New ‘Proton’ would drain country again, says economist

(FMT) – A former World Bank economist has rejected the idea of setting up another national car manufacturing company, saying it will incur more losses to the country.

Lim Teck Ghee said Proton has been a white elephant, costing the country billions of ringgit in public funds and burdening consumers with cars that are priced too high for the local market just to support the prestigious project.

He said it was not economically feasible to build another local car company as the industry was increasingly competitive and had to contend with complex supply chains and changing consumer demands.

“New technologies, the rise of electric and hybrid cars, fuel price issues and a loss of other variables need to be brought into the equation besides the low productivity of many of our local enterprises,” Lim told FMT.

At a forum on Chinese investments in Malaysia held on Thursday, former prime minister Dr Mahathir Mohamad mooted the idea of a new national car manufacturing company to help local businesses that will suffer from DRB-Hicom having sold 49.9% of Proton to Chinese carmaker Zhejiang Geely Holding Group (Geely).

“If I cannot get back Proton, I have some ideas about starting another automotive company. The idea to build another national car is because (like Proton) it can become a catalyst for the growth of our engineering know-how and capabilities.

“For Proton, various companies were established to manufacture components and parts for the cars. Cars need 4,000 parts, so these provide opportunities for manufacturers,” Mahathir had said about his legacy project from the 1980s.

However, Lim cautioned that Proton, despite having been around for more than 30 years, still lagged far behind in terms of engineering know-how because a lot of the design and manufacturing was still being outsourced.

“I am also against the idea of waiting for the success of Geely with Proton before embarking on other local car manufacturers.

“Malaysia is a latecomer to the global car manufacturing business and the country does not have the sizeable home market required for sustainability,” he said.

Lim, who is currently the chief executive officer of the Centre for Policy Initiatives, warned against listening to the demands of local car component manufacturers, who already wasted 30 years with no products of their own.

“They will claim to need another 30 years or more to succeed. Best to put our diminishing public funds into more worthwhile sectors,” he said.

Mahathir set up Proton in 1983, with the national car manufacturing company becoming a strong symbol of his industrialisation policies. The first Proton car was rolled out in 1985.

Proton continued to be regarded as the national carmaker even after it came under the private ownership of the DRB-Hicom group in 2012.

Mahathir was appointed chairman of Proton in 2014 but quit effective March 30 last year, with many saying he was forced to quit under pressure after having left Umno the month before, and in order to ensure Proton was bailed out by the government.

Proton, at its peak, dominated 80% of all passenger cars sold in the country.

But over the past 15 years, it fell well behind Perodua and later even lost out to foreign marques like Toyota and Honda.

In May, Second Finance Minister Johari Abdul Ghani announced a deal between DRB-Hicom and Geely, saying that Proton would remain a national car as it would still have a majority share of 50.1%.