When Prime Minister Dr Mahathir Mohamad said that domestic taxes will be imposed on all cars after Afta, I finally concluded that the economic managers of this countries are just plain incompetent. Don't they know it will only make things even worse for Proton and Perodua?

All evidences suggest that taxes on cars will make it even worse for uncompetitive car makers. When taxes are imposed on car makers, the tendency is for consumers to buy the best they can afford. In Singapore, Mercedes and Toyotas outsell cheaper cars because they offer the best value and choices. Ask the low-cost Korean car producers and they will tell you they have better market share in open tax free countries like US than places with high-GST taxes of Australia or Europe.

The logic is quite simple really. The more a car is a bigger part of your expenditure, the shrewder you are in choosing value. Hence, the more uncompetitive the car-maker is, the lower the preference for their cars. Mahathir and the relevant ministries (Finance, International trade and industries) in propping up car prices by various means after Afta kicks in show their incompetency in tackling the new world economy and that they are forever beholden to the NEP mentality and dubious meritocracy system.

I now wonder if they know that not only is imposing taxes on cars in a country like Malaysia bad for the economy overall but also that in the long run they have no choice but to remove them.