The Malaysian government wants to deregulate its auto industry as it tries once again to find an overseas partner for loss-making Proton. On Wednesday, it unveiled its National Automotive Policy which sets a framework to deregulate the industry and end a system of import permits.

The new policy allows foreign carmakers producing large cars worth more than 150,000 ringgit (US$44,120) 100% ownership of new manufacturing operations in the country but keeps excise duties on completely built cars and kits. The new policy, which ends a three-year long ban on production permits, comes into effect from 1 January.

"We would like to develop further the local industry in Malaysia, this is of strategic importance to us," international trade minister Mustapa Mohamad told reporters in Kuala Lumpur. An import permit system for vehicles will be scrapped in 2015, while incentives and exemptions will be increased to develop local auto parts.

The policy, first launched in 2006, aims to liberalise an automotive sector that heavily favours Proton through steep taxes on imported vehicles in Malaysia, the biggest car market in the Association of Southeast Asian Nations bloc (ASEAN).

Malaysia has lowered trade barriers and eased regulations as it seeks to challenge Thailand as a southeast Asian carmaking hub to boost employment and trade. The country used to have taxes of as much as 300% on imported vehicles to support state-owned Proton, considered a national symbol.

Proton is still in discussions to form a partnership with a global carmaker, Mustapa said, without elaboration. Any deal must include making Malaysia a manufacturing hub, he added.

"We hope this strategic partnership will be concluded soon," he said. Proton, unprofitable in two of the last three years, has previously held talks with automakers including Volkswagen and General Motors.

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