. /.RESTRICTEDWORLD TRADE
ORGANIZATIONG/C/W/208
29 May 2000
(00-2165)
Council for Trade in Goods Original:  English
MALAYSIA’S REPLIES TO WRITTEN QUESTIONS FROM JAPAN1
PURSUANT TO ARTICLE 5.3 OF THE AGREEMENT ON TRIMS
The following communication, dated 24 May 2000, has been received from the Permanent
Mission of Malaysia.
_______________
1. Please explain in detail and in concrete terms the effort your government has made to
abolish the TRIMs by December 1999, including legal schedules leading to the abolition.
The Malaysian Government has conducted a number of awareness programmes on the
phasing out of TRIMs since the TRIMs agreement was concluded in 1994.
The Government has encouraged measures undertaken by private sector companies in the
automotive sector to become more competitive in order to meet the deadline of the TRIMs elimination
by 2000.   Measures undertaken by the automotive companies include:
- implementing the modular concept of manufacturing;
- introduction of cost-cutting measures;
- undertaking research and development, design and engineering of new parts and models.
As the TRIMs measure is implemented administratively, it will not involve any legislative
amendments.
2. Please explain in detail the factors that prevented your government from abolishing the
TRIM as scheduled.
• The financial crisis impacted negatively on the development of the automotive industry in
Malaysia.  The economic downturn resulted in a significant decline in sales and production of
motor vehicles.  Sales of motor-vehicles declined by 59.5% to 163,851 units in 1998.  Despite the
improvement in sales in 1999 to 316,703 units, this is still far below crisis levels.
• The decline in production of component parts was also severe.  Production of component parts
declined by 40% to RM1.98 billion in 1998, from RM3.3 billion in 1997.
• Majority of component parts manufacturers rely on a single domestic automotive producer. Most
of the component parts manufacturers have reinvested between RM500,000 to RM1million asdevelopment costs in anticipation of the launch of a new PROTON model in mid 2000. The
removal of local content policy by 1/1/2000 at this juncture will affect the chances of recouping
                                                     
1Regarding requests by Mexico, Chile, Romania, Malaysia, Pakistan and Argentina (G/C/W185)G/C/W/208
Page 2
this investment and jeopardise 6,200 jobs and investment of RM1.6 billion in the affected
companies.
• Malaysia is still recovering from the financial crisis.  We do not wish to jeopardise these recovery
efforts at this early stage nor add further to plant closures and unemployment.
3. Please explain in detail the TRIMs for whic h your Government seeks an extension of the
transition period.  Also please, provide us wi th the domestic legal basis on which such TRIM
measures are taken.
The Malaysian Government’s request for extension covers only the TRIM on Local Content
Policy on Motor Vehicles, and applicable only to passenger cars and commercial vehicles.   This
extension is requested based on developmental needs.
The local content requirements are:
(1) Passenger cars – 45% to 60%
(2) Commercial vehicles – 45%
GOM has not requested for an extension of the second notified TRIM, that of Local Content
Requirement related to Investment Incentives.
The TRIM on Local Content Policy on Motor Vehicles is applied administratively, and is not
based on an existing statute.
4. Any extension must be limited to the minimum necessary to phase out TRIMs.  Please
explain the reason why your government has judged that the specific length of the extension you
seek is necessary.
The two-year period extension that was requested is determined as a result of consultations
with the automotive industry. The request for extension is based on the fact that ec onomic crisis of
1997/1998 affected the plans of Malaysian automotive companies to comply with WTO requirements.
Given the positive indication of the economic recovery, an extension of two years will help
the component parts manufacturers to upgrade their level of competitiveness. The industry needs an
extension period for recovery to a more sustainable level of production in order to achieve economies of
scale and to face a competitive open market environment.
5. Please explain in detail the phase-out schedule (including necessary legal actions) leading to
the ultimate abolition of TRIMs, assuming that a transition period is granted.  In this light, pleasenote that Japan is of the view that even if an extension is granted this time, another extension after
the initial should not be granted.
Automotive companies n Malaysia have been informed that the request for extension of the
TRIM is for two years.   The period requested is minimal in view of the fact that a longer timeframe isenvisaged for the complete recovery of the automotive sector.
__________