Government’s decision to retain approved permit (AP) system a regressive move, according to economists

Last week, minister of investment, trade and industry Tengku Datuk Seri Zafrul Abdul Aziz reiterated that the government has no intention of phasing out the approved permit (AP) system for vehicle imports despite providing a leeway for Tesla.

He said that the AP system would remain in effect even though the government has allowed Tesla Motors to sell its vehicles in Malaysia without the AP rules required of other car companies selling cars in Malaysia, as the American EV maker was the first approved applicant in the ministry’s BEV Global Leaders initiative.

The decision to continue with the scheme is a regressive move, say economists. While acknowledging that dismantling the scheme may cause the government to lose substantial revenue that it collected from permit holders, Universiti Malaya’s Nazari Ismail said that the removal of APs would allow for healthy competition between local and foreign-based carmakers, as FMT reports.

“That will spur domestic carmakers to improve quality and reduce the price. These are all good for consumers,” he told the news portal.

Carmelo Ferlito of the Center for Market Education agreed, saying that abolishing the AP scheme would
create better competition and benefit consumers. “Removing APs will not (only) allow consumers to have access to more products at a more affordable price, but it will also create a competitive push for local producers, forcing them to improve on price and technology,” he said.

He noted that the government’s move to grant Tesla the exemption was undoubtedly aimed at furthering the country’s electrification efforts, but asked if it could have perhaps been done differently. “This is not wrong in principle, but I would have preferred (that a different mechanism be used such as imposing) different sales taxes, for example,” he said.

He said this was because the exemption gave the impression that preferential treatment was being given to a brand rather than for a product. “This may create an issue in the government’s relationship with other suppliers who have operated in Malaysia for a long time,” he said.

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