A kind soul sent me the following analysis which explains why the mainstream media never tells us the truth.
WHAT IS NEVER MENTIONED IN Mainstream Media like NST/TheStar/Utusan/BH are these facts....
Malaysian PerCapita Income USD 5000
VS
Singaporean PerCapita Income USD 25000
Further The Star made a comparison of prices in Thailand , Singapore and Indonesia .
For Thailand it is quoted at RM3.90/liter, however are they aware that in Thailand new cars are cheaper than Malaysia by RM10,000? They pay only one life time for their driving license? No renewal fee after that? Also that goes for road tax as well? And do TheStar also aware that you can drive all the way from Hadtyai to Bangkok on a six lane highway without paying any Tolls ??!!
Whereas here in Malaysia you have to pay yearly renewal for road tax , driving license and TOLLS, TOLLS, TOLLS!!!
For Singapore how can you quote RM 5.20 ? Please quote in Singapore Dollars because they are earning in Sing Dollars. You might as well say Europeans are paying RM10/liter. RM5.20/liter = Sing $ 2.20/liter, still cheaper than Malaysia in view of fact that Singapore is not a crude oil exporter. Are you saying that you fill up petrol in Singapore by paying Ringgit?
In economy, dollar to dollar must be compared as apple to apple. Not comparing like durian in M'sia is much cheaper than durian in Japan !! Of course-lah, Japan is not durian producer!!! Comparing Malaysian durian with Thailand durian make more sense!!
For Indonesia we might say is cheaper there at RM2.07/liter but compare that to their level of income!
Now, let us compare the price with OIL PRODUCING countries:
UAE - RM1.19/litre
Eygpt - RM1.03/litre
Bahrain - RM0.87/litre
Qatar - RM0.68/litre
Kuwait - RM0.67/litre
Saudi Arabia - RM0.38/litre
Iran - RM0.35/litre
Nigeria - RM0.32/litre
Turkmenistan - RM0.25/litre
Venezuela - RM0.16/litre
MALAYSIA - RM2.70/litre
RM 2.70!!! Individual perspective:
As of last month a Toyota Vios would 'cause a damage' of about RM 89,000.
In the international market, a Toyota Vios is about USD 19,000
USD 19,000 = RM 62,700 (using the indicative rates of USD 1 = RM 3.30)
That makes Malaysian Vios owners pay an extra RM 26,300.
This RM 26,300 should be cost of operations, profit and tax because the transportation costs have been factored in to the USD 19,000.
RM 26,300/ RM625 petrol rebate per year translates to a Vios being used for 42.08 years.
I do understand that the RM 625 is a rebate given by the government, but it also means that one has to use the Vios for 42.08 years just to make back the amount paid in taxes for the usage of a foreign car. Would anyone use any kind of car for that long?
Now with these numbers in front of us, does the subsidy sound like a subsidy or does it sound like a penalty? This just seems to be a heavy increment in our daily cost of living as we are not only charged with high car taxes but also with a drastic increase in fuel price.
With all the numbers listed out, I urge all Malaysians to join me in analyzing the situation further.
Car taxation is government profit, fuel sales is Petronas' (GLC) profit which also translates into government profit. The government may ridicule us Malaysians by saying look at the world market and fuel price world wide. Please, we are Malaysians, we fought of the British, had a international port in the early centuries (Malacca), home to a racially mixed nation and WE ARE NOT STUPID!!!
We know the international rates are above the USD 130/barrel. We understand the fact that the fuel prices are increasing worldwide and we also know that major scientist are still contradicting on why this phenomenon is happening. Some blame Bush and his plunders around the world and some blame climate change and there are others which say petroleum 'wells' are getting scarce.
Again we go back to numbers to be more straight fwd
1 barrel = 159 liters x RM2.70/liter = RM 429 or USD 134
On 1 hand, we are paying the full cost of 1 barrel of crude oil with RM2.70 per liter but on the other hand the crude oil only produces 46% of fuel.
Msia sells crude oil per barrel at USD130 buys back Fuel per barrel at USD134. And not forgetting, every barrel of fuel is produced with 2 barrels of crude oil.
1 barrel crude oil = produce 46% fuel (or half of crude oil), therefore
2 barrel crude oil = approximately 1 barrel fuel
In other words, each time we sell 2 barrels of crude oil, equivalently we will buy back 1 barrel of fuel.
Financially,
Malaysia sell 2 barrel crude oil @ USD 130/barrel = USD 260 = RM 858
then, Malaysia will buy back fuel @ USD 134/barrel = RM 442/barrel
Thus, Malaysia earn net extra USD 126 = RM 416 for each 2 barrel of crude sold/exported vs imported 1 barrel of fuel !!!
(USD 260-134 = USD 126 = RM416)
So where this extra USD 126/barrel income is channeled to by Malaysian Govt?????????
Another analysis:
1 barrel crude oil = 159 liters.
46-47% of a barrel of crude oil = fuel that we use in our vehicles.
46% of 159 = 73.14 liters.
@ RM 2.70/liter x 73.14 liter = RM197.48 of fuel per barrel of crude oil. This is only 46% of the barrel, mind you. Using RM 3.30 = USD 1, we get that a barrel of crude oil produces USD 59.84 worth of petrol fuel (46% of 1barrel).
USD 59.84 of USD 130/barrel turns out to be 46% of a barrel as well.
Another 54% = bitumen, kerosene, and natural gases and so many more.
And this makes a balance of USD 70.16 that has not been accounted for.
So this is where I got curious. Where is the subsidy if we are paying 46% of the price of a barrel of crude oil when the production of petrol/barrel of crude oil is still only 46%?
In actual fact, we still pay for this as they are charged in the forms of fuel surcharge by airlines and road taxes for the building of road (because they use the tar/bitumen) and many more excuse charging us but let us just leave all that out of our calculations.
As far as I know, only the politicians who live in Putrajaya and come for their Parliament meetings in Kuala Lumpur (approximately 60+ km) are the ones to gain as they claim their fuel and toll charges from the money of the RAKYAT's TAX.
It is so disappointing to see this happen time and time again to the Malaysian public, where they are deceived by the propaganda held by the politicians and the controls they have over the press.
Which stupid idiot economist equates rebates for rich or poor with the cc of the vehicles? An average office clerk may own a second hand 1300cc proton Iswara costing $7,000 (rebate = $625) while the Datuk's children can own a fleet of 10 new cars of BMW, Audi and Volvo all less than 2000cc costing $2 millions and get a total rebate of $625 x 10 = $6,250! Wow what kind of economists we are keeping in Malaysia ...wonder which phD certificate that they bought from...
Misleading concept of Subsidy:
The word 'subsidy' has been brandished by the BN government as if it has so generously helped the rakyat and in doing so incurred losses. This simple example will help to explain the fallacy:
Example:
Ahmad is a fisherman. He sells a fish to you at $10 which is below the market value of $15. Let's assume that he caught the fish from the abundance of the sea at little or no cost. Ahmad claims that since the market value of the fish is $15 and he sold you the fish for $10, he had subsidised you $5 and therefore made a loss of $5.
Question : Did Ahmad actually make a profit of $10 or loss of $5 which he claimed is the subsidy?
Answer:
Ahmad makes a profit of $10 which is the difference of the selling price ($10) minus the cost price ($0 since the fish was caught from the abundance of the sea). There is no subsidy as claimed by Ahmad.
The BN government claims that it is a subsidy because the oil is kept and treated as somebody else's property (you know who). By right, the oil belongs to all citizens of the country and the government is a trustee for the citizens. So as in the above simple example, the BN government cannot claim that it has subsidised the citizen!
Sunday, June 22, 2008
Saturday, June 7, 2008
Hefty increase in price of petrol by 78 sen per litre
We are all aware of the hefty increase in the price of petrol since Black Wednesday but it's time to fight for an overhaul of the tranportation system and the the costs of owning a car in Malaysia.
For example, did you know that in Singapore, once you get your driving license, there is no yearly renewal fee? It's free for life!! Just like some of the credit cards being promoted out there.
We need to fix these issues:-
1. LRT, KTM Komuter, KL Monorail and RapidKL services. They are all there but no one is able to make it worth together like an orchestra. I heard the Mat Salleh who wanted to fix it was given the boot for his ideas. What a joke!!
Today, less than 30 trains service over 100,000 passengers daily compared with 300,000 on 62 trains when KTM Komuter was in full swing. The double tracking project from Rawang to Ipoh is already completed but the service can't start because the company that supplies the trains has gone bust!!
2. Toll roads
Most of the toll operators are making a huge profit after repaying their development costs and either the companies should be taken over or consolidated with the money-losing train systems that the government was forced to take over. How can the government allow toll operators to charge so much due to short-sighted agreements and yet use taxpayers money to bail out transit rail systems operators? It makes no sense at all. Plus Expressways Bhd declared a Profit before Tax of RM1.308 billion for FY 2007. On the other hand, Star LRT and Putra LRT were taken over by Syarikat Prasana Negara Bhd (SPNB) at a whopping costs of RM3.3 billion and RM4.5 billion respectively. In other words, Malaysian taxpayers have to bear the costs of privatisation failures and pay more toll to toll operators who rip us off and demand compensation from the Government so as not to increase tolls further. We are really idiots!!
3. Exorbitant import and excise duties and road taxes on cars
Why do we have to pay huge amount of import duties and taxes on our cars just in order that Proton is able to keep making cars. Aren't we putting our heads in the sand? An average popular car like Toyota Vios cost US$10,000 (RM33,000) in America. In Malaysia, it costs more than RM80,000. How can this be? Only because, we are supposed to drive around in Proton cars or else!
If Proton can't compete after 22 years of subsidy from the rakyat, it should sold off or shut down. The duties and taxes should be abolished or streamlined in order not to burden the rakyat.
4. Abolish AP system
The AP system should be abolished and no more APs should be given out. Over the many years, AP has been given, individuals has pocketed billions of ringgit for doing nothing. Except for a handful of companies who re-invested their profits to build a thriving business of selling and servicing cars, the AP system seems only a way to print money without increasing our competitiveness in the business of selling and servicing cars. Even then, some of these companies continue to abuse the system by buying new cars overseas, declaring them as used cars to obtain lower import duties and then selling the cars locally and making obscene profits.
5. Export our old cars
Did you know that Singapore exports more cars than Proton? Singapore exports over 100,000 cars a year. Due to its mandatory car scrapping law where cars more than 10 years old are automatically assigned to the scrapyard and its incentives to dispose of cars used for more than 5 years, Singapore car owners are able to purchase a new car and used cars are thus exported out of the country. It helps that the COE system keeps the car price competitive unlike in Malaysia where we can't export our cars since most of the value is in duties and exorbitamt taxes.
6. Encourage diesel cars by selling higher quality diesel and giving incentives for using diesel engines
It's a fact that over 60% of cars in Europe run on diesel today and modern diesel engines are far more efficient and less polluting than petrol engines. Yet, due to the fact that Proton does not produce cars with diesel engines, we are discouraged from owning one. And yet the government is giving incentives to build biodiesel plants. No wonder, all the projects failed. The right hand does not know what the left hand is doing. A turbo charged modern Euro 4 gives a higher power output and yet consumes half that of a petrol engine but most of these engines start to give problems after a while because of the high sulphur content of our local diesel
It time to give the rakyat a break or we will call in the ghostbusters - PR.
Tuesday, April 1, 2008
What to do about old cars - the Singapore way
Given the increasing number of vehicles on the road each day, month and year, used vehicles are piling up at dealerships as car buyers purchase new cars. Unlike our southern neighbour who have found a way to reduce their stockpile of dilapidated vehicles, used car dealers are collapsing due to high unmoving inventories of old cars which are unable to find new owners. Due to our high import and excise duty structure, our old cars cannot be exported competitively.
Let's visit the scrapping system used by Singapore and see if we can apply a similar system.
(Extracted from AAS)
What to do with your existing car
Unless you're a virgin car buyer, or between cars at the moment, chances are you'll have an existing car to get rid of when you buy a new set of wheels. Disposing of it couldn't be simpler, but according to how much inconvenience you're willing to put up with, some ways will get you more money from your existing car than others. Naturally, it's typically the case that the more inconvenient the method, the more value you can get from your used car.
You have three main options: to scrap the car, to sell it or trade it in:
Scrapping your car
It might seem wasteful sending a perfectly serviceable car to the scrap yard, but let's be clear about one thing: 'scrapping' a car more often means deregistering it and then exporting it. Many of our cars end up in places like New Zealand, where second-hand car vultures get to feast on the remains of our automotive stock.
One of the reasons why we have a bumper crop of COEs at the moment is that the early scrapping of cars has been a rising trend. In fact, in the year 2000, a whopping 93,349 cars were scrapped, not a small number considering we only have around 400,000 passenger cars on the road. In 2001, 83,536 cars were scrapped, and in 2002, the number was 96,466. Look around the streets. The cars you see are mostly nearly new, or close to ten years old, with relatively few models from a couple of years ago.
Obviously, the scrapping route is a popular one for car buyers. This is largely because in many cases, there is simply no choice. Given how new car prices have fallen lately, most cars registered in the past couple of years are literally worth more as scrap than on the second hand market.
The Preferential Additional Registration Fee rebate system, which ensures that the Government will 'buy' back your car when you scrap it, was actually fairly generous up to May 2002, when a new PARF rebate system was introduced.
Here's how to calculate the scrap value of your car. You'll need to know the Open Market Value, the COE value and the exact age.
If the car was registered before May 2002, the amount you'll get back will vary according to how old it is.
Find the right age of your car, then multiply its OMV by the corresponding percentage to get your PARF rebate.
Then there's the COE portion of it. The Government will refund you the unused portion of your COE, pro-rated to the day. Keep in mind though that if your car is two years or younger, the COE rebate is capped at 80%.
So let's say we have a car with an OMV of $20,000, a COE of $40,000 and is just a day short of turning six years old. The PARF rebate is 120% of $20,000, or $24,000, and since there are almost four years left on the COE, the COE rebate is roughly 4/10 x $40,000, or $16,000. So the total scrap value of the car is $40,000.
From the schedule above, one thing is apparent. The best time to scrap a car is just before its 5th birthday, since you get 130% of OMV right up till then. And given that ARF was 140% at the time, scrapping a car by the fifth year effectively meant paying just 10% of OMV in upfront taxes.
The current scheme for PARF rebates is somewhat less generous.
In such a case, the ARF paid on a car with the same $20,000 OMV would have been 130% of $20,000, or $26,000. Theoretically, scrapping it by the sixth year would net the buyer just 70% of that, or $18,200, a steep drop from the $24,000 of the older system.
In any case, if your car is two years old or older, you'll benefit from the old system. One thing worth keeping in mind is that the scrap rebate will be given to you as a PARF certificate which you can only use to offset the upfront taxes on a brand new car. The LTA will not pay you in cash for scrapping your car.
NAP - National Automotive Policy - Tax the car buyer to death
NATIONAL AUTOMOTIVE POLICY
A. INTRODUCTION
Since the establishment of Proton in 1985, Malaysia has succeeded in developing integrated capabilities in the automotive industry, which include local design and styling capability, full scale manufacturing operations and extensive local participation in the supply of components. Today, Malaysia is ASEAN’s largest passenger vehicle market with more than 500,000 vehicles sold annually with 90% of that manufactured or assembled domestically.
Nevertheless, much of the country’s success in developing the domestic automotive industry has been facilitated by policies that have promoted local vehicle manufacturers and moving forward, global and domestic challenges put the sustainability of this industry at risk.
The global industry is seeing slow growth, value destruction and massive rationalisation, driving vehicle manufacturers to merge to achieve even higher levels of scale. Recognising this global environment, the National Automotive Policy (NAP) seeks to address the manifold issues and challenges and transform the domestic automotive sector to become a more viable, competitive and significant contributor to the economy.
Moving forward, Government policy and support will be focused towards automotive industry participants providing sustainable economic contribution. The key drivers for such contribution will be economic scale, industry linkage and competitive value added activities.
B. OBJECTIVES OF THE NATIONAL AUTOMOTIVE POLICY
The overall objective of the NAP is generating sustainable economic value creation. This will maximise the long term contribution of the automotive sector to the national economy and at the same time ultimately benefit the Malaysian consumer. The need to create economic value entails that the industry will continue to require supportive Government policies in order to become fully competitive internationally.
The NAP therefore aims to facilitate the required transformation and optimal integration of the national industry into regional and global industry networks. The urgency of the transformation is driven by an increasingly liberalised and competitive global environment. Consequently, the Government has set out the following objectives for the national automotive sector:
To promote a competitive and viable domestic automotive sector, in particular the national car manufacturers
To promote Malaysia as an automotive regional hub, focusing on niche areas
To promote a sustainable level of economic value added and enhance domestic capabilities
To promote a higher level of exports of vehicles as well as components and parts that are competitive in the global markets
To promote competitive and broad based Bumiputera participation in the domestic automotive sector
To safeguard the interests of consumers in terms of value for money, safety and quality of products and services
C. POLICY THRUSTS OF THE NATIONAL AUTOMOTIVE POLICY
1. Provide Government support and incentives based on sustainable economic contribution
The Government will continue to nurture and support the development of the domestic automotive sector via a comprehensive package of grants and incentives. Such Government support and incentives will be aimed at optimising sustainable economic contribution, namely the scale of operations, extent of industry linkages, and the development of local and Bumiputera capabilities.
A sustainable level of economic contribution must ultimately relate to the type and level of value added activities, which will be competitive for the domestic market and for export in a fully liberalised environment. Thus, it would not be consistent with this policy to seek to maintain a level of value added activities which will not be viable and sustainable in the long run.
The level of support will also be correlated to the level of economic contribution and value add. In this context, a large scale manufacturing concern with exports and high industry linkage will be favoured relative to a pure assembly operation with little value added activities. Similarly, greater emphasis will be given to sales, distribution and after sales activities compared to pure importation of vehicles.
Support for manufacturing will come principally in the form of access to the Industrial Adjustment Fund and research & development (R&D) grants. These grants and incentives will be given based on pre-agreed conditions and timely achievement of Key Performance Indicators (KPIs).
2. Increase scale via rationalisation to enhance competitiveness
For the industry at large, all participants across the value chain will be encouraged to focus on achieving a scale of operations that ensures their enduring competitive viability.
The Government will encourage rationalisation initiatives in the domestic automotive sector, in order to create a leaner and more sustainable industry structure. A leaner industry structure throughout the value chain will enable industry participants to achieve a sufficient level of scale to be competitive.
In this respect, the Government will promote, through grants and incentives, two national manufacturers in the high-volume car segment to ensure sufficient scale and industry linkage. To enable achievement of required scale and industry linkage, these national manufacturers must be able to rationalise their models and platforms portfolio.
The rationalisation at the vehicle manufacturers’ level will consequently enable rationalisation of the component sector that will lead to greater scale, skills and improved quality. The end result will be a smaller number of vendors, all of whom will be operating at a scale, cost and quality level that will allow them to remain competitive and be able to export.
3. Promote strategic linkages with international partners
Scale and focus are necessary to achieve greater competitiveness but in themselves, they are not sufficient. In addition, global best practices and industry linkage are other important key success factors for the automotive industry. Therefore, the Government will continue to encourage industry participants to collaborate with external parties to establish strategic tie-ups. Apart from sharing scale and resources, such strategic tie-ups open up opportunities and provide access for domestic industry participants to enter the global automotive supply chain and vice versa. Moreover, such strategic tie-ups also compel domestic industry participants to adopt best practice management, processes and procedures to deliver on higher quality standards that are necessary in accessing international markets.
4. Become a regional hub focusing on niche areas and complementary activities
The Government aims to position Malaysia as a regional manufacturing and assembly hub by encouraging existing participants to deepen their commitment in Malaysia. The Government will encourage existing vehicle manufacturers to rationalise the models assembled in Malaysia, scale up focused production and deepen industry linkage, in order to export competitively. It is expected that they will not primarily compete with high-volume national manufacturers in terms of pricing or target market.
The expansion of these participants and the deepening of industry linkages will also lead to greater scale and improved quality of the industry’s component vendor sector, thereby improving overall viability of the industry.
D. SPECIFIC POLICY INSTRUMENTS
1. Excise Duty Structure
The excise duty structure has been streamlined resulting in an overall reduction in the effective tax rate on most motor vehicles and a reduction in the tax differential between the different categories of motor vehicles (e.g. cars, MPVs, 4WD and between the different engine capacities). It is intended that the streamlining of the tax structure will promote greater transparency in pricing.
2. Gazetted Values of Imported Cars
To further promote greater transparency, the Government will gazette the values of imported cars for the purposes of duty computation. With the cooperation of the industry and the general public, it is expected that the incidence of tax underdeclaration will be significantly addressed. At the same time, the Government will step up enforcement measures against tax underdeclaration.
3. ASEAN CEPT Import Duty
To promote greater integration with the ASEAN automotive industry, Malaysia will reduce the ASEAN CEPT import duty to 5% for qualifying vehicles. While this will expose the domestic industry to greater competition, it is consistent with the policy thrust for rationalisation of models and increasing scale through exports.
4. Industrial Adjustment Fund
Grants from the Industrial Adjustment Fund will be made available to all companies – be they local, foreign or joint ventures – that create significant economic contribution.
These grants will be awarded based on two main criteria: scale and industry linkage subject to a sustainable level of overall capacity. Grants will be given on a model-by-model basis, subject to minimum threshold levels on both the scale and industry linkage criteria.
Specific R&D grants will also be made available, based on the viability and economic contribution of the R&D project. Further consideration will be given to companies that promote sustainable and competitive Bumiputera participation.
5. Manufacturing Licences
New manufacturing licences will only be issued after over-capacity in the domestic automotive sector is resolved. In the meantime, vehicle assemblers will not be allowed to use or make available their existing excess capacity to third parties to assemble new makes or models that compete directly with those produced by national car manufacturers.
Where an increase in production capacity is required, companies in the high-volume and middle-volume segments will be encouraged to use existing excess capacity. New assembly facilities will only be allowed on a strictly case-by-case basis.
6. Approved Permits
The current system of Approved Permits (APs), primarily used as a monitoring and data collection measure, will be phased out by 31 December 2010.
In the interim, APs will be made available based on economic contribution. Priority will be given to vehicle assemblers that have committed to a significant increase in production volume (with significant exports) in a particular model and require APs to import models that complete their product range for the Malaysian market. APs will be made available for a limited number of vehicles not assembled in Malaysia in order to ensure a sufficient choice of products for Malaysian consumers.
The importation of second hand cars (other than individual personal imports) will be progressively phased out culminating in a total ban in 2010, in order to stimulate demand for locally manufactured and assembled vehicles.
The Government will encourage and support companies currently awarded open APs (PEKEMA members) to transition into other related business activities e.g. sales and distribution or component manufacturers/vendors.
7. Vehicle Type Approval
Vehicle Type Approval (VTA) processes and procedures will be implemented comprehensively, in order to prevent the import and sale of sub-standard vehicles. The VTA process will ensure strict compliance with roadworthiness, safety and emissions standards. The VTA process will be implemented by the Road Transport Department (RTD) and other relevant agencies.
E. CONCLUSION
As a result of the implementation of these policy measures, the Government expects to see an industry with two strong national vehicle manufacturers, complemented by a number of foreign vehicle manufacturers (potentially with local joint-venture partners) who will upscale their assembly operations and at the same time rationalise the models assembled, to drive sustainable industry linkage.
Consequently, the components sector will also become more viable – there will be fewer companies (as incumbents merge), but their volumes will be higher and more networked into the global automotive industry. Gradual liberalisation will lead to reduced scope for importers, but genuine distributors will benefit from the increased sales volumes.
The NAP aims to provide a clear and transparent direction for all industry participants to enable them to make the optimal plans and investment decisions for the future.
Going forward, any Government policies and measures introduced for the domestic automotive sector will be based on this NAP. The NAP will be a long term policy base for the domestic automotive sector subject to reviews and refinement dictated by the global automotive industry environment.
The Government believes that this NAP will be a key measure towards driving the transformation of the domestic automotive sector to one that is viable, competitive and resilient, for the benefit of industry participants, consumers and the Malaysian economy.
A. INTRODUCTION
Since the establishment of Proton in 1985, Malaysia has succeeded in developing integrated capabilities in the automotive industry, which include local design and styling capability, full scale manufacturing operations and extensive local participation in the supply of components. Today, Malaysia is ASEAN’s largest passenger vehicle market with more than 500,000 vehicles sold annually with 90% of that manufactured or assembled domestically.
Nevertheless, much of the country’s success in developing the domestic automotive industry has been facilitated by policies that have promoted local vehicle manufacturers and moving forward, global and domestic challenges put the sustainability of this industry at risk.
The global industry is seeing slow growth, value destruction and massive rationalisation, driving vehicle manufacturers to merge to achieve even higher levels of scale. Recognising this global environment, the National Automotive Policy (NAP) seeks to address the manifold issues and challenges and transform the domestic automotive sector to become a more viable, competitive and significant contributor to the economy.
Moving forward, Government policy and support will be focused towards automotive industry participants providing sustainable economic contribution. The key drivers for such contribution will be economic scale, industry linkage and competitive value added activities.
B. OBJECTIVES OF THE NATIONAL AUTOMOTIVE POLICY
The overall objective of the NAP is generating sustainable economic value creation. This will maximise the long term contribution of the automotive sector to the national economy and at the same time ultimately benefit the Malaysian consumer. The need to create economic value entails that the industry will continue to require supportive Government policies in order to become fully competitive internationally.
The NAP therefore aims to facilitate the required transformation and optimal integration of the national industry into regional and global industry networks. The urgency of the transformation is driven by an increasingly liberalised and competitive global environment. Consequently, the Government has set out the following objectives for the national automotive sector:
To promote a competitive and viable domestic automotive sector, in particular the national car manufacturers
To promote Malaysia as an automotive regional hub, focusing on niche areas
To promote a sustainable level of economic value added and enhance domestic capabilities
To promote a higher level of exports of vehicles as well as components and parts that are competitive in the global markets
To promote competitive and broad based Bumiputera participation in the domestic automotive sector
To safeguard the interests of consumers in terms of value for money, safety and quality of products and services
C. POLICY THRUSTS OF THE NATIONAL AUTOMOTIVE POLICY
1. Provide Government support and incentives based on sustainable economic contribution
The Government will continue to nurture and support the development of the domestic automotive sector via a comprehensive package of grants and incentives. Such Government support and incentives will be aimed at optimising sustainable economic contribution, namely the scale of operations, extent of industry linkages, and the development of local and Bumiputera capabilities.
A sustainable level of economic contribution must ultimately relate to the type and level of value added activities, which will be competitive for the domestic market and for export in a fully liberalised environment. Thus, it would not be consistent with this policy to seek to maintain a level of value added activities which will not be viable and sustainable in the long run.
The level of support will also be correlated to the level of economic contribution and value add. In this context, a large scale manufacturing concern with exports and high industry linkage will be favoured relative to a pure assembly operation with little value added activities. Similarly, greater emphasis will be given to sales, distribution and after sales activities compared to pure importation of vehicles.
Support for manufacturing will come principally in the form of access to the Industrial Adjustment Fund and research & development (R&D) grants. These grants and incentives will be given based on pre-agreed conditions and timely achievement of Key Performance Indicators (KPIs).
2. Increase scale via rationalisation to enhance competitiveness
For the industry at large, all participants across the value chain will be encouraged to focus on achieving a scale of operations that ensures their enduring competitive viability.
The Government will encourage rationalisation initiatives in the domestic automotive sector, in order to create a leaner and more sustainable industry structure. A leaner industry structure throughout the value chain will enable industry participants to achieve a sufficient level of scale to be competitive.
In this respect, the Government will promote, through grants and incentives, two national manufacturers in the high-volume car segment to ensure sufficient scale and industry linkage. To enable achievement of required scale and industry linkage, these national manufacturers must be able to rationalise their models and platforms portfolio.
The rationalisation at the vehicle manufacturers’ level will consequently enable rationalisation of the component sector that will lead to greater scale, skills and improved quality. The end result will be a smaller number of vendors, all of whom will be operating at a scale, cost and quality level that will allow them to remain competitive and be able to export.
3. Promote strategic linkages with international partners
Scale and focus are necessary to achieve greater competitiveness but in themselves, they are not sufficient. In addition, global best practices and industry linkage are other important key success factors for the automotive industry. Therefore, the Government will continue to encourage industry participants to collaborate with external parties to establish strategic tie-ups. Apart from sharing scale and resources, such strategic tie-ups open up opportunities and provide access for domestic industry participants to enter the global automotive supply chain and vice versa. Moreover, such strategic tie-ups also compel domestic industry participants to adopt best practice management, processes and procedures to deliver on higher quality standards that are necessary in accessing international markets.
4. Become a regional hub focusing on niche areas and complementary activities
The Government aims to position Malaysia as a regional manufacturing and assembly hub by encouraging existing participants to deepen their commitment in Malaysia. The Government will encourage existing vehicle manufacturers to rationalise the models assembled in Malaysia, scale up focused production and deepen industry linkage, in order to export competitively. It is expected that they will not primarily compete with high-volume national manufacturers in terms of pricing or target market.
The expansion of these participants and the deepening of industry linkages will also lead to greater scale and improved quality of the industry’s component vendor sector, thereby improving overall viability of the industry.
D. SPECIFIC POLICY INSTRUMENTS
1. Excise Duty Structure
The excise duty structure has been streamlined resulting in an overall reduction in the effective tax rate on most motor vehicles and a reduction in the tax differential between the different categories of motor vehicles (e.g. cars, MPVs, 4WD and between the different engine capacities). It is intended that the streamlining of the tax structure will promote greater transparency in pricing.
2. Gazetted Values of Imported Cars
To further promote greater transparency, the Government will gazette the values of imported cars for the purposes of duty computation. With the cooperation of the industry and the general public, it is expected that the incidence of tax underdeclaration will be significantly addressed. At the same time, the Government will step up enforcement measures against tax underdeclaration.
3. ASEAN CEPT Import Duty
To promote greater integration with the ASEAN automotive industry, Malaysia will reduce the ASEAN CEPT import duty to 5% for qualifying vehicles. While this will expose the domestic industry to greater competition, it is consistent with the policy thrust for rationalisation of models and increasing scale through exports.
4. Industrial Adjustment Fund
Grants from the Industrial Adjustment Fund will be made available to all companies – be they local, foreign or joint ventures – that create significant economic contribution.
These grants will be awarded based on two main criteria: scale and industry linkage subject to a sustainable level of overall capacity. Grants will be given on a model-by-model basis, subject to minimum threshold levels on both the scale and industry linkage criteria.
Specific R&D grants will also be made available, based on the viability and economic contribution of the R&D project. Further consideration will be given to companies that promote sustainable and competitive Bumiputera participation.
5. Manufacturing Licences
New manufacturing licences will only be issued after over-capacity in the domestic automotive sector is resolved. In the meantime, vehicle assemblers will not be allowed to use or make available their existing excess capacity to third parties to assemble new makes or models that compete directly with those produced by national car manufacturers.
Where an increase in production capacity is required, companies in the high-volume and middle-volume segments will be encouraged to use existing excess capacity. New assembly facilities will only be allowed on a strictly case-by-case basis.
6. Approved Permits
The current system of Approved Permits (APs), primarily used as a monitoring and data collection measure, will be phased out by 31 December 2010.
In the interim, APs will be made available based on economic contribution. Priority will be given to vehicle assemblers that have committed to a significant increase in production volume (with significant exports) in a particular model and require APs to import models that complete their product range for the Malaysian market. APs will be made available for a limited number of vehicles not assembled in Malaysia in order to ensure a sufficient choice of products for Malaysian consumers.
The importation of second hand cars (other than individual personal imports) will be progressively phased out culminating in a total ban in 2010, in order to stimulate demand for locally manufactured and assembled vehicles.
The Government will encourage and support companies currently awarded open APs (PEKEMA members) to transition into other related business activities e.g. sales and distribution or component manufacturers/vendors.
7. Vehicle Type Approval
Vehicle Type Approval (VTA) processes and procedures will be implemented comprehensively, in order to prevent the import and sale of sub-standard vehicles. The VTA process will ensure strict compliance with roadworthiness, safety and emissions standards. The VTA process will be implemented by the Road Transport Department (RTD) and other relevant agencies.
E. CONCLUSION
As a result of the implementation of these policy measures, the Government expects to see an industry with two strong national vehicle manufacturers, complemented by a number of foreign vehicle manufacturers (potentially with local joint-venture partners) who will upscale their assembly operations and at the same time rationalise the models assembled, to drive sustainable industry linkage.
Consequently, the components sector will also become more viable – there will be fewer companies (as incumbents merge), but their volumes will be higher and more networked into the global automotive industry. Gradual liberalisation will lead to reduced scope for importers, but genuine distributors will benefit from the increased sales volumes.
The NAP aims to provide a clear and transparent direction for all industry participants to enable them to make the optimal plans and investment decisions for the future.
Going forward, any Government policies and measures introduced for the domestic automotive sector will be based on this NAP. The NAP will be a long term policy base for the domestic automotive sector subject to reviews and refinement dictated by the global automotive industry environment.
The Government believes that this NAP will be a key measure towards driving the transformation of the domestic automotive sector to one that is viable, competitive and resilient, for the benefit of industry participants, consumers and the Malaysian economy.
It's time for cheaper cars in Malaysia
My 4 year old BMW 325i has started to develop mechanical failures as it ages. Unlike real estate which appreciates despite getting older, cars depreciate at a frightening rate. More so if you are a resident in Malaysia.
I'm looking for another car but since the introduction of the NAP, the value of my car has dropped so much that I will have to pay the finance company to sell my car and not have any residual value left over as a down payment for my next car.
Unlike ten years ago, when everyone could change cars by trading in their old jalopy and get some money back, today, when you buy a car you are actually renting it. If you opt for a 9 year installment, you are actually buying a 9-year lease on your car at the end of which you will receive nothing but a piece of roadworthy metal if you take good care of it to begin with.
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