Malaysia has reiterated that Thailand has no grounds to seek compensation over Kuala Lumpur's two-year delay in opening up its auto sector under a regional free trade plan.

Thailand would not suffer losses from the delay as it was not a key auto supplier to Malaysia, Trade Minister Rafidah Aziz said late Saturday.

"There is no really compensation thing here," she told reporters at the end of the Association of Southeast Asian Nations (ASEAN) economic ministers annual retreat in a hill resort outside Kuala Lumpur.

"Our major imports of cars are not from ASEAN countries. They are mainly from Japan, Europe and Australia even.

"For ASEAN countries including Thailand, it's very, very, very minimum so there isn't even a supplying interest... the word compensation should be deleted from any conversation or question."

Good neighbourly spirit

But in good neighbourly spirit, Rafidah said Malaysia had agreed to buy more Thai rice and other products to make up for its delay.

"Because we know there is this interest to supply in the future or maybe within the next two years, in lieu of you not being able to sell cars to us, we will buy more of your rice and products. Compensation is not the word to use," she said.

Under the ASEAN Free Trade Area (AFTA), most members must cut tariffs on imports for agreed products to a maximum five percent by next year but Malaysia has been allowed to delay opening its heavily-protected auto sector until 2005.

The deferment was to give national carmakers especially Proton, which is the biggest selling car in Indonesia, Malaysia, the Philippines and Thailand, time to recover from the 1997/98 Asian financial crisis.

Rafidah said Malaysia had taken into consideration the fact that Thailand may want to supply vehicles to Malaysia in the future but there was "no guarantee" they can supply.

Even at high tariffs

"At the moment, even with the high tariffs, Japan is supplying tens of thousands of cars to us, so what is stopping Thailand from exporting cars to us even at the high tariffs," she said.

Malaysia has pledged it would not seek to extend the two-year delay in liberalising its auto sector.

But in May, Rafidah said the government may introduce measures such as higher sales tax and surcharges or certificates of eligibility allowed under AFTA to protect local carmakers.

The government would also find new ways to equalise treatment for local and imported products without losing revenue from the lowering of tariffs, she added.

ASEAN groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam. AFP