A Free Trade Agreement was finalised and signed between Malaysia and Japan on Wednesday. The Japan-Malaysia Economic Partnership Agreement (JMEPA) focuses on solving issues with the trade of automobile and steel between the two countries. This will mean some tax incentives for the import of Japanese vehicles into our country.

Now before everyone shouts “Hooray, now that Honda Jazz I’ve been eyeing will be affordable to me now!”, there’s some conditions involved. Whatever benefits that the JMEPA brings would only affect vehicles that do not compete with Proton and Perodua. What does this mean? What are the types of cars that Perodua and Proton does not make? Probably only SUVs, high performance sports sedans and luxury vehicles, at least for the time being. Everything would probably take effect step by step, with the final stages being tax abolishment for Proton/Perodua competitors. When? Probably when the government thinks our home boys are ready to take on the Japanese makes.

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.

The Star

Not very beneficial to the majority of the rakyat isn’t it? I mean, the people who can afford sports cars and luxury vehicles are already rich and have the money to begin with. And with such degree of protection on Perodua and Proton, no reason for them to strive to be better, except for competition between themselves as we can see with the recent Myvi vs. Savvy battle.

Other items which the agreement covers are industrial goods, agriculture, customs procedures, trade-in services, investment, cooperation between countries, intellectual property, anti-competitive activities (what about local car manufacturers protection?), and enhancement of business environment.

The JMEPA is expected to start effect this December.

More details on JMEPA available at these links.

Motor players to gain from Malaysia-Japan FTA
Japan-Malaysia economic pact may be signed in December
Ministry of Foreign affairs Japan – JMEPA Joint Press Release Statement
Free trade agreement lifts tariffs on Japanese cars