Let Proton swim or sink on its own
Public policy makers and practitioners need to be reminded as to why the national car project has been continued long after its rational economic shelf life ran out.
Lim Teck Ghee, The Heat Malaysia
In a press release following the announcement by Tun Dr Mahathir Mohamad that he was resigning from his position as Proton’s Adviser, the International Trade and Industry Minister Datuk Mustapa Mohamad signalled that the government would be putting in yet another huge sum to bail out Proton from its latest crisis which apparently has seen a shrinking market, tens of thousands of its stock unsold, parts suppliers not paid, and interest charges accumulating on loans.
According to the statement, the company’s share of the domestic automotive market which hit a peak of 74 percent in 1993 currently hovers at 15 percent.
Since its establishment in 1983, the government has provided grants, various forms of assistance, as well as taxes forgone, to Proton to the tune of about RM13.9 billion in total.
Much of the press release deals with the old story of how Proton, the national car project initiated by Mahathir, has failed to become competitive, despite numerous management changes, restructuring deals and massive injections of taxpayers’ funds.
Wanted: Another competent management team
Now apparently a last final warning is being given by government in response to pressure by Proton’s present management for another bailout, speculated to be in the region of RM1.5 billion.
The Minister has listed several conditions for any new money, including:
– Proton needs to immediately identify a strategic foreign partner
– The Company must be professionally managed
– There must not be any interference in its business
– Some tough but necessary measures must be put in place for the long-term sustainability of Proton
In fact, these so-called new conditions are no different from those trotted out during previous attempts at salvaging Proton. And, except for the one relating to a strategic foreign partner which Proton has resisted, they have not worked.
Proton’s business model of going it alone was unsustainable right from the start.
When the project was first begun, a colleague at University of Malaya’s Economics Faculty, Dr Chee Peng Lim, provided an assessment of the project explaining that the country was not ready for such investment in heavy industry because Malaysia lacked the economies of scale to succeed. For his pains, Chee was heavily criticised, sidelined by Mahathir’s administration, and eventually he left the country.
Thirty three years later, the Government has swallowed its false pride. It is looking desperately for a white knight or even yellow knight to appear from overseas to help save the 10,000 jobs in Proton and another 30,000 said to be part of the company’s ecosystem.
Whatever the outcome of that search, now is the right time to pull the plug on public funds and to let the owner, DRB-Hicom, controlled by Syed Mokhtar Albukhary, foot the bill.
