Responding to a warning by economist KS Jomo, Ong said it was wrong to say that ratifying the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership (CPTPP) would result in an increase in imports.
Jomo, speaking to reporters on Nov 9, cited a study saying that Japanese cars would swamp the local market.
“Proton and Perodua can say good-bye,” he remarked.
Ong said that this was a mistaken notion and explained that most cars on the road, including popular Japanese cars, were completely knocked-down cars, with a large part of the assembly process taking place in Malaysia.
“This is part and parcel of the Industrial Linkage Programme (ILP), which gives an incentive in the form of lower excise tax,” he said.
Ratifying the CPTPP or even the Regional Comprehensive Economic Partnership (RCEP), he added, would have little to no effect on existing incentives for local components and assembly.
“As such, the notion of Japanese imported cars suddenly flooding the market post-CPTPP or post-RCEP is a mistaken one.”
Ong also said Malaysia had not been flooded by imported Japanese cars after it signed a bilateral free trade agreement (FTA) with Japan and became party to an Asean-Japan FTA.
The ILP, he added, still allowed room for Malaysia to continue on the path to greater localisation of components and assembly by foreign auto makers.
Economist Yeah Kim Leng of Sunway University gave Ong some support, telling FMT he doubted that Proton and Perodua would be finished if the CPTPP was signed.
He noted that the two companies have foreign partners in Geely and Daihatsu, saying neither was a small-time player.
He said excise duties and import duties did provide Malaysian-made cars some level of protection and added that they might still be able to compete even if the playing field was level.
He also said it would have been unlikely for Geely and Daihatsu to partner with Proton and Perodua if they did not think the latter companies could be viable without government protection.
“We might see their profit margins affected, but this is good for consumers because it will force producers to be more competitive in pricing,” he said.
He added that ratifying the CPTPP would likely see Proton and Perodua improving their productivity and being pushed to look for foreign markets.