Prime Minister Dr Mahathir Mohamad's warning that car prices will not drop when Afta kicks in is very puzzling and it would be interesting to see how he plans to continue milking Malaysians behind the wheel.

To protect the fledgling Proton, he introduced sky-high import tariffs in the 1980s. The result was its dominance of the local car market.

Let us assume that Proton cars make up 80% of total car sales revenue and imported cars (both completely built-up and knockdown — CBU and CDU — versions) make up the balance 20%, including import tariffs.

For simplicity sake, let's assume total car sales revenue is RM10,000. Therefore Proton cars contribute RM8,000 (assuming zero import tariffs on them) while all other cars (including import tariffs) contribute RM2,000.

Now assume that the average import tariff is 100% (it actually ranges up to 300%). This means the sales revenue from non-Proton cars consists of:

Pretax sales of RM1,000 and import tariffs of RM1,000 (i.e.100%) which add up to a total of RM2,000.

So the total import tariffs received by Malaysia, as a whole, is RM1,000. This is what the government 'loses' after Afta, in this illustration.

Now, according to Mahathir, the government is only going to "replace the loss of import tariffs with local taxes applicable to all cars", in his actual words.

Therefore, the RM1,000 of import tariffs will have to be recovered from new local taxes levied on:

Proton sales of RM8,000 and non-Proton sales of RM1,000 which totals RM9,000.

Since 1,000/9,000 = 0.1111 or roughly 11%, this means that the new "replacement" local tax will be only 11% i.e non-Proton cars will be subjected only to a new local tax of 11% compared with an import tariff of 100% previously while Proton cars will be subject to an identical new local tax of 11%.

Therefore, a Proton car that costs RM50,000 now will cost RM55,000 post-Afta while a non-Proton car that costs, say RM200,000 now (of which RM100,000 is pre-tax sales price and RM100,000 is current assumed import tariff of 100%) will cost only RM111,000 post-Afta.

This is real good news for those waiting to buy imported cars.

So why didn't Mahathir say so openly? This would make him popular beyond his wildest dreams.

On the other hand, if the new local tax differentiates between Proton and non-Proton cars, you can bet your bottom dollar that will be hotly disputed by our Asean partners as deliberate evasion of the Afta agreement. They won't keep quiet whatever Asean's tradition in avoiding controversy.

And what about WTO (the World Trade Organisation)? When similar protectionist barriers are dismantled on a global scale, Malaysia will have to comply if it wishes to continue being a full trading partner.

Better to bite the bullet sooner rather than later. Let's go for transparency, tell the people the facts, the truth, the whole truth and nothing but the truth. That's a good motto to run a country by. Don't the rakyat deserve it?