malaysia..gbe presentation 2

8/8/2019 Malaysia..Gbe Presentation 2

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Malaysia: Protectionism of the

automobile industry


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Malaysian Industrial Development Authority

MALAYSIA IS AMONG THE:

Top 3 growth centres in emerging marketsDeutsche Bank Research 2005

Top 10 countries as a choice for business locationTNSGlobal Reputation Survey 2005

Top 3 countries for Offshore Location CentresA.T.Kearney Annual GlobalServices Location Index, 2005

Top 5 countries for energy, finance and logistics inglobal shared services and outsourcing (SSO)

Frost & Sullivan -SSOHub PotentialAnalysis 2005

23rd most competitive economy in the worldIMD World Competitiveness Yearbook, 2006

Kuala Lumpur is the cheapest city in the world to live inUBSBank ofSwitzerland, 2006


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Background

1960 - Malaysian Automotive industry begins

1984 - PROTON, national car maker is

established.

1985 - Proton SAGA is launched.

1992 - Second National car maker PERODUA is

established (Primary focus on compact cars).

Perodua

Proton saga


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Market share: The entry of proton into the local automobile market

resulted in massive structural changes in theeconomy

Sale and market share of Japanese cars which haddominated the market prior to the launch of Protonwere reduced as Malaysians bought their nationalcar.

The success stories of Proton and Perodua were

positively influenced by high tariffs imposed by thegovernment

As a consequence, national cars market shareamounted more than 60% of total sales(2009figure)


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ANALYSIS Analyzing the effects of Malaysias

protectionist policy involving the

automobile policy

AFTA (ASEAN Free Trade Area)

ASEAN leadership

WTO

Domestic consumers


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Implications :

ASEAN leadership

Malaysia as a founding nation needs to

lead via example, otherwise it will lose

credibility.

WTO membership requires all member

states to dismantle all trade barriers Domestic market

Limited choice and poor quality


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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 and

components

10% sales tax on all assessed vehicles. Import Quota on completely built up units

(CBU)


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Delay implementation of ASEAN free

trade area

Malaysia is a part of the Association of theSouth East Nations (ASEAN)

4thASEAN summit, AFTA was initiated withthe objective of creating a free trade area in

ASEAN by 2010.

Malaysia promised to remove all protection

related to the national car industry by 2003. In 2003, Malaysia asked for extension till

2005.


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The National Automotive policy

(NAP)

Given the significant challenges facing

the automotive industry, in particular

globalization, economic liberalizationand increasing competition the

Malaysian government launched the

National Automotive Policy (NAP) inMarch 2009.


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Highlights of the revised NAP

Removal of import duty on importedvehicles and components.

Reduction of excise tax on importedautomobiles.

Removal of excise tax rebates on

national automobiles. Government sell of shares in national

car producers (i.e. Proton)


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Government Influence on

Trade

Economic rationale

Fighting unemployment

Protecting the infant industry

Developing an industrial base

Economic relationships with other

countries


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Trade

Non economic rationale

Maintaining essential industries

Preventing shipments to unfriendly

countries

Maintaining and extending spheres of

influence Preserving national identity


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Trade Tools of Governmental intervention

Tariffs, Subsidies, Quotas

Tactics for dealing with importcompetition

Convincing decision makers

Involving the industry and stakeholders Preparing for changes in the competitive

environment


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Core Issues

Malaysian Governments policy on

protectionism

Increased international pressure on

free trade by WTO and ASEAN

The uncertain future of national cars

Malaysian consumer is disadvantaged


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Recent Developments

Review of revised NAP with effect 1,

Jan 2010

Strategic partner still in lieu for Proton

Increased consumer


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Future Recommendations and

Possible Solutions


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Conclusion

malaysia..gbe presentation 2

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