ABSTRACT
This chapter gives an historical account of Malaysian automotive development, split into three phases. The first phase (1967–1982) involved ISI policy. The second phase (1983–2003) included state-led national car projects. The third phase (2004–present) is of liberalisation of the industry under WTO rules. The government’s actively state-led automotive development policy in the 1980s and 1990s established national car producers. The Malaysian government provided various discriminatory and protective industrial policies in order to foster the development of national car producers, especially Proton. Policy measurements included favourable tariff rates and excise duties for national car producers. In addition, the Malaysian government encouraged many bumiputra (indigenous, mainly ethnic Malay) entrepreneurs into the automotive industry through the Vendor Development Programme, with subsidies to Proton in particular. Such strong industrial policy measures in Malaysia needed to be changed in the 2000s under the WTO. The Malaysian government implemented its first liberalisation policy in the automotive sector by lowering tariffs, abolishing local content requirements and discriminatory measures for national car producers, and later introducing the National Automotive Policy in 2006. However, the Malaysian government still has some controversial protectionist policies, linked with local content provisions, non-tariff barriers, and manufacturing licensing.
