Saturday, May 16, 2009


The handling, awarding and distribution of AP or Approved permit for vehicle by Ministry of International Trade and Industry (MITI) have long been a contentious issue. In 2009, the Kuala Lumpur and Selangor Car Dealers and Credit Companies Association has suggested for the government to open APs to all or give a quota of 30% to bumiputras with the rest open for auction. In response, the Deputy Minister of MITI, Datuk Mukhriz has announced that formulation of a new mechanishm for AP is one of the Ministry’s top priority.

Now what is an AP? AP is a license to enable one to bring in a completely built up vehicle. The AP does not waive one from paying taxes. The issue on AP was hotly debated and received very extensive media coverage in 2005. APs in the market previously are dubbed as the wonder paper as it enables one to generate risk free profit. The AP was issued initially to encourage and set a platform for Bumiputra players to participate in the automotive industry.

However, the AP instead evolved into a trading paper and the value hit nearly RM50,000 per AP. Before the debacle in 2005, there are two different type of AP namely franchise AP and open AP.

For Franchise AP holder, the AP is tied to a certain franchise or mix of vehicle. However, do not be mistaken that it is necessary for a franchise AP holder to have an extensive showroom and service centre. Most franchise AP holder merely acts as a middle man where it plays the importer role and in most cases not extensively involved in the retailing and after sales of the vehicle. Each AP for each vehicle is sold ranging from RM20,000 to RM50,0000 to the actual franchise distributor. The franchise distributor that has to invest huge capital to develop its network is unable to import the vehicle itself but dependent on the franchise AP holder. In addition, the franchise AP holder collects its money upfront regardless of whether the car is sold by the distributor to the end customer. Some franchise AP holder even requires that the franchise distributor appoints the AP holder company as the company for pre-delivery inspection and fitting of accessories resulting.

Meanwhile for open AP it is not tied to any particular mix of vehicle and it is usually for what the industry term as ‘recon car’. Open AP are usually for MPV, 4FWD and cars models that are not carried or serviced by the main distributors. As Open AP is not tied to any franchise mix or vehicle it is more ‘tradeable’ and easily ‘sold’ hence considered more lucrative to obtain.

Based on media report in 19 July 2005, a total of 67,158 AP whereby 49,632 AP relates to franchise AP and 17,526 relates to Open AP. The people dubbed as AP kings in the media reports in 2005 are Allahyarham Tan Sri Nasimuddin SM Amin, Datuk Syed Azman Syed Ibrahim, Datuk Mohd Haniff Abdul Aziz and Datuk Azzuddin Ahmad as they receive more than 28,000 AP of the total 67,158. Assuming the minimum value of each AP is RM20,000 the AP issued out in 2005 would be valued at RM1.3billion. This is just one year and apparently the AP system has been in place since 70’s and actively in place since 1997 onwards. The AP did not cost the government any cost except paper and administrative cost yet the holder potentially could have yield RM1.3billion in one year. Sadly it is the consumer and rakyat who bought any CBU units that have contributed to the AP holders’ coffers.

Subsequent to the 2005, MITI has subsequently issued franchise AP to franchise distributor directly after much effort by the franchise distributor. As such, most franchise AP holder is the franchise distributor but there is no certainty it is 100% as there is severe lack of disclosure and transparency of information on the allocation of AP. Hence, I believe that the call by The Kuala Lumpur and Selangor Car Dealers and Credit Companies Association to open all AP or to reserve 30% for bumiputra and to auction the rest relates mainly to Open AP.

In November 2008, during parliament session, the Deputy Minister of MITI has replied that the total AP given has been declining from 70,381 APs were issued in 2005, 60,460 in 2006, 50,304 in 2007 and 44,168 this year. The decrease in AP cannot be attributed to the fact that there are strict controls by MITI rather it can caused by numerous reasons. For example, the decrease can sometimes be due to the fact the distributor no longer import the vehicle in CBU but is assembled in Malaysia like Mercedes , hence no AP is required. The other contributing factor is that due to high oil price, the purchase of MPV, 4FWD and big cc cars have slowdown considerably in 2008. The amount of AP disclosed would provide more insight if the type of AP issued is also disclosed.

Assuming the percentage of franchise AP to open AP for 2005 (26%) is similar to 2008, thus for 2008 the open AP issued are 11,400 open AP. With a value of RM20,000 per open AP, thus the potential value of the AP issued is RM228mil yearly.

As such, I support and hope that the MITI would implement the idea mooted by the The Kuala Lumpur and Selangor Car Dealers and Credit Companies Association to encourage transparency in the allocation AP and to increase the revenue of the Government. Opening up the allocation of AP would also benefit the consumer as they will not be overburdened by the overpricing of AP held by selected few. It would also promote fair competition among car dealers as the AP is auctioned. This would also avoid cases, whereby car retailers that do not possess any AP are held ransom by the AP holders as they cannot meet their delivery and purchase stock without AP.

By introducing the auction concept, the complication relating to the selection process and control on the AP can be minimised. The 30% AP allocated to Bumiputera should not be tradeable and should be allocated to those that are genuine car dealers and distributor. I believe this would at least help the Government achieve the goal of creating a class of bumiputra entrepreneurs and uplifting the economic position of bumiputras. Currently based on the available information and judging from the media report in 2005, the AP system has not really achieved its objective as only a handful bumiputras that benefit from the AP.

As long as the AP issue is not resolve, it can remain a time bomb as the allocation is shrouded with secrecy. It would continue to create discontentment among non-bumiputra entrepreneur involved in the car industry as they are dependent on others to obtain license as most of them would not be able to obtain AP even though they have the financial and technical capabilities. Likewise, bumiputra entrepreneur would also have the same opinion if only selected few bumiputra or the politically connected remain to receive the AP. Meanwhile, if there is no revamp, the favoured would continue to amass great wealth at the expenses of the Malaysians.

Ultimately, scrapping the AP would be the best option to open up and liberalise the market, but further study would need to be carried out on the potential impact to assemblers and also the national car industry. While protectionism is unhealthy it is not detriment in every case for example in the US, the agriculture industry is heavily subsidised and the steel industry receives heavy protection.



不过,AP最后成了一种交易商品,一张AP要价近5万令吉。2005年之前有两种不同的AP,一种是连锁AP, 一种是开放AP。








通过拍卖AP, AP的遴选及控制程序的复杂性可以减到最低。30%保留给土著的AP应该分发给真正的汽车经销商,而不是用来交易。我相信这将达到政府提高土著经济地位的目标。根据报道,由于AP由小撮土著控制,因此达不到其原本目标。



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