Citing state-owned news agency Bernama, Dow Jones reported on Monday that Malaysia would cut duties on car imports from other Association of Southeast Asian Nations countries beginning in 2003.

According to Dow Jones, Bernama quoted international trade and industry minister Rafidah Aziz as saying that car import duties would fall to 20% by 2005. Tariffs on car imports currently stand at between 42% and 300%.

Rafidah said details of the planned reduction would be announced at a later date. Rafidah also said the government has also decided to impose separate excise duties on all vehicles beginning in 2003. Currently, excise duty is only levied on local manufacturers while fully finished imported cars are exempt.

Details, however, weren’t yet available on the excise rate to be imposed.

Rafidah said the tax changes were part of the government’s efforts to meet the new challenges with the advent of the Asean Free Trade Area, or AFTA. Under the AFTA plan, regional tariffs on motor vehicle imports among Asean members are set to fall to zero to 5% in 2003. However, Asean members have agreed that Malaysia needn’t apply the tariff cuts until 2005, and even then the rate will only be cut to 20%.

It is unclear when Malaysia would have to comply with the lower zero to 5% tariffs.

Malaysia’s two national car manufacturers are Perusahaan Otomobil Nasional Bhd., or Proton, and Perusahaan Otomobil Kedua Sdn. Bhd., or Perodua. The government is a controlling shareholder in both companies.

The two companies have a combined market share of around 75% in Malaysia.

In theory, Dow Jones said, from January 2005, the two local car makers will face keen competition from regional countries like Thailand, a major car assembler, as the import tariffs are dismantled under AFTA.

Bernama also reported Rafidah as saying the government will also discontinue the price supervision mechanism on vehicles with effect from January 1, 2004.

Prices of motor vehicles sold in Malaysia now are subject to approval from the Malaysian authorities.

Malaysian government officials weren’t immediately available to comment on the report, Dow Jones said.