"Are you thinking of buying a new car?"

"Yes, I'm thinking about it. The old one is getting unreliable, and I'm tired of always having it in the shop. Maybe I'll trade it for a new one."

"Ahmad, what about AFTA?"

"What about it?"

"If you wait until after the AFTA comes into effect, you can save the duty. The prices will be a lot cheaper."

"That's not what the salesman said."

"What did he say?"

"He said that the government will not abolish the tariffs."

"How can he say that? The tariffs are part of the AFTA agreement. They have already been allowed to extend the car duty for two more years."

"Well, it doesn't matter. The salesman says that the government has no intention of giving up the tariff protection for the Proton and the Perodua."

"Ahmad, how can he say that? In effect, he is saying that the Malaysian government is dealing in bad faith. The government is telling the other Asean members that their cars will be allowed to be imported without duty. Now, according to the salesman, the ministers are secretly plotting to keep the tariff protection in place, only under a different name. How can they get away with that?"

"The salesman said that the government will replace the duty with other types of fees and taxes to keep the imported cars expensive."

"How does he know that?"

"He says that his company has inside information from the international trade and industry ministry. The major stockholder is the son-in-law of the minister, he says."

"Suppose he is just telling you that to get you to buy a new car now now instead of waiting?"

"Would a car salesman lie?"

"Be serious. How can you be sure he is not just saying these things to induce you to buy now, rather than waiting. If the AFTA agreement is genuine, then there will be a big loss if you buy now, especially if you buy one of the bigger cars, like a Mercedes or BMW."

"Well, even if he is wrong, still it can't amount to much."

"Oh, yes it can ..."

"How much?"

"Well, suppose you buy a Nissan Cefiro now for about RM130,000. In four years it will cost only about RM70,000, unless there is a big change in the inflation rate or the exchange rate. So, if inflation stays about the same, and the ringgit is still pegged to the dollar, in forty-eight months the car you buy today will cost RM60,000 less than it does today. Why not wait, and save the extra money. RM60,000 is a lot of money."

"Yes, I suppose so, but I want a new car now."

"I know, but are you prepared to absorb the loss?"

"I think so. How much did you say it was?"

"About RM60,000 for the Nissan. If you buy a car with a 2.0 engine it would be more than twice that, and for a 3.0 engine it would be more than RM200,000."

"Whew! That's big money. Do you mean that if I buy a new car today I am really going to lose that much money?"

"Yes. Think about it. The new car you buy today has a normal depreciation schedule, and based on normal driving, you can expect it to lose about half its value in the four years until January 2005. In addition to the depreciation for age and use, you must factor in the amortisation of the duty which is supposed to be removed."

"How much is that? The amortisation for the duty, I mean?"

"Well, there are about 50 months until the duty is to be removed. So if the duty today is RM60,000, that means the value of the car is decreased by 1/50th of the duty each month between now and then. That amounts to RM1,200 per month. For a car with a 2.0 engine that would be about RM2,500 per month, and for the car with the big 3.0 engine it would be around RM4,000 or more every month."

"Suppose the salesman is right, and the duties are not removed?"

"Well, nothing much will change over the present car market, and you might as well buy now. But I think the salesman is wrong."

"Why?"

"Because the Asean members meet almost every month, and they discuss this very issue. If they thought Malaysia was dealing in bad faith, it would be the end of AFTA, so far as Malaysia is concerned, and probably for all the others also."

"But the salesman sounds so convincing. How can he say these things unless he believes them?"

"Maybe he thinks it's the truth. Probably his sales manager has told him this story to get him to sell cars."

"I wonder if the government knows about this. I wonder if the government allows these salesmen to tell this story to new car buyers?"

"Ahmad, why don't you ask the international trade and industry minister? It can't be both ways. Either the duties are going to dropped, or the government is dealing in bad faith. If the government plans to replace the tariff with special taxes and fees, then the other Asean countries have a right to know that now."

"I think so, too, Rahman."

"If the AFTA is going to be honored, then the new car salesmen should not be allowed to lie about it. They should be held liable for what they say, and if the value of the car falls because of the removal of tariffs, then the dealer should legally be responsible for the statements of his salesmen. The car dealers should be required to pay out of their pocket for any loss."

"Suppose the new car dealers are being told that they will get protection?"

"By whom? Who could give them this assurance?"

"The ministers. If the ministers are telling the dealers that the tariffs will be replaced with comparable taxes and fees, then it is the ministers who should be held liable."

"Rahman, do you think the ministers would do that? Tell the dealers one thing and tell the other Asean members something else?"