Industry analysts said while the gains are not expected to be immediate, this would an end a period of uncertainty for the national car makers, Perusahaan Otomobil Nasional Bhd (Proton) and Perusahaan Otomobil Nasional Kedua (Perodua).

"Proton, Perodua and EON will have a better time from now on. They may even get more incentives under the National Economic Recovery Plan of the NEAC (National Economic Action Council)," an analyst with a Malaysian brokerage said.

The powerful NEAC, set up at the start of this year to find ways out of the economic crisis facing the economy, in early July recommended higher car loans, longer repayment periods and greater tax exemptions to help the domestic car industry.

"The immediate task is to improve local demand for cars and sustain the operation ofthe firms," the NEAC said in its National Economic Recovery Plan.

NEAC recommended raising credit to 85 per cent of a car's price from 70 per cent, increasing repayment period to seven years from five years and raising excise duty exemption on Proton cars to 70 per cent from 50 per cent.

NEAC also recommended the suspension of a 13 per cent duty on imported Proton components. It said these measures will cost the government nearly 250 million ringgit in revenues.

"These measures mean that locally made cars are going to enjoy an even greater price advantage over others. It is just a matter of time before they translate into sales," an analyst with a foreign research house in Kuala Lumpur said.

He said the local car industry will also benefit from the capital controls introduced by Malaysia, which make the ringgit worthless overseas. Fixing the ringgit at 3.8 to the dollar also stabilises operating conditions for the companies, he said. This will make it even more difficult for car importers, who have toget central bank permission for every purchase.Foreign car makers -- there are 15 of them assembling or just selling cars in Malaysia -- complained that the NEAC plan only helps local car makers.In a follow-up to the NEAC report, Bank Negara announced on July 28 it would allow car loans up to 85 per cent of the price and scrap the 40,000 ringgit ceiling on the price of cars eligible for easier credit for units already in the country.

Before these announcements, the Malaysian Motor Traders Association (MMTA) said car sales fell by 64 per cent in the first half of 1998 over the corresponding period last year.

It said that sales for the whole of 1998 are expected to be down by 64 to 70 per cent over the previous year.

"The economic slowdown has made it very difficult for the car industry to survive and I don't see any imminent hope of recovery this year," MMTA chairwoman Aishah Ali said. Until 1996, car sales in Malaysia were fuelled by a booming economy which grew by eight per cent or more for adecade.

Then Asia's financial crisis erupted in July 1997, sending Malaysia's economy into a tailspin and curbing consumer spending.

MMTA said four out of nine assembly plants run by its members had shut down temporarily and some 3,700 staff, or 38 per cent of their workforce, have been laid off. Towards the end of July, Proton, the main national carmaker, had a stock of 250,000 cars, according to the NEAC.

Proton said it expected its profit for the 1998/99 financial year to be lower than last year. It reported a 41 per cent drop in its net earnings to 440.57 million ringgit for the year ended March 31, 1998.

Edaran Otomobil Nasional Bhd (EON), Proton's distributor, announced earlier this month that it has made a loss of 7.25 million ringgit in the first six months of 1998 against a profit of 199.18 million in the year-ago period.