Let’s do away with our pretence over Proton’s Malaysian-ness

A QUESTION OF BUSINESS | The only way to get Proton to move forward firmly is to understand and accept once for all that Proton never produced and will never produce a Malaysian car - almost all the cars that it produced, and especially the more successful and reliable ones, had plenty of foreign input in terms of engine, gearbox, chassis, design, development and engineering.

Producing a completely Malaysian car, an idea so cherished by former prime minister Dr Mahathir Mohamad - and rashly and irrationally pursued - was an abject and abysmal failure. It could have cost Malaysians as much as a massive RM360 billion from the time the first Proton rolled out from the Shah Alam assembly plant in 1985.

As a new Chinese CEO takes over Proton’s manufacturing operations, the group, currently owned by DRB-Hicom Holdings, announced that Proton, with help from China’s Zhejiang Geely Holding Group (Geely), will turn around within five years. Geely acquired a 49.9% stake in Proton for RM460.3 million from DRB-Hicom which owns the remaining 50.1% stake in Proton, DRB-Hicom announced.

However, the deal is more complex than that and details are in this column I wrote at the time of the deal. Basically, while the overall deal is valued at about RM770 million, some aspects are excluded which are detrimental to Proton and DRB-Hicom. This includes valuable land in Proton, and Lotus - the wholly-owned British specialist sports car manufacturer. Lotus was sold for RM560 million to Geely (51%) and Syed Mokhtar and his wife (49%).

In fact the exclusion of the land from the Proton deal could result in as much as RM3.5 billion in profits for the DRB-Hicom group which is controlled by influential, connected businessman Syed Mokhtar Albukhary.

With such a track record, it looks like the best things in Proton - valuable land and Lotus - are being milked out to Syed Mokhtar’s DRB-Hicom, to Syed Mokhtar himself and Geely, leaving the troubled car manufacturing operations under Proton still majority controlled by DRB-Hicom with Geely a substantial minority partner holding the remaining 49.9%.

Rebadged Geely cars

So what are the prospects for Proton and what will happen? What will likely take place is that Proton will effectively sell rebadged cars from Geely starting with the successful Boyue SUV which will be merely reengineered to right-hand drive for the Malaysian and Asean market.

Make no mistake about it - this will be a Chinese car, not a Malaysian one. But that is no different with almost all Proton cars previously manufactured with foreign help. In fact the same has been true with Perodua, the other national car, which effectively sells rebadged Daihatsu cars. There are no Malaysian cars - only cars with varying degrees of Malaysian content with no significant parts manufactured in Malaysia.

But despite its cars being Chinese, Proton will continue to be accorded Malaysian status, giving it access to considerable protection by the Malaysian government behind whose tariff barriers it will continue to be given the right to profit by exploiting the Malaysian public which will continue to pay higher prices for all Malaysian cars.

And so, giving it a profit base from Malaysia, Proton will venture out into the Asean market and eventually into the world market. But it will not be a Malaysian car - Proton will sell a car developed by a Chinese company with Chinese expertise and enterprise.

Proton will never be a Malaysian car but expect the politicians to boast about how they brought a Malaysian car to the world market. What will happen is the sale of a Chinese car, only partly made in Malaysia, to the world market.

If Proton is to truly become viable in its own right, then it has to recognise the fact that it does not make a Malaysian car but a Chinese car in Malaysia with technological help from its Chinese partner.

Once that is recognised and accepted, everything else becomes much easier in terms of what should be done going forward, although what should be done and what is done differs widely, especially with Proton in Malaysia.

Remove tariff protection

First, because of historical baggage, keep tariff protection but only for five years until Proton finds its footing. Progressively remove all duties on all cars so that Malaysians don’t pay taxes on cars in five years - if you remove subsidies, you should remove taxes on goods and services besides GST of 6%. Everything else should go to make the economy globally competitive.

That will mean that cars manufactured in Malaysia will be as competitive or better than anywhere else which implies retraining our workforce and adopting best work practices in terms of increasing productivity - a true benefit to the economy. That means rewarding workers too for better productivity.

And really, there’s no reason to restrict entry of major car manufacturers into Malaysia. So long as they are prepared to incorporate locally and produce for the international and local markets, they should be welcomed with open arms to help Malaysia become an international car manufacturer, much like what Thailand has done for many years and in the process overtaking Malaysia as a car manufacturing hub.

This can be repeated for all industries making the economy internationally competitive by giving space to all foreign enterprises to set up shop here so long as they produce for both the export and local markets.

When ego and inferiority complex gets in the way of business, business fails. That’s what happened to Proton and one hopes it does not happen yet again. It will be folly to give continued protection to Proton because it never was, is not, and never will be a Malaysian car in the true sense of the word.

In fact even if Malaysia produced a true Malaysian car by all common measures it will be of no consequence if it is not economically feasible and therefore even that venture should not be given indefinite tariff protection.

To take one industry example - rubber gloves enjoy no tariff protection but Malaysia is the largest manufacturer in the world. Ditto rubber wood furniture.

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P GUNASEGARAM says common sense a should be the bedrock of government policy. E-mail: t.p.guna@gamail.com.- Mkini