Thursday, May 04, 2006

Malaysia and Korea accepting the Free Trade Agreement

written by: S.M.Mehdi Hassan

Malaysia and Korea auto market have remained closed all this time to the foreign markets. Now the two countries are moving toward free trade agreement. The United States will be holding free trade talks with Malaysia on the month of June. In that meeting the United States will pursue Malaysia to open up its auto market to the foreign companies.
According to Stephen Collins, President, Automotive Trade Policy Council Malaysia has a very unique market. It has the biggest automobile market in Southeast Asia. Until now Malaysia was producing and using automobiles that were produced by the domestic companies. Proton and Perdua are the two major domestic models. Twenty years ago, it was decided to build up automobile company which will be fully owned and operated by Malaysia. Since then they shut down all possibilities for the foreign market to do business through protective tax barriers and various policies. However, things have started to change after Malaysia participated in the world trade organization. It also signed an FTA agreement with its neighboring countries.
Korea like Malaysia, produce its own cars and protected its domestic companies through various taxes on foreign automobiles and protective policies. The United States has been pressing the Korean Government for the last ten years to reduce their taxes on foreign auto parts. The two governments signed Memorandum of Understanding in 1995 and then 1998 opened its automobile markets to foreign companies but the import figure did not raise that much because of taxing policies. The Korean citizens were brought under taxation when they bought foreign vehicles but now days that rule has changed.
Both Korea and Malaysia have a flourishing economy which makes it a market with great potential for the western automakers. Hence, they are interested to export their products. I think at this present age of free market economy and globalization it is tough for a country to cut off foreign investors and traders because it will also affect that country, as it export products to other countries as well. So Malaysia and Korea should accept free trade agreement.

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