Prime Minister Abdullah Ahmad Badawi today said he will unveil a new tax structure for imported cars by the end of the month but refused to confirm reports that national carmaker Proton has sought an additional 20 years of government protection.

"I don't want to comment on it now because it has not come to me officially," Abdullah told a news conference when asked about Proton's reported request.

"Regarding the imported cars and what are the excise duties, I will be making a separate statement towards the end of the year."

The Asian Wall Street Journal last week cited industry sources as saying that Proton chief executive Mahaleel Ariff had sought another 20 years of tariff protection in a letter last month to Abdullah, who is also finance minister.

Mahaleel also requested immediate exemption from all import duties and excise taxes, and asked for government grants for research and development, the newspaper said.

Under the Association of Southeast Asian Nations (Asean) Free Trade Area (Afta), tariffs on most products in the region fell below 5.0 percent in January but Malaysia has obtained a reprieve for its auto industry until 2005.

Nevertheless, the government proposed during the 2004 Budget in September to impose excise duties on imported cars when other levies on these vehicles are reduced from Jan 1, 2004.

No end

Economists said any move to extend protection for Proton would hurt Malaysia's image and may hamper its efforts to attract foreign investors amid intense competition from neighbouring Thailand, which is fast emerging as the regional auto hub.

Japan has already voiced fears that foreign carmakers could be penalised amid concerns that the new excise duties will discriminate between national and non-national cars.

"That is outmoded, it is unacceptable. I do not think it is sustainable to subsidise or protect Proton for the next 20 years because then there will be no end," Ramon Navaratnam, an economist and former treasury official, told AFP .

"After the 20 years, people will still feel that you must continue to protect them because there are so many vested interests that have been gaining from protection."

Instead, he said Proton should link up with global players to boost its competitiveness.

"I think we should take the (issue squarely). The way out is to increase competitiveness by establishing strategic alliances with world players. We have got some comparative advantages and together with international cooperation, we can do better," he said.

"We have to become more competitive and less protective and we have to do this sooner rather than later."

Smaller market share

Proton, set up nearly two decades ago as part of Malaysia's move into heavy industry, is already feeling the heat of stiff competition ahead of Afta.

Proton used to sell six out of 10 new cars in the country but for the first time in years, its market share has shrank to less than 50 percent amid intense competition from Japanese and South Korean rivals.

Sales dropped 10 percent last year to 239,783 units and by another 25 percent in the first 10 months this year.

The carmaker has moved to diversify its product range to boost sales, with plans to roll out improved models by the first quarter next year from its new hi-tech manufacturing plant in Tanjung Malim, north of Kuala Lumpur.

However, it is still grappling with a perception of poor quality and low acceptance overseas, with exports accounting for less than 10 percent of its total sales. - AFP