Malaysia’s missed opportunity

Thirty-two years ago Malaysia embarked on a grand project - to produce our very own national car, Proton. The result was spectacular as we finally saw the birth of the Proton Saga, our first national car in 1985. We were extremely proud of this achievement.

Several protectionist measures were put in place to ensure that Proton had ample room to establish a strong footing within our automotive industry. We had high hopes that Proton will be the start of something meaningful - a new, exciting and uplifting industry that will create lots of jobs, generate exports, and above all receive global recognition. To an extent, some of these objectives were achieved.

Malaysia was once the largest passenger car market in South-East Asia. Given the vast potential of our domestic market, we could have simply been the automotive hub of Asia. However, our priority back then was the national car project; and in order for us to make it work, some forms of protection had to be introduced. Unfortunately, however, as a result of our auto policy, some global manufacturers shied away from investing in Malaysia.

It should be noted that Thailand only started to develop their automotive industry 10 years later than us. However, they took a completely different route. Thailand had a liberal auto policy. They relaxed a number of regulations in their automotive sector - including removing the requirement for foreign firms to enter into joint-ventures with local partners. The corporate tax rate was also significantly reduced.

The result was a total transformation of Thailand’s automotive industry - from a low-end assembler of pick-ups to the ‘Detroit of the East’. In 2015, despite very low local demand, they still managed to produce 1.9 million vehicles, of which 1.2 million were exported.

Thailand is now ranked in the top 10 of world car exports - the cars produced have the highest local content compared to South-East Asian neighbours and their export of component parts is bigger than all other Asean countries combined. Thailand is therefore not only strong in exports of completely built-up (CBU) units, but also in the manufacturing and export of car components.

The sheer size of Thailand’s automotive industry is unmatched by many. It is currently home to 18 renowned car-makers. Additionally, Thailand has over 700 Tier 1 auto-parts suppliers and around 1,700 Tier 2 and 3 suppliers. Out of the world’s top 100 auto-parts manufacturers, almost half of them have established their plants in Thailand.

The industry has created more than 1.2 million employment opportunities. Exports of CBU and auto components are one of the top three exports of Thailand.

At the same time, the rise of Indonesia’s automotive industry is also something that we need to monitor. More and more of global car manufacturers such as Toyota and General Motors have been investing heavily in Indonesia to take advantage of its low per capita-car ownership, cheaper labour costs as well as a rapidly expanding middle class. In 2015, Indonesia has registered 1.1 million in the production of vehicles.

Our automotive industry has plateaued

Meanwhile at home, our automotive industry has plateaued, with a total industry volume (TIV) of 680,000 last year. We have been left behind and are now playing catch up with our neighbours.

All this while, we have been proud to be the only South-East Asian country with its national car. However, this national pride comes at the expense of consumers who have been paying higher prices for automobiles, Above all, Malaysia had missed the opportunity to establish ourselves as the regional automotive hub. Last year, the export of our motor vehicles only stood at RM1.3 billion.

Having said that, what’s done cannot be undone. However, there are some important lessons which can be learnt from the past.

I believe that the painful reality faced by Proton as expressed by the International Trade and Industry Minister Mustapa Mohamed should be read with an open mind. If we were to put emotions aside, we will see that instead of running down Proton, the minister was actually issuing a wakeup call to the national car maker.

His message was simple - Proton cannot continue with business as usual, piling up losses. Any further assistance from the government to this national car project, especially now that it is a private entity, must be made conditional upon Proton’s commitment to implement several painful measures.

But rather than being regarded as punitive, this advice should be viewed as something good for Proton and the country. Hopefully by implementing these measures Proton will have the scale and be able to compete not only in Malaysia but also abroad.

We had high expectations when the first Proton was launched in 1985, but, clearly, Proton has fallen far short of these expectations. We hope the assistance that the company is expected to receive from the government will allow Proton and its vendors to recover from the current challenging period.

As Malaysians, we naturally want Proton to gain a bigger market share, increase its exports from 1,000 units currently to 50,000 units. And help make Malaysia a regional automotive hub. -Mkini