PUTRAJAYA, Malaysia (AFP) - Malaysian national carmaker Proton on Wednesday sealed a 16-year alliance with Iran’s Automotive Industry Development Company (AIDCO) in a pact marking its aggressive global expansion to prepare for market liberalization.

Under the deal, Proton will supply Malaysian designed and built vehicle platforms and its own Campro engines as well as assist AIDCO in developing its research and manufacturing capabilities until 2020, it said in a statement.

AIDCO owns Iran’s two top car manufacturers, Iran Khodro and SAIPA, which jointly control 90 percent of the country's market.

Proton said the 'technology cooperation agreement’ marked a "significant drive forward" in its push to expand.

It will help Proton cut reliance on the domestic market and benefit from Iran's booming auto market, where sales could hit one million units in coming years from an estimated 700,000 this year.

Outgoing Prime Minister Mahathir Mohamad, who is also finance minister, witnessed the signing ceremony between the chief executives of Proton, Mahaleel Ariff, and AIDCO, B.Alimoradlou, at his office in Putrajaya, south of Kuala Lumpur.

Mahaleel said the alliance represented a "significant milestone" for Proton, which now joined the ranks of established car manufacturers worldwide which have developed and sold their technology capabilities.

"It gives us access to a market that has the potential of selling more than one million cars per year, it provides us with the economies of scale that we require and it allows us to develop our future products at more productive costs," he said.

Proton said the agreement also paved the way for the establishment of a joint-venture company that would be licensed to assemble, manufacture and sell new generation of Proton vehicles under a brand name to be decided.

It said it would provide the new firm the engineering and technical know-how, as well as components where necessary, to develop a new generation of Iranian national cars.

The Iranian tie-up came a day after Proton ventured into the motorcycle arena by signing a letter of intent to acquire a 50 percent stake in Italian motorcycle producer MV Augusta SpA.

The overseas forays mark Proton’s preparations for market liberalization in 2005 under the Association of Southeast Asian Nations Free Trade Area (AFTA).

Tariffs on imported cars in Southeast Asia fell below five percent in January under AFTA but Malaysia has obtained a reprieve for its auto industry until 2005.