A new ASEAN-Japan Comprehensive Economic Partnership Agreement (AJCEP) will be taking effect on the 1st of December 2008. This FTA covers not only goods but services and investments. It will enable Japanese companies that want to expand into the ASEAN region to reduce trade costs, which is especially beneficial for electronics and automobile manufacturers.
Tariffs on 93% of imports from ASEAN into Japan will be removed within 10 years, while 90% imports from Japan into ASEAN will be reduced by six ASEAN members (Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand) within 10 years.
For Malaysia in particular, CKD kits for motor vehicles regardless of engine displacement are classified under the B4 range, which means tariffs have to be gradually reduced in 4 annual installments starting from 35%. This probably means a step by step reduction every year until the 4th year which will see a maximum 5% CEPT tax.
For CBU vehicles, the rate begins at 50% for vehicles with engine displacements under 2,500cc (B7 category) and will slowly be reduced in 7 annual installments down to a maximum CEPT rate of 5%. CBU vehicles above 2,500cc is classified under the R category, which means reduction to a maximum of 10% tariff (not a CEPT 5% tariff) in 11 equal annual installments.
Malaysia is part of ASEAN but Malaysia already has an FTA with Japan called the Japan-Malaysia Economic Partnership Agreement (JMEPA). This agreement also provides tariff reductions for cars coming in from Japan. Under the JMEPA, CBU vehicles with engine displacements are covered with a 0 to 5% tax in 2008 and eliminated by 2010. All other CBU tacxes are to be eliminated by 2015.
These reductions in taxes will allow more companies to be like DRB-HICOM companies Suzuki Malaysia Automobile and Mitsubishi Motors Malaysia, offering CBU Japan vehicles at surprisingly good prices. Its either that or they maintain prices and fatten up their account books anyway, which hopefully will be reinvested locally into better 3S centers and other support facilities.
The bad news is with this new AJCEP there is one less reason for Volkswagen to pick Malaysia over Indonesia or Thailand for its ASEAN assembly plant if it also wants to use the plant to penetrate the Japanese market.
Interestingly, industry people are of the opinion that this new FTA will probably not change much. John Bonnell of Automotive Resources Asia in Bangkok says policies are not always implemented, preferential rates are not always honored and there will be all kinds of stalls. Head of research for BNP Paribus Securities Indonesia Ferry Wong is of the opinion that not all countries will play by the new rules.
Of course, Malaysia has always and probably for a long time more been criticized as being one of these FTA-dodging countries, especially when it comes to the automobile sector, thanks to the dark shadow cast by the controversial Approved Permit system.
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haih….hold on hope only la…
Even if taxes were completely removed (like the two most popular brands in Malaysia currently) for imports of CKD or CBU from Thailand, automakers are still not cutting their prices, due in part:
1. They can already sell well enough hitting their targets and overachieving it.
2. The government would be in a trouble state with our two PRO&PER if the T and the H prices were within reach of our dear ProPer.
So in the end, the governments were forced by PROPER to force the Japanese to earn our $$ in HUGE amounts.
import tax only…gov just increase excise duty and sales tax…
yea, don trsut the G, 2005 supposed to have cheap cars but…
Ask yourselves this; what do we as Malaysians gain in this FTA? Then ask yourselves what does Japanese gain.
We get cheaper CBU cars. Japs get our money. Oh of course, some of that goes to local guys. But the main bulk goes to…? You just contributed to the country’s deficit. Thank you very much.
In this dificult economic times, can we afford money going out of the country? Yes you can afford a smug on your face driving that foreign car. You are just plain ignorant about world economics and won’t realise until recession sets in, and you are too deep in it to get away from it.
Yes. Why don’t you just do that. You deserve it.
We get cheaper CBU cars. Japs get our money. Oh of course, some of that goes to local guys. But the main bulk goes to…?
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er…. khairy?
bobdbilder said,
October 22, 2008 @ 9:03 pm
Ask yourselves this; what do we as Malaysians gain in this FTA? Then ask yourselves what does Japanese gain.
We get cheaper CBU cars. Japs get our money. Oh of course, some of that goes to local guys. But the main bulk goes to…? You just contributed to the country’s deficit. Thank you very much.
In this dificult economic times, can we afford money going out of the country? Yes you can afford a smug on your face driving that foreign car. You are just plain ignorant about world economics and won’t realise until recession sets in, and you are too deep in it to get away from it.
Yes. Why don’t you just do that. You deserve it.
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Who are you Warren Buffet? You obviously dont know the first thing about economics and worst u prove it by making a fool of urself here. U know Honest Abe (u probably dun kno, do u?) once said its better to let ppl think ure a fool than to talk and prove it.
If we’re spending money to buy something, it doesnt mean the money keeps flowing out. How the hell did we get the money? Its about keeping money constantly flowing in and out. The more the flow the better. And u kno im a bit sick of this mentality of frightening ppl. Its either recession or some form of violence leading to a black day in the 60’s. Bullsh*t i tell u. If a recession sets in there are a dozen things u can do. But of course there will always be those who are too darn dumb to find a means to live and will hope for the g to……
Put it this way, those Calibans deserve to go the way of the dinosaurs
Trust me the price will never going down drasticly.Look what happen to the automotive industry when they lower the car prices several years ago.New cars took long time to gain back buyers and many Towkays second hand cars(especially beside MR2 near selayang) wipeout.They learned their lesson and will control the impact this time.
yeah, they have a way of twisting their words.
would you like to know how much the AP for the Nissan Teana is?
75k. 75 THOUSAND RINGGIT. don’t ask me how i know. i just do.
230k(retail price here)- 75k = 155K.(Supposed Selling price estimate)
so now you know where the money goes to. say goodbye to cheaper CBUs.
Well, the very 1st step when they implied these systems was unbrilliant. There’re no way to cut down in a mass way, but slowly. Well, 2nd hand boss felt it immediately, others auto-related sector…slowly..
lol what a debate. yup, let the G earns the money, better than it ‘goes’ to the jap. then the G personnels take the money and save in foreign banks for lavishly retirement, overseas. so whos the suckers now? to us it still the same in the end no matter where the money goes, and the differences, we’re getting crappy cars.
bobdbilder said,
October 22, 2008 @ 9:03 pm
Ask yourselves this; what do we as Malaysians gain in this FTA? Then ask yourselves what does Japanese gain.
We get cheaper CBU cars. Japs get our money. Oh of course, some of that goes to local guys. But the main bulk goes to…? You just contributed to the country’s deficit. Thank you very much.
In this dificult economic times, can we afford money going out of the country? Yes you can afford a smug on your face driving that foreign car. You are just plain ignorant about world economics and won’t realise until recession sets in, and you are too deep in it to get away from it.
Yes. Why don’t you just do that. You deserve it.
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Now, now, mr economics, not to poke holes into your theory, while it does have some merits, this is an overly simplified view. If there is a global recession, there is really not much any individual can do. As a collective perhaps, but regardless of who you buy from, there will be monetary flows out of the country.
Like KT said, the point is not to stop outflows (its impossible) but to maintain inflows (increase if possible) for a favourable BP. In a global recession
When you buy an import, don’t think that ALL the funds will leave the country. There is still taxes and duties, there is the bloody AP issue, local “accesories”, local adminitrative charges (ie. like dealers and such).
I’ll let you be the judge where the monies earned(daylight robbery more like it) like from the AP system goes. It stays in Malaysia? I think not.
Not to bring Proton kicking and screaming into this….. but imagine this,
If Proton can build good, reliable and cheap cars, there is no reason to fear the FTA.
It is in due failure of proton that we have gotten ourselves in this mess.
…In a global recession, the key world is global, there isn’t much any one country can do. Global demand will drop.
I submited the post accidentally.
People that work in MITI will surely die now.. They need to crack their head to create another policy just to make sure G wont loose their money.. G on the other hands, keep their relation on good position with other countries by signing the deal.. Rakyat will always stay in this position. I wonder why P1 car is so expensive? Toyota Camry enter Malaysia just cost Rm81K… why cant Perdana V6 that sold more 10K expensive than camry (without tax) cant be as quality as camry?
We Want Cheap Car !
bobdbilder said,
October 22, 2008 @ 9:03 pm
Ask yourselves this; what do we as Malaysians gain in this FTA? Then ask yourselves what does Japanese gain.
We get cheaper CBU cars. Japs get our money. Oh of course, some of that goes to local guys. But the main bulk goes to…? You just contributed to the country’s deficit. Thank you very much.
In this dificult economic times, can we afford money going out of the country? Yes you can afford a smug on your face driving that foreign car. You are just plain ignorant about world economics and won’t realise until recession sets in, and you are too deep in it to get away from it.
Yes. Why don’t you just do that. You deserve it.
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well now our tax money is all going to proton, which is the main cause of us paying excessive prices for imported cars. when the money could be used for other things like fixing the streetlamps and resurfacing the roads. we now have to pay pornographic amounts of money to the ap kings and queens(the result of excellent governing by barisan nasional). an ap is even better than printing fake money. by the way, our economy was always shit, it got even worse when mahaithir and proton came.
ma-hai-tiu n his proton u mean :P
ALPINA BMW said,
October 23, 2008 @ 10:39 am
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well now our tax money is all going to proton, which is the main cause of us paying excessive prices for imported cars. when the money could be used for other things like fixing the streetlamps and resurfacing the roads. we now have to pay pornographic amounts of money to the ap kings and queens(the result of excellent governing by barisan nasional). an ap is even better than printing fake money. by the way, our economy was always shit, it got even worse when mahaithir and proton came.
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as usual, you are 100% wrong. unless you can clarify or otherwise prove what you’ve just said. our taxes do not go to proton. in fact, proton pays taxes also. and there is money for streetlamps, roads..etc. its a matter of maintenance, and who is doing the job or not doing the job. and whats wrong with streetlamps? i actually think malaysia has more streetlamps(in the klang valley) than many western countries i’ve been too.
the affect on the economy is not as simplistic as AP kings and proton. personally, there are more important issues at stake.
4G63T DSM said,
October 23, 2008 @ 7:45 am
If Proton can build good, reliable and cheap cars, there is no reason to fear the FTA.
It is in due failure of proton that we have gotten ourselves in this mess.
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fair comment, but to ignore the current situation with proton is not giving balance to the big picture.
the market will open-up, thats for sure. and in case many dont realise, its already opening up in some areas.
i think to say proton is still protected is already outdated. perodua has taken a large slice of the market, the koreans have their own large piece today, and toyota and honda have the lions share of the rest, and followed by all the other makes..
proton used to have 70% market share, and now they have about 34%. if anything, people should be making noises about perodua now. they’re national, they’re protected, and they sell the most cars in the country. so if someone wants to say now that we are paying more for imported cars, they shouldnt be blaming proton, but all “national makes”, naza… perodua.. inokom…etc.
also, unfortunately for the anti-proton brigade.. proton didnt roll-over and die. but instead, they changed mgment, came up with some new cars, started tightening up on quality, and people started buying again. now they’ve set their sights on the export market, and they’re making money again.
but even if proton did die, will taxes on cbu cars come to an end? i dont think so.. you still have perodua, naza, inokom…etc…
Honest Abe was shot, dead and burried around when Adam Smith touted to all the world to see of a free market economy that would administer itself and spread wealth to everybody around the world. Hello 2008 and that fell flat on USD 700 bil request to help that steadfast pillar of open market.
Come answer that question; what do we get for opening our market to an economic superpower? Can we sell our veggies? Can we sell our instant noodles? What? And compete against Chinese food? What about PCB’s pieced together in Penang. The same PCBs come back to us in a handphone, a motherboard, a PABX system. We end up paying more of what we sold. Free Trade is not Fair Trade. What’s in it for us? We can never compete in terms of trade against an economic powerhouse such as Japan, the US or the EU.
The textbook antidote for INFLATION is keeping the money flowing in the market so that we can give work to people, to sell stuff. Yes well understood. We have always had inflation.
A RECESSION happens when growth falls. When business cannot grow. When it is too expensive to operate. They lay off workers. You lose your job with a house to pay and a nice piece of corroding asset in your parking spot.
Put that in the context of paying more for something imported. We are paying for Thais. We are paying for a piece of jap machinery that has paid for itself after the 100,000th car before this one on your driveway. And you get a nicely bound, nicely smelling piece of depreciated asset.
The tax helps by maintaining money here even in the case where one is so ignorant to buy these. If there was no tax, the government has less money. Less money to pay National debts. Our deficit increases. Where is the country going to get an additional amount of money from the loss in tax?. Less money to build that bridge you wanted so much. At the very least the tax is there to help consumers think for a nanosecond if that money is worth spending on something that will never give you equivalent return on investment.
We as a country are affected by what is happening around us. Be it increase in energy demand or financial meltdown. Its a global issue yes. Another FTA now DOES NOT help the healing process. Especially not a Washington Consensus driven one. And the Mexs and the Argies can attest to this. Since when did the free market helped the NAFTA countries? Since when did they help the Africans who will forever be in debt for generations to come? Why was the most affected bourse was Indonesia Exchange?
so later.. we will see ‘how hard’ toyota to reduce their price. (for the time being as well). Mitsubshi seems already decrease their price a bit. but NOT toyota.
Toyota is a real blood scuker.
BanyakMasukWorkshop said,
October 23, 2008 @ 11:44 am
ALPINA BMW said,
October 23, 2008 @ 10:39 am
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well now our tax money is all going to proton, which is the main cause of us paying excessive prices for imported cars. when the money could be used for other things like fixing the streetlamps and resurfacing the roads. we now have to pay pornographic amounts of money to the ap kings and queens(the result of excellent governing by barisan nasional). an ap is even better than printing fake money. by the way, our economy was always shit, it got even worse when mahaithir and proton came.
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as usual, you are 100% wrong. unless you can clarify or otherwise prove what you’ve just said. our taxes do not go to proton. in fact, proton pays taxes also. and there is money for streetlamps, roads..etc. its a matter of maintenance, and who is doing the job or not doing the job. and whats wrong with streetlamps? i actually think malaysia has more streetlamps(in the klang valley) than many western countries i’ve been too.
the affect on the economy is not as simplistic as AP kings and proton. personally, there are more important issues at stake.
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is ur name mahaithir, or are u related to him in any way?
Maybe one day they will completely remove all these duties and taxes one day?? Well in my mind unlikely la. Imagine if Proton and Perodua take on Toyota and Honda in a perfectly competitive market and come out victorious, how proud would us Malaysians be. If they can do it and sell at the same price as the japs, and still outsold them, then and only then malaysia really boleh.
bobdbilder said,
October 23, 2008 @ 12:39 pm
Honest Abe was shot, dead and burried around when Adam Smith touted to all the world to see of a free market economy that would administer itself and spread wealth to everybody around the world. Hello 2008 and that fell flat on USD 700 bil request to help that steadfast pillar of open market.
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OMG I JUST LOVE IT WHEN A PREY PRACTICALLY FALLS INTO MY LAP. HONEST ABE ALSO KNOWN AS ABRAHAM LINCOLN DIED IN 1865; (I LOVE THIS) THATS 75 YRS AFTER YES AFTER!!! ADAM SMITH DIED. U r such a big a**hole and i warned you not to make a fool of yourself. Its fatuous unevolved life forms like u that pass wrong info to the people and cause a ruckus in the first place. Therefore a lowly being like u does not deserve my attention and therefore i choose to end this argument here. And boy im disappointed i wasted my energy on a vacuous creature like you.
think the recond car importer will take this as a big advantage instead.
this appear to be the content of the agreement.. not sure wat is malaysia response to this… waiting for durian fall i guess… After miss the opportunity.. then you blame someone else for not acting fast.
Beemer Freak said,
October 23, 2008 @ 10:57 pm
Maybe one day they will completely remove all these duties and taxes one day?? Well in my mind unlikely la. Imagine if Proton and Perodua take on Toyota and Honda in a perfectly competitive market and come out victorious, how proud would us Malaysians be. If they can do it and sell at the same price as the japs, and still outsold them, then and only then malaysia really boleh.
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thats the way, i really hate it when proton claims themselves to be the “rakyat’s” car. just make that “mahaithir’s cash cow”