engines bigger than 3,000cc, tariffs will be cut to between zero and 5% in 2008 and totally eliminated by 2010.
Local motor industry players welcomed the long-awaited conclusion of the FTA.
According to Perusahaan Otomobil Kedua Sdn Bhd (Perodua) managing director Hafiz Syed Abu Bakar, the tax regime is a welcome change as it would benefit local assemblers, especially those that source their parts from Japan.
The playing field is more level and transparent now. This is also good news for us since we are in partnership with Daihatsu and we get our replacement parts from Japan, Hafiz told StarBiz.
However, he said a strong Japanese yen might offset some of the benefits.
Proton Vendors Association committee member and Tracoma Holdings Bhd managing director Mohd Shah Datuk Abu Bakar said the agreement served as a wake-up call to local players to further develop and improve their technological capabilities, and prepare for greater challenges ahead once the market was fully liberalised.
He said consumers stood to benefit from the FTA as it will give the public a broader range of cars, adding that Japanese carmakers were likely to bring in models that were currently not built locally.
They may not want to jeopardise their own manufacturing facilities here by bringing in the same category of cars so the market is likely to see a wider range of vehicles soon, he added.
Malaysia Automobile Association (MAA) president Aishah Ahmad said the FTA would make Japanese cars as competitive as Asean-made vehicles.
Japanese carmakers already have a heavy presence here. With the agreement, their market share is likely to increase further, she pointed out.
Did you find this article insightful?