AG: MITI increased allocation of Open APs without systematic records of justification

Between 2017 and 2020, the Ministry of International Trade and Industry (MITI) has increased the allocation of Open APs used by recond dealers to import used cars and motorcycles by 61,527 permits (56,527 for cars, 5,000 for motorcycles), said the latest Auditor-General’s report for 2019 (series 2) released yesterday.

However, the Auditor-General’s report said the justifications for increasing the allocation to each recipient company was not updated/registered systematically, but instead relied only on minutes of meetings from the Special Administration Committee for Import and Export Licenses (JKAP) and company documents.

It also found that some Open APs were given out to dormant companies, while others didn’t even use their allotted Open APs at all.

Previously, the allocation of Open APs was capped below a threshold percentage of the country’s total output of locally-assembled cars. In 2017, that threshold was 6 percent for cars, and 3 percent for motorcycles.

In 2019, MITI removed this cap (announced by then MITI Minister Ong Kian Ming). In theory, Open APs are now unlimited. The basic allocation will be determined based on the recipient company’s paid-up capital, but companies can apply for more.

Additional allocation will be given on two criteria - the company’s sales performance (car sales exceeding 50 percent of the allocated Open APs, 70 percent for motorcycles), or an increase in paid-up capital.

Since the cap removal in 2019, the total number of Open AP recipients went up from 137 to 198.

The audit team also found that between 2017 and 2020, there were 10 used car importers that did not use any of the 750 Open APs given to them, while 70 companies that imported used motorcycles did not use their 13,750 Open APs given.

In response to the audit team’s findings, MITI had on June 2021, told the audit team that it has setup an internal database to record the additional allocations of Open APs approved. Discussions with the system’s vendor to improve the ePermit system will be held in July 2021.

As for companies that did not utilize their allocation of Open APs, MITI had on 26-February 2021, told the audit team that these companies will be asked to provide an explanation on the low utilization before their next basic allocation will be approved by the ePermit system.

MITI also said that on 3-December 2020, 10 recipient companies for Open APs (motorcycles) had their basic allocation removed while 2 companies were found to be dormant and has since been removed from MITI’s list. The remaining 4 companies had given their explanation and their basic allocation for 2021 has since been approved.

Open APs, short for Approved Permits, are an import control mechanism used by the Malaysian government.

For motor vehicles, there are two types of APs – Open APs are used for import of used cars, colloquially referred to here as ‘recond’ cars, while Franchise AP are given to authorized importers or distributors of new cars.

In 2020, MITI approved 38,040 Open APs for cars and 9,100 Open APs for motorcycles, up 8 percent and 18 percent respectively from 2019's total.