VZCZCXRO3223
RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHKL #0232 0890248
ZNR UUUUU ZZH
R 300248Z MAR 09
FM AMEMBASSY KUALA LUMPUR
TO RUEHC/SECSTATE WASHDC 2531
INFO RUCNASE/ASEAN MEMBER COLLECTIVE
RUCPDOC/USDOC WASHDC
RUEHGV/USMISSION GENEVA 1688

UNCLAS KUALA LUMPUR 000232 
 
SIPDIS 
 
DEPT FOR EB/TPP/MTAA B Nafziger 
DEPT PASS USTR D Bell 
GENEVA FOR USTR 
 
E.O. 12958: N/A 
TAGS: ECON ETRD EINV EFIN PREL WTO MY
SUBJECT: MALAYSIA'S AUTOMOBILE PROGRAMS 
 
REF:  State 4753 
 
¶1. (U) Summary: Malaysia's second fiscal stimulus package includes 
incentives for Malaysians to trade in their old Proton or Perodua 
brand vehicles for new ones.  Up to 4.8 million owners of Proton or 
Perodua vehicles that are more than ten years old might be eligible 
for this program.  The stimulus package also sets aside USD56 
million for Malaysia's Automotive Development Fund.  Malaysia's 
National Auto Policy (NAP), in effect since 2005, is designed to 
both increase foreign investment and strengthen the national 
automakers.  The Approved Permit (AP) system restricts the right to 
import foreign cars to government approved import permit holders, 
thus increasing prices of imported cars.  End Summary. 
 
Subsidy for Malaysian Manufacturers 
----------------------------------- 
¶2. (U) Malaysia's second fiscal stimulus package, announced on March 
10, includes a special subsidy that encourages Malaysians to turn in 
over ten year old Malaysian brand (Proton or Perodua) vehicles for 
new ones.  Under the scheme, car buyers will receive a subsidiary of 
USD 1,400 if they turn in the old vehicle to the Malaysian 
manufacturer and purchase a new one from them.  Half of the 
subsidiary comes from the government, and the other half from the 
Malaysian auto makers.  Only cars made by the two Malaysian 
manufacturers, Proton and Perodua, are eligible for the program, 
i.e. imported cars or other cars assembled in Malaysia are not 
eligible. 
 
¶3. (U) Perodua managing director Hafiz Bakar estimated in a media 
interview that there are approximately 4.8 million Malaysian brand 
cars that are over ten years old on the road.  Proton chairman 
Nadzmi Salleh praised the proposal as helping the industry which 
employs almost 200,000 people in Malaysia. 
 
¶4. (U) The Malaysian Automotive Association (MAA) objected to the 
scheme because it is limited to the two largest national car 
manufacturers only.  MAA appealed to the Finance Minister for the 
scheme to be extended to all locally assembled or manufactured 
vehicles. 
 
Automotive Development Fund 
--------------------------- 
 
¶5. (U) The fiscal stimulus package also sets aside USD56 million for 
Malaysia's Automotive Development Fund.  The purpose of the fund is 
to support the development of Malaysian auto manufacturers and auto 
dealers. 
 
National Auto Policy 
-------------------- 
 
¶6. (U) Malaysia's National Auto Policy (NAP) has been in effect 
since 2005.  The NAP framework is intended to encourage increased 
foreign investment in Malaysia's auto sector, while simultaneously 
strengthening national carmakers Proton and Perodua. 
 
¶7. (U) The NAP Framework's five major objectives are: 
"-- to promote a competitive and viable automobile sector, in 
particular national car manufacturers; 
-- to become a regional hub for manufacturing, assembly and 
distribution for automotive vehicles; 
-- to enhance value added and local capabilities in the automotive 
sector; 
-- to promote export-oriented Malaysian manufacturers as well as 
component and parts vendors; 
-- to promote competitive and broad-based Bumiputera participation 
in vehicle manufacturing, distribution and importation as well as in 
component and parts manufacturing." 
 
Approved Permits - More for the Middleman 
------------------------------------------ 
¶8. (U) Malaysia's Approved Permit (AP) process, which restricts 
importing cars to government approved permit holders, is intended to 
favor Bumiputera (ethnic Malay's and native tribes) by enabling 
Bumiputera to set up automobile sales and service operations. 
Instead, the AP process has become a lucrative "middle man" 
operation, where many AP holders sell their permits to non-Malays 
and keep the cash.  This adds thousands of dollars to the retail 
cost of imported cars. 
 
¶9. (U) While the NAP proposed elimination of APs in the long term, 
the GOM announced in January 2009 that they intend to extend the AP 
process probably for the next five years.  (Note: According to MITI 
officials, permits were withdrawn from holders that re-sold the 
permits to non-Bumiputera companies or individuals. End Note.) 
 
KEITH