Chances of an alliance between Proton and Volkswagen are "reasonably good," a Malaysian cabinet minister was quoted as saying on Monday.

The two carmakers may hold a third round of negotiations, although no timetable is set for conclusion of the talks, second finance minister Nor Mohamed Yakcop told the Associated Press (AP) on the sidelines of an international economic conference.

The fact that state-owned Proton and VW held their first round of talks in New York earlier this month and met again in Bangkok recently with the possibility of a third round "would almost by definition be a good news," he reportedly said.

"The fact that we had a first round and a second round and a possible third round means that things are progressing, and the probability of working something out is reasonably good," he told the Associated Press.

The resumption of talks between Proton and VW marked a surprise turnaround after Malaysian Prime Minister Abdullah Ahmad Badawi said attempts to form a strategic alliance between the two had failed, the news agency noted.

Nor Mohamed was reported to have said the government, which holds a 43% stake in Proton through its investment arm Khazanah Nasional, has not rejected General Motors' proposal for a tie-up with Proton, although the two are not currently negotiating.

"GM's proposal is still on the table. We have not shut the door on any of them," he told the news agency.