A local consumer advocate group, Era Konsumer today urged the government to be cautious with its implementation of the proposed domestic tax on cars when the Asean Free Trade Agreement (Afta) kicks in next year to avoid being misconstrued as discriminatory to imported cars.

"The government must be careful about the domestic tax [on cars]. It could be seen as being discriminatory. It could still be seen as a protectionist [policy] if there is a tax difference between foreign and locally-made cars," Era Konsumer secretary-general T Indrani told malaysiakini in a telephone interview today.

Prime Minister Dr Mahathir Mohamad dashed the hopes of many prospective cars buyers on Thursday when he announced that car prices will not go down as anticipated by many following Afta.

The import duties on 'completely knocked down' cars, which are currently about 42 percent, are expected to be cut to less than five percent by 2005.

The premier said that while the Malaysian government could no longer impose high duties on imported cars, there will other taxes on both locally-produced and imported cars.

Proton not protected

According to him, the taxes are necessary because the government needs "to finance development and to pay government servant salaries".

He however stressed that the national car, Proton would not be protected as all cars would be subjected to the same tax.

Mahathir was also quoted by the New Straits Times yesterday as saying that Malaysia cannot be accused of introducing non-tariff barriers as other countries will also be having a similar tax arrangement.

Nevertheless, Indrani warned that the government should be careful of the possible repercussion from other Asean countries which had opened up their markets under the free trade regime.

"The government should re-look at this domestic tax so other Asean countries would not take Malaysia to task or ask for a compensation," she said.

According to her, other Asean countries would be resorted to take action against Malaysia if they are unable to compete in the market or find the tax practices as discriminatory.

Unified trade practice

Charles Santiago, an economist specialising in globalisation issues, concurred with Indrani's view.

He explained that a free trade regime means there should be a unified trade practice among its member countries and warned that the proposed domestic tax could violate the practice.

There is a dispute settlement mechanism under Afta to resolve the trade disputes and grievances that may arise among member countries.

"Under Afta, everyone must open up [their markets] at the same time. Malaysia had already asked for an additional two-year extension to prepare its national car industry (Proton) for market liberalisation," Indrani said.

The consumer advocate also argued that consumers are not benefitting from the free trade regime at the end of the day.

"From the concept of free trade, it entails that consumers should be able to choose from wide varieties of products at a lower prices," Indrani explained.

However, this was not reflected in the latest policy announcement. "The whole gamut of liberalisation does not hold water," she said.

The government should provide a balance between the producers and consumers and not only siding with the producer, Indrani said, hinting to the Malaysian government's support for Proton.

She noted that with Mahathir being a prominent spokesperson on the injustices of globalisation, Malaysia should push forward a pro-consumer policy.

"At the end of the day, everyone is a consumer," Indrani added.