Malaysia, a leader in the development of AFTA, cannot continue to protect its domestic market indefinitely.
Tun Dr Mahathir Mohamad in his speech to the Kuala Lumpur International Automotive Conference on Nov 13 said that he was of the opinion that the national auto industry must be sustained if we are going to have a positive balance in our trade.
What exactly does he mean by “being sustained” and for long is the industry to be sustained? And more to the point, will the national auto industry really be able to ensure that Malaysia will have a positive balance in our trade in the future?
From 1967 when tariffs on completed cars were raised drastically, the automobile industry in Malaysia has been a tool used by the BN government to achieve not national interests but the vested interest of those in Umno and their cronies!
What had characterized this industry are the hasty policies implemented from time to time designed not to advance the automobile industry in Malaysia but the socio-political agenda of Umno without regard for commercial considerations and realities.
A socio-political agenda that was ostensibly for the benefit of the Malays but in reality benefiting the interests of Umno, BN politicians, their families and cronies at a cost of billions to our economy, burdening as always, the future generations who will be left with the debt now accumulating “to sustain” the national auto industry.
In 1983 Mahathir announced a change of tact in the auto industry of Malaysia. Proton was established and Malaysia was to have it’s own National Car – and the jostling began for the spoils that was to come from this greatest of Malaysia’s rent seeking juggernaut.
By 1985 when Proton started production of the Saga series, that iconic phrase “preferential treatment” had become the reason why the national car profit to sales ration peaked at 18.6% in 1991, due to the reduction and waiving of import duties on imported parts, reduction and waiving of excise duties on the sale of completed cars and low interest financing for government servants
Let me list these affirmative actions taken by the Mahathir-led government in the name of “sustaining” the national car industry.
Cars are price control items. Proton cannot transfer any increase in production costs to sales price – they need government approval to do so.
Government demanded that employment level be maintained in Proton even through the recession. Proton cannot downsize or restructure its operations to suit prevailing economic realities.
The Vendor Development Program (VDP) (whose purpose was to develop a domestic capability to manufacture parts and equipments for the national car industry) failed in terms of quality, costs and delivery.
The transfer of technology from the Japanese partner predictably failed to eventuate.
The same can be said for the second national car project that started selling its Perodua car in 1994.
The result of these preferential treatment and generous protection lavished upon the national car industry had the effect of isolating the national car manufacturers from basic market principles and gradually the national car became competitively inferior on an international level.
How can any responsible government sustain such an enterprise when the survival of the automobile industry in any country today depends on its ability to adapt to alliances and partnership formed globally?
It depends on the industry ability to develop technology to respond to environmental and safety concerns. It depends on its ability to reorganize and restructure its operations to distribute the burden of large-scale expenditure necessary for technological development through alliances and partnership formed worldwide.
On top of this, deregulation and the opening of domestic markets amongst the Asian automobile industry is being rolled out with a vengeance. Malaysia can delay but not avoid these measures.
In the face of all these realities, this BN government cannot continue to “sustain” the national car industry because the burden of the socio-political role that Proton and Perodua carries makes it critically deficient in two areas:
1) Technological skills
2) Management skills
Malaysia, a leader in the development of Asean Free Trade Area (AFTA), cannot continue to protect its domestic market indefinitely.
This BN government must ask itself in all seriousness if Proton’s and Perodua’s skewered socio- political agenda is valid when Proton and Perodua are faced with the real need to make strategic affiliations with foreign car manufacturers in order to secure the global production network critical to strengthen its international competitiveness. Without this, Proton and Perodua will not survive.
So Mahathir should not talk about the national car industry as being essential to Malaysia’s ability to have a good trade balance. You and I know that he is being economical with the truth.
From its inception the national car industry is no different from what KLIA, KLCC, MAS, Putrajaya, PKFC, NFC, North South Highway, IPP’s and every other rent seeking business opportunities given to Umno and their cronies to make them rich.
For this government to “sustain” this auto industry at the costs of billions to our people, our country and our future are simply untenable.
CT Ali is a reformist who believes in Pakatan Rakyat’s ideologies. He is a FMT columnist.