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Thursday, February 2, 2017

Khazanah Will Sell Silterra To China For Peanuts

Someone sent me this :
  • In the next few days, Khazanah will announce the sale of Silterra to SMIC; the same company that wanted to buy Silterra 2 years ago. This first attempt failed after your (OutSyedThe Box) article on Silterra.
  • The term of the disposal will be the same - SMIC will pay  about USD110M. Khazanah will write off about RM2.5Billion in loan.
  • SMIC got the company debt free - and we the tax payer will be saddled with RM2.5B liabilities.
  • Another company goes to mainland China.

My comments :  Why not sell Proton to the Chinese as well? People say that DRB has suffered over RM400 million losses from Proton alone. 

Why not sell Proton to the Chinese? Then at the same time remove all and any duties and taxes on the importation of automobiles into Malaysia. Just break open the market. This will immediately lower the prices of cars in Malaysia by 30% - 60%.  Imagine the amount of money it will save the consumer.

I want to point out something. Silterra is actually a very good investment and a good project for Malaysia. It is an intensively high technology industry. Silterra melts silicon and makes those silicon ingots which are then sliced to become silicon wafers from which they cut those microchips.

Silterra has at last turned the corner and is now beginning to show positive results. If at all, now is not the time to sell it. 

The other thing to note about Silterra is that they do not sell their product to the Malaysian public. Silterra's products are not consumer items. They dont sell silicon ingots at Mydin Hypermarket.

The problem with Proton is that their cars are sold to the Malaysian consumer. And to give Proton a chance to survive, the gomen imposes high tariffs, taxes, duties, AP requirements etc on other imported vehicles. This raises the prices of cars sold inside Malaysia. In the process, Proton also sells its cars way above their actual market value.  And the Malaysian consumer suffers higher cars prices.

What is Proton's actual market value?  Well Proton sells their cars cheaper in UK than in Malaysia. Also Proton is cheaper in Langkawi.  The cheaper price of Protons in the UK and Langkawi are closer to market prices.

My view is we should not burden the Malaysian consumer directly to become guinea pigs in the experiment to introduce new industries in Malaysia.  These experiments inevitably fail and the Malaysian consumer also suffers (aka becomes poorer) because of these experiments. Proton has been a failed experiment for 32 years now.

Because of Proton, and the protection needed to give Proton a chance, the Malaysian consumer pays among the highest prices for cars in the whole world.

Silterra and other 'non consumer' based industries like CTRM (Composite Technology Research Malaysia) are good examples of new and high technology industries that do not burden the Malaysian consumer directly.

Silterra makes silicon ingots and CTRM makes parts for Airbus jetplanes and other products like Unmanned Aerial Vehicles or drones.  Here are pictures of 'Made-In-Malaysia' drones produced by CTRM.

These new industries like Silterra and CTRM are very high tech and cutting edge. They really increase the value added curve in Malaysia. They also create a high income nation because their technicians and engineers become highly skilled in high tech industry.

And they do not burden the Malaysian consumer. They do not depend on the Malaysian consumer to buy their  products.  CTRM's drones are not sold at Mydin Hypermarket either. Plus I dont think there are high import duties, taxes and APs required if you wish to import drones and silicon ingots from outside the country.

The idea to spend taxpayers money to create new industry sectors is experimental. It is always an experiment.  And we cannot be sure if it will work or not. 

We cannot make the experiment even more risky by burdening the Malaysian consumer with the task of being the guinea pig to make the experiment work.  That is very unfair.

It will be less burdensome on the Malaysian consumer to "create" new and high technology industries where the end products are not dependent on the Malaysian consumer.  We should focus government funding to manufacture industrial and intermediate industrial products  -  which are not end consumer based products.

Other than Silterra's silicon ingots and CTRM's drones we could consider manufacturing fully Made-In-Malaysia fork lift trucks, back hoe tractors, garbage disposal trucks,  swimming pool pumps,  giant sized "rubber dampers" for bridges, marine diesel engine parts and a million other things that are NOT consumer end products. We need not burden the Malaysian consumer with buying back hoe tractors and garbage disposal trucks.

The local market can absorb some of these products but we must manufacture for export. If you want the Ringgit to go back to RM2.50 to the US Dollar or better, we have to export.  More export, stronger Ringgit. Less export, weaker Ringgit. 

But sadly our GLC boys are mostly bean counters who do not seem to understand technology. Hence they want to sell Silterra. They are strictly financial players and ex Forex speculators.  

API Steel Grade is not some kind of fire ok. Despite all the wonders of IT and new materials sciences, high tech industry still has to cut steel.  Steel is still the basis of industry.  The world's consumption of steel keeps increasing. We must cut steel. 

So there is still a great future for our country folks. RUU355 and hudud do not have any role in our future. Dont waste your time.

1 comment:

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