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Malaysia’s New Economic Model:
Risks and Rewards
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AseanAffairs Magazine May - June 2010

Prime Minister Najib Razak vows to take Malaysia forward and transform it into a high income nation through economic and social reforms. Initial responses to this ambitious drive are mixed, details are scarce and investors play wait-and-see.Yet, Najib insists he’s got support to push ahead.

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In this interview with AseanAffairs, Datuk Aishah Ahmad, President, Malaysian Automotive Association, expresses optimism over prospects for the automotive industry in Malaysia as economy returns to growth.

Q: In this interview with AseanAffairs, Datuk Aishah Ahmad, President, Malaysian Automotive Association, expresses optimism over prospects for the automotive industry in Malaysia as economy returns to growth.

The New Economic Model (NEM) is targeted at transforming the nation into a high-income economy that is sustainable and inclusive and will position the nation on the right path towards attaining developed nation status by 2020.

The NEM would make Malaysia more competitive regionally and globally with benefits accruing to all Malaysians, with their per capita income increasing to us$15,000 by the end of the decade from $7,000 currently.

Demand for new motor vehicles is expected to increase in tandem with the improvement in living standards and increase in the per capita income of the people.


Q: Apart from the expected rise in GDP, what are the other key factors that would contribute to this sales increase?

• sustainable global economy recovery.
further rise in consumer sentiments and confidence with the
improvement in employment market.
improvement in business confidence level
rise in commodity prices.
introduction of new models to generate buying interest.

Q: Is Malaysia still ahead of Thailand in terms of total passenger car sales? What are the prospects for growth in this top-selling segment?

Yes, Malaysia is still ahead of Thailand in terms of total passenger car sales. The prospects for the passsenger vehicle segment in Malaysia is still very good as the country strives to achieve the high-income economy and developed nation status by 2020.

Q: Malaysia is forecast to post significant growth in domestic car sales in 2010. Will the total sales in 2010 break the record taken in 2005?

During our annual press conference held in January 2010, MAA had forecasted the total industry volume (TIV) for 2010 at 550,000 units which was a 2.4 percent increase over TIV in 2009. For the first quarter of 2010, the total industry volume (TIV) of new motor vehicles registered in Malaysia reached 147,414 units against 120,389 units registered in 2009.


Q: What has been the industry’s response to the New Automotive Policy that came into force in January?
Will it attract more foreign investment into the automotive industry in Malaysia?

We welcome the release of the revised NAP, particularly the roadmap to phase out import AP (Approved Permit) requirement and the direction towards safe and environmental friendly vehicles.

The revised NAP is an important policy document which spelt out the government’s plan, policy and future direction for the local automotive industry.

The various strategies and measures underlined in the revised NAP are meant to ensure orderly development as well as long term competitiveness and capability of the local automotive industry. Emphasis has been placed in attracting investments particularly in high value-added manufacturing activities using latest technology and high technology.

The freeze on issuance of new manufacturing license was lifted for selected segments such as hybrid and electric vehicles, pick-up trucks, commercial vehicles and motorcycles with engine capacity of 200cc and above.


Q: Do you think it will make the industry more competitive?

The revised NAP was formulated after extensive discussions with industry players including manufacturers, assemblers, auto parts makers, non-governmental organisation, etc.

It is the intention of the government that the new policies and measures, covering licencing, duties, incentives, technology and environment, safety and standards, approved permits, etc., would be able to make the local automotive industry more competitive.


Q: There have been comments from industry analysts that the New Automotive Policy has initiatives not strong enough to draw investors’ attention for them to consider Malaysia as an export hub. What is your take?

It is difficult to make an assessment. However if this question relates to getting global motor vehicle manufacturers to set up produciton bases in Malaysia , then the comments made by industry analysts are correct as up to now there has been no announcement by these global players on such a move.


Q: How does this new policy encourage local players to set up partnerships with foreign automakers?

The government has acknowledged that the local automotive industry needs to improve its capabilities and competitiveness in order to survive in the long term.

Local players are encouraged to look beyond the domestic market and to explore partnerships with foreign automakers in penetrating the global markets.

Under the revised nap, new and better incentives such as tax exemption on the value of increased exports of vehicles and parts/ components are provided to automakers.


Q: What are the latest developments in Malaysia’s drive to promote clean and sustainable energy, particularly on the automotive industry front?

Under the revised NAP, the new measures which were aimed at driving Malaysia towards clean and sustainable energy include: promote hybrid/electric vehicles and development of related infrastructure.implementation of euro 4 fuel standards and exhaust emission regulations. Apart from what had been already announced in the revised nap, there has been little development in this area.

Q: Do you see any substantial effect on the Malaysia’s automotive industry after the launch in January of the Asean Free Trade Agreement (AFTA)?

Overall there is little impact on the local automotive industry. The industry adjustment fund, which is an incentive for locally assembled vehicles, has ensured that CKD (completely knocked down) vehicles remain competitive under AFTA (Asean Fre Trade Area).


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