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NEWS UPDATES 28 December 2009

Malaysia anticipates consumer prices to go down as Afta begins

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Come Jan 1, things at the local supermarket are going to be cheaper – at least that is what is supposed to be when the Asean Free Trade Area (Afta) agreement comes into effect, reported local daily the StarBiz.

A total of 1,943 items from the other nine Asean countries now being sold in the country – ranging from fruit juices to T-shirts to canned foodstuff – should be at least 25 percent cheaper, as under Afta, these products are no longer subject to tax.

In reality, the prices of such goods have been coming down since 1993 with Asean countries gradually reducing import duties on each other’s products.

International Trade and Industry Minister Mustapa Mohamed said that before 1992, import duties for goods like textiles were 30 percent to 60 percent while for cars, the duties used to be more than 100 percent.

“Now, it has come to zero. Textiles are the best example. Clothes and materials used to be quite expensive but now, you can buy a dress for just RM25,” he told StarBiz in an interview.

At the same time, Malaysian-made goods would have greater market access in the region and enjoy the same tax-free status.

Despite the fact that prices of certain goods may be reduced, the overall trend of rising prices is a cause for concern. Mustapa admitted that income levels of Malaysians had not risen in tandem with the increase in overall prices of goods.

“The consumer price index is a combination of items, which include not only clothes but other products like fuel.

Prime Minister Najib Razak is expected to unveil a new economic model in February, based on innovation, creativity and high value-added activities, which is aimed at doubling per capita income over the next 10 years.

Mustapa also dismissed concerns over the implementation of the goods and services tax (GST) in mid-2011, describing them as unfounded.

“It is a tax to replace existing sales and services tax. We believe at 4 percent it is not going to add to inflation.


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