. /.RESTRICTEDWORLD TRADE
ORGANIZATIONG/C/W/291
31 August 2001
(01-4193)
Council for Trade in Goods Original:  English
MALAYSIA – REQUEST FOR EXTENSION OF THE TRANSITION
PERIOD UNDER THE AGREEMENT ON TRADE-RELATED
INVESTMENT MEASURES
The following communication, dated 30 August 2001, has been received from the Permanent
Mission of Malaysia.
_______________
In accordance with the Decision of the Council for Trade in Goods of 31 July 2001, I hereby
submit on behalf of my Government, the request for an extension of the transition period under
Article 5.3 of the Agreement on Trade-Related Inve stment Measures, for the period 1 January 2002 to
31 December 2003.G/C/W/291
Page 2
The Government of Malaysia is requesting a further 2-year extension of the transition period
for TRIMs pursuant to the 31 July 2001 Deci sion of the Council for Trade in Goods.
1. Malaysia's earlier request to the WTO, as documented in G/C/W/174 dated 12 January 2000,
was for a 2-year extension of the local content policy on motor vehicles from 1 January  2000  until31 December 2001. A further extension of this measure from 1 January 2002 until
31 December 2003  is now necessary.
2. The removal of the TRIMs on 1 January 2002 would adversely affect the motor vehicle and
component manufacturing industry. The discontinuation of this measure is projected to have negative
impacts on the domestic automotive industry through the:
− retrenchment of a least 6,259 employees,
− annual turnover losses amounting to at least RM 716 million,
− capital investment losses amounting to at least RM 1,674.5 million, and
− possible closure of 47 local plants.
3. The 2-year extension ending on 31 December 2001 is inadequate for the motor vehicle
industry to attain full recovery from the financial crisis that affected Malaysia. The automotive sector
has yet to achieve the level of competitiveness and consolidation to compete in the open market.
4. At least 53% of component manufacturers, mostly small and medium size enterprises, are
dependent on some kind of assistance. Given the existing level of readiness to face competition, the
removal of such assistance would result in a drop in demand, reduction of market share and resultantcash flow and loan servicing problems.
5. An extension of the transition period for TRIMs is necessary for the recovery of investment
cost undertaken by the industry. The majority of vendors have yet to fully amortise the cost of
retooling and other investment taken prior to the financial crisis. The enterprises in the component
manufacturing industry have been heavily dependent on a single product, the domestic market andforeign technology. A longer time is needed for structural adjustment. The industry produces a total of
6,000 components parts with investment of RM 4.6 billion and total employment of at least 30,000.
6. Programmes to enhance the competitiveness of the local automotive component industry have
already been implemented. However, more time is needed for vendors to strengthen and enhance their
product and design development and upgrading of skills and technology in order to be able to expandtheir supply to the regional and global market.
7. Malaysia's plan to phase out the TRIMs includes removal of all penalties on non-conformance
of the local material content policy by 31 December 2002 . This will be followed by removal of all
penalties under the compulsory sourcing of locally manufactured items by 31 December 2003 .
8. Progress of the phase out plan will be reported to the Council for Trade in Goods as required
by the Decision of 31 July 2001.
9. We seek your cooperation in forwarding this request for the consideration of the Council at its
next meeting.
__________