During his visit to Berlin yesterday, Malaysian Prime Minister Mahathir Mohamad was quoted by AP as saying that German luxury carmaker BMW has chosen Malaysia as its operations centre for Asia. According to Mahathir, BMW would set up regional operations in the Cyberjaya technology centre and in the southern port of Tanjung Pelepas.

Time will tell how much of a strategic coup this really is, as most car makers have chosen Thailand as their South East Asian base, at least as their manufacturing base. Thai manufaturing costs are much lower than that of Malaysia, but part of the Malaysian deal includes state incentives and BMW has requested 100% equity. Malaysian maintains high import tariffs for imported cars in order to protect Perusahaan Otomobil Nasional Bhd the government auto maker. While making car ownership an option for a wider cross-section of the Malaysian consumer market, and registering modest export successes itself, the reduction of competition has not assisted in raising the quality of the local product or service as a competitive marketplace would.

The slowness of Malaysia in reducing tariffs as part of the AFTA free trade agreement has been slow, the latest justification being that the Asian crisis necessitated extension of the policy. Relations between Thailand and Malaysia have been affected behind the scenes due to this.

BMW however is building a hi tech brand and locating in Malaysian's much spun "Multi Media Super Corridoor" (who other than me cringes at the mention of that insipid nomenclature?), may lend re-inforcement to the brand image.

Meanwhile Thai representatives are telling Bangkok reporters that the decision will not affect BMW's comittment to the Thai auto industry, including the BMW assembly and wholesale operations, and that plans are still being made to assemble the "7" series in Thailand.

Very little information at the moment is available on the nature of the Malaysian operation.