According to Prime Minister Dr Mahathir Mohamad in his farewell budget last Friday, "the government proposes to levy excise duties on imported cars when import duties are reduced from Jan 1, 2004." As car prices would not fall under Afta , he urged consumers to buy now.

The whole objective of Afta is to cut intra-regional tariffs within Asean commencing from 2004 to between zero and five per cent for more developed members of Asean (of which Malaysia touts as one). The track of this objective will be defeated and evaded if reduction in tariffs (import duties) is neutralised by corresponding increase in excise duties. The application of import tariffs ought not to be confused with that of excise duties.

Unlike import duties, which are tariffs levied on articles such as cars manufactured or imported from outside the taxing country, the primary meaning of 'excise duty' is that it is a tax on articles produced or manufactured within the taxing country

and intended for home consumption, such as Proton Saga, rather than (say) Honda or Mercedes.

It is unfortunate that in the overarching attempt to protect Malaysian's national car, the Proton, the difference between import duties and excise is blurred. For national hubris, the average consumers have, for two decades, been forced to support the national carmaker - by the simple reason that foreign makes are being priced out by import tariffs, presently ranging from 140 to 300 per cent.

Malaysian consumers carry considerable opportunity cost by way of money foregone in having to either (in the case of those who can afford) pay exorbitant tariffs on imported brands, or (in the case of a majority who cannot afford) buy Proton.

If foreigners are also not attracted to buy the national car, it means that its market will primarily be confined to Malaysia. Bereft of economies of scale, manufacturing will not be efficient in terms of reduction of costs that Malaysian consumers could otherwise enjoy.

This is does not even factor in the royalty costs that Proton has to pay Mitsubishi for its older generation engines and parts that are passed on to consumers. And if Proton's balance sheet runs into red, who bails it out?

The spirit of Malaysian Boleh cannot be continuously constructed on the back of Mitsubishi's prototype engine. The way to survival is to accelerate its R&D and come out fast with its true in-house Malaysian design that is efficient and can compete without too much hike in production costs, and tying in with other major automobile producers.

If car prices would not fall under Afta, would consumers heed the exhortation to buy now? Generally those who need to buy will buy, and those who don't need to, won't irrespective.

If the PM's exhortation is intended for the segment of buyers with original intention of buying imported cars - who presently defer purchase only because they hope to take advantage of the fall in prices due to Afta - the exhortation is not likely to be heeded in local car manufacturer's favour.

They will probably still defer purchase, save money and wait for what happens the next time or budget around when Proton's main patron would have made his exit.

It is true that regime change in October is not likely to herald a drastic change in governmental policies.

But still how could government policies, that bend so far backwards to the extent of confusing between applications of import and excise duties, be sustained in the face of government's avowed commitment to Afta and the WTO liberalisation process to which Malaysia is signatory?

Is the government prepared to face the consequences of evading the imperatives of Afta and WTO?

I read the exhortation as intending to go out of the way to bolster local Proton and Perodua by the eleventh-hour reprieve to get their act in order before competition is unleashed upon them soon in the absence of their main patron.

Buyers of foreign cars could wait a little longer, save money, and see what happens next. Certainly they would not want to make a hasty decision and wind up in regretting for buying now.