The owners often rent out their vehicles illegally as they cannot afford to pay the steep commercial insurance coverage as well as fees for the annual inspection at Puspakom.

The additional costs would also have resulted in tourists having to fork out higher rental rates.

The daily rental for a saloon vehicle is RM50 during low season and RM150 during peak periods.

Almost 80% of the “hire-and-drive” car market segment on the island is dominated by unlicensed operators.

Malaysian Association of Tour and Travel Agents (Matta) Kedah chapter chairman Pishol Ishak said 155 members in Langkawi had agreed to legalise the vehicles after discussing with the ministry and the Commercial Vehicles Licensing Board (CVLB).

He said there were some 1,000 “hire-and-drive” vehicles on the island and as of yesterday, the ministry’s licensing division had issued 500 permits.

When contacted, a ministry spokesperson confirmed that it was in the midst of licensing the vehicles by May 1.

In a related development, Pishol said financial institutions on the island were slow to respond to the applications by the Matta members to refinance their vehicles to meet the ministry’s requirements.

To legalise the vehicles, members need to insure it and include clauses to legally protect tourists renting the cars as well as the owners, who are the rental car operators and also travel agents, he added.

“These are additional operational expenses and the banks must assist Matta,” Pishol said.