Published on March 18th, 2019 | by Daniel Sherman Fernandez0
MITI aims to be fully transparent on the issuance of Open Approved Permits (APs)
After our recent article highlighting the increased number of new Open Approved Permits (AP) holders (36 new companies are now holding AP’s) in the past few months, the International Trade and Industry (MITI) has issued a statement explaining the reasons why and now comes a statement from the Deputy Minister.
This is a Media Statement by Dr. Ong Kian Ming, Deputy Minister ofInternational Trade and Industry (MITI) on the 14th of March, 2019
One of the main contentions about theimplementation of the Approved Permit (AP) policy in the past has beenallegations that these APs were given to a small number of well-connectedindividuals and companies which then quickly sold the APs to other parties fora quick profit. These allegations led many people to ask for the abolition ofthe AP policy.
Under Pakatan Harapan (PH), we arecommitted to ensuring that only genuine Bumiputera entrepreneurs are able toobtain these APs. In September 2018, our Prime Minister, Tun Dr. Mahathir,warned those who sell their APs for a quick profit will find their permitsbeing cancelled.
MITI’sstatement on the 13th of March, 2019 outlined some of the stringent conditionsby which existing AP holders as well as new applicants were evaluated beforetheir APs were issued in 2019. These companies:
- Must be 100% Bumiputera-ownedcompanies based on their registration with the Companies Commission of Malaysia(CCM)
- Must have paid up capital of atleast RM1 million
- Must have experience of atleast 2 years in selling and distributing motor vehicles
- Must not have directors /shareholders / management team with shares in other companies holding open APs
- Must have a minimum of 5full-time staff in management, marketing and the technical departments
- Must have a suitable showroomand office
- Must have the financial andmanagerial capabilities to operate a business to sell imported vehicles viaOpen Aps
Once a company has been allocated Open APs, they must comply with the additional requirements:
- Any change in the equityholdings and the directors of any company must obtain the approval of MITIbefore this can be executed
- No usage of middle-men orintermediary companies to sell these Open AP vehicles
- Opening of new branches to sellvehicles obtained via the Open AP must have the approval of MITI
- The vehicles must be displayedor stored in a MITI-approved premise
- The documents for importation(Bill of Lading / Airway Bill) must not be more than 1 month from the date whenthe company submitted its AP application to MITI. The name of the company inthese documents must be the same as the name of the company in the MITIapplication and approval forms.
- The company must produce theimport and sales figures as well as the record of inventory to MITI before the10th of every month
- The APs must be used in theyear of approval which is before the 31st of December every year
- The company must prepare awarranty of at least one year and have an agreement with the Original EquipmentManufacturer (OEM) to provide after sales services
As a result of these stringent applicationand approval conditions, only 164 out of 282 applications were approved byMITI. Out of these 164 approved applicants, 128 are existing companies and 36are companies which previously did not receive any APs (termed as “new”companies). Out of 109 applications bynew companies, only 36 were approved.
Although there are no longer hard caps onthe number of APs which can be issued in one year, there are definitely hardcaps on the maximum number of APs which a company can obtain.
For companies which have not obtained APsin the past and which have a paid up capital of RM1 million, the maximum numberof APs for passenger cars which can be obtained is 60 per company. For existingplayers with a paid up capital of RM2 million, RM3 million, and RM4 million, themaximum number of APs which can be obtained by these companies are 120, 180,and 240 respectively (See Table 1 below).
The rationale of capping the number of APsfor companies which have not received APs in the past is to ensure that thesecompanies have the financial and sales capability to sell up to 60 vehiclesfirst in their first year before they can increase their quota of APs in thefuture, based on their paid-up capital.
Table1: Maximum number of APs (vehicles) allocated in 2019 by company type
The total number of Open APs issued has notbreached the 30,000 mark over the past 2 years. They represent only about 4.3%and 5.3% of total passenger car sales in 2017 and 2018 respectively (See Table2 below).
Table2: Total Number of Open APs issued compared to Total Passenger Car Sales (2017vs 2018)
Open APs are issued mostly for the higherend of the consumer market segment. They have no effect on the car prices forthe mass market. The volumes of the cars brought in via Open APs are very smallwhen disaggregated into the various brands. The low volumes don’t provideenough economies of scale for them to be assembled in Malaysia.
In fact, the large majority of passengercars on the road, including the foreign brands, are manufactured and/or assembledin Malaysia. Honda, for example, has a local plant in Pegoh, Melaka; Toyotahas a new manufacturing plant in Bukit Raja, Klang; Tan Chong Motorsassembles the current Nissan models in its plant in Serendah, near Rawang.Even Mercedes-Benz has a local plant in Pekan, Pahang assembling plug-inhybrids while BMW has a local plant in Kulim, Kedah.
With the localisation of the domesticpassenger car market, APs are no longer as commercially lucrative as they oncewere. Car sales in Malaysia and globally have slowed down and the accumulationof the stock of imported luxury cars have dampened the local market conditions.With a RM10,000 price tag per AP plus the investment needed for showrooms andpaid up capital, only genuine and competitive players can remain in the market.
MITI continues to push for greatertransparency in our AP policy. The full list of ALL 164 AP holders has beenpublished in MITI’s website.
We encourage the public to report anyinformation regarding AP holders who may be attempting to sell their APs tothird parties to [email protected] or to call the hotline (603) 6208 4970 or towrite to “Director, Export and Import Control Section, MITI, Level 7, Menara MITI, No.7, Jalan Sultan Haji AhmadShah, 50480 Kuala Lumpur, Malaysia”.