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January 25, 2014

Challenges facing NAP 2014

THE long awaited revision of the National Automotive Policy (NAP) 2014 has been finally unveiled.

Undoubtedly, the stakes are high not only for the auto players, but also for the survival of the industry at large as a crucial contributor to the economy.

First introduced in March 2006, the NAP had undergone its first revision in 2009 and NAP 2014 seems to be the final push to transform the automotive industry to greater heights until 2020.

The six objectives of the NAP 2014 are similar to the six objectives of the first NAP, but this time around, the niche areas have been identified, that is the Energy Efficient Vehicle (EEV), of which Malaysia is expected to become a regional hub by next year. Looking at the automotive industry holistically, the issues and challenges remain: How to make the industry more competitive, resilient, and viable. Will NAP 2014 make a difference?

It is commendable that liberalisation is still the key strategy in the framework of NAP 2014 and the focus on EEV is in tandem with one of the three New Economic Model (NEM) guiding principles.

The RM2bil financial package, if spent wisely, could improve the industry further to a higher level. Furthermore, the lifting of the ban on new manufacturing licences for cars below 1,800cc is laudable, though it is only applicable for the EEV category.

Perhaps the biggest disappointment is the fact that many key issues in Malaysia’s auto industry are still “under study”.

Take the licencing system of import quotas, for example. When the first NAP 2006 was announced, it was stated clearly that the Approved Permit (AP) would be gradually phased out and completely abolished in 2010.

The first revision of NAP 2009, on the other hand, specified that open AP be terminated in 2015 and franchise AP be scrapped in 2020.

In the true spirit of liberalisation and in line with the realisation of the Asean Economic Community (AEC), the ongoing talks on the Trans-Pacific Partnership Agreement (TPPA) and the Regional Comprehensive Economic Partnership (RCEP), it is crucial for the AP system to be abolished sooner rather than later.

The endeavour for any form of protectionism in the name of “infant industry” no longer holds water as 31 years of being “infant” seems unnatural by any standard.

With liberalisation comes competition. Competition is good because it will encourage transparency, promote efficiency and reinforce the role of market mechanism in determining prices.

Competition not only creates economies of scale, but also economies of scope and economies of agglomeration.

Thailand and Indonesia’s auto industry are far ahead of us simply because they embraced competition earlier than us.

But that does not mean that Malaysia’s auto industry will remain behind forever.

The NAP 2014 proves that Malaysia is serious to be the regional leader in the industry, especially in the EEV market.

Still, how far the NAP 2014 can attract auto foreign direct investments (FDI) remains to be seen.

As Malaysia aspires to become a regional hub for EEV, the numbers of auto FDI in EEV coming to Malaysia must be greater than neighbouring countries, especially Thailand and Indonesia.

The expansion of the export market thus must be the main priority. Not only because Malaysia has a comparatively small domestic market, but more importantly, as Malaysia aims to become a developed nation by 2020, the focus should be more on the usage of public transportation rather than a private one.

DR IRWAN SHAH ZAINAL ABIDIN
Universiti Utara Malaysia
Sintok, Kedah

 - The Star

 

 

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