Malaysia will cut tariffs on imported cars from Southeast Asian countries from next year but will offset the reductions with higher excise duties.

Industry leaders said they were disappointed because imported cars would not be any cheaper due to the offsetting duties.

International Trade and Industry Minister Rafidah Aziz said the details of the tariff reductions for imported vehicles were still being finalised.

Rafidah was quoted by Bernama news agency as saying that the automobile tariffs would eventually fall to 20 percent by 2005. The current tariffs range between 42 percent and 300 percent.

But the trade minister said Malaysia would impose excise duties on both imported and Malaysian vehicles starting next year.

Nothing to gain

Aishah Ahmad, president of the Malaysian Automotive Association described the announcement as "disappointing" because cars prices would not fall.

"You are not going to gain. The government will cut tariffs but will impose excise duties," she told AFP .

But Aishah said the long awaited announcement at least meant the industry could plan its sales strategy.

Prime Minister Dr Mahathir Mohamad had warned recently that Malaysians should not expect cars to be cheaper when Afta comes into force, saying local taxes would be imposed on all cars to replace the loss of revenue from import tariffs.

Malaysia's two national car manufacturers, Perusahaan Otomobil Nasional and Perusahaan Otomobil Kedua currently have a combined market share of about 93 percent of passenger cars in the country.

The import tariffs were originally supposed to be reduced by 2003 under the Association of Southeast Asian Nations (Asean) Free Trade Area (Afta) pact but Malaysia negotiated a two year extension to give local automakers more time to prepare for tougher competition. AFP