The United States today kicked off free-trade talks with Malaysia, signalling it will press for concessions in the protected automotive industry and the finance sector.

United States assistant trade representative for the Asia-Pacific Barbara Weisel said that despite the touchy issues on the agenda, she was hopeful of wrapping up the negotiations by the end of the year.

Weisel said that during the inaugural talks the two sides would identify potential problem areas and map out a plan for the next four sessions which are scheduled to be held over the next six months.

"We're hoping to conclude by the end of the year," she said in a phone interview from Penang where the meeting is taking place.

"That remains our goal. Both sides have done a lot of work in the areas that are sensitive to both sides. We've started out I think in a very positive opening session."

The US is rushing to complete the pact before July 1 next year when the Congress will regain the right to amend any pact negotiated by the reigning administration.

Weisel said the US delegation wanted to assess the situation in the banking and finance sectors after recent liberalisation moves before deciding what position to take during the negotiation process.

Sensitive auto market

The United States was "watching carefully" changes in the national auto policy in Malaysia, which has been reluctant to abandon measures to protect the struggling home-grown manufacturer Proton.

"I think for anybody that's followed the auto sector for a long time, there have been concerns expressed by Malaysia's trading partners on restrictions to access to this market," she said.

"Most of the foreign vehicles you see in this market are assembled here, there are only a limited amount of imports."

Malaysia's automobile sector has been partially liberalised under a Southeast Asian region-wide trade deal, but stiff import duties are still imposed on foreign vehicles to protect the nation's car industry.

Another hot topic will be the issue of government "procurement" which is linked to Malaysia's efforts to promote its ethnic Malay majority, by channelling lucrative contracts to Malay businesses.

"This is one of the most sensitive areas for them," Weisel said. "Some of the procurement is reserved for Malaysian companies. We are looking for a more transparent system."

US firms want open bidding

The American Malaysian Chamber of Commerce said it would also like to see procurement issue addressed in the FTA, and called on the government to allow both foreign and local companies to bid directly for government projects.

In return, Malaysian firms would have access to the US government's massive procurement programme which absorbs more than US$200 billion in goods and services each year.

The chamber "would like to see greater transparency in the decision-making process when procurement policies are formulated," it said in a statement.

The trade talks cap a transformation in the relationship between the two countries since the departure three years ago of Prime Minister Mahathir Mohamad who was renowned for his anti-Western rhetoric.

Analysts have welcomed the talks as a positive step for Malaysia's economy that will help it attract more direct investment from the United States, its 10th biggest trading partner.

However, activists and consumer groups say that an FTA could undermine job and food security and the nation's economy.