Malaysia to ease restrictions to lure foreign auto investments

by **Cals** Mon 20 Jan 2014, 18:55

Business & Markets 2014

Written by Bloomberg

Monday, 20 January 2014 09:28

(Jan. 20): Malaysia will relax restrictions barring foreign automakers from manufacturing small passenger vehicles as Southeast Asia’s third-largest economy competes with Thailand for investments.

Malaysia will selectively seek foreign investments that bring advanced technology and offer customized incentives to attract companies, according to M. Madani Sahari, chief executive officer of the Malaysia Automotive Institute, a unit of the trade ministry. Under the previous policy, the licenses only allowed for the manufacture of vehicles that had engines 1.8 liters or bigger, he said.

“This is a big deal because previously we didn’t issue any licenses” for the manufacture of small cars, Madani, whose unit was involved in drafting the government policy, told reporters in Kuala Lumpur last week.

Effective immediately, the new policy further opens up national maker Proton Holdings Bhd. to foreign competition. The drive to attract global automakers also comes at a time when neighbor Thailand is mired in political protests aimed at ousting Prime Minister Yingluck Shinawatra’s government.

Malaysia wants to position itself as a manufacturing hub for energy-efficient vehicles to differentiate the country from Thailand, where foreign automakers have invested to produce pick-up trucks and other vehicles, Madani said.

“By focusing on energy-efficient vehicles, we are also at the same time making Malaysia a center for excellence in technology,” he said.

Vehicle Sales

Vehicle prices may fall in Malaysia by as much as 30 percent by the end of 2018 as a result of local production by global automakers and other government initiatives, he said.

Sales of passenger and commercial vehicles rose 4.9 percent to 595,300 units in the 11 months ended November, according to the Malaysian Automotive Association. That’s faster than the 2.7 percent pace in the year-earlier period.

The government is seeking to attract automakers that have yet to establish major manufacturing facilities in Southeast Asia for passenger cars, including Volkswagen AG, Renault SA, Hyundai Motor Co., Fiat SpA and some Chinese companies, according to Madani.

The country’s trade ministry is scheduled to hold a briefing at about 2:30 p.m. today to release more details.