Malaysia on Wednesday moved to review its system for importing cars, criticised as fertile ground for cronyism and unpopular with foreign car-makers, according to a Reuters report.

Prime Minister Abdullah Ahmad Badawi reportedly said - after a lengthy cabinet debate on the issue - that he would chair a committee to draw up a new auto policy, including the issue of car imports.

Reuters noted that Malaysia only awards car import permits to businesses owned by entrepreneurs from the country's ethnic Malay majority, under a decades-old affirmative action policy, but critics, including some Malays, say these permits have been handed to a select few.

The issue reportedly has angered sections of the Malay ruling party, which dominates the ruling coalition, forcing the prime minister's hand.

Under the existing system, foreign carmakers, including Honda, have needed to tie up with some virtually unknown Malay-owned businesses to import their cars, Reuters said.

"The results of the review will be taken into account in the National Automotive Policy to be announced next month," the Prime Minister's Office said in a statement cited by the news agency. "The policy to be announced will tackle all problems which had emerged as a result of this issue and will safeguard the position of Proton as a national car."

Reuters added that Malaysia's auto policy has been skewed towards protecting its largest carmaker, state-controlled Proton Holdings Bhd , but the government has been slowly exposing the firm to more competition as the nation signs up to free-trade pacts.