KL urges Proton to speed up foreign alliances

KL urges Proton to speed up foreign alliances

Agence France-Presse, Kuala Lumpur

The Malaysian government is pushing national carmaker Proton
to accelerate efforts to form strategic foreign alliances to help
it penetrate the global market, reports said on Tuesday.

Despite dominating the domestic market, Proton has not had
similar success overseas partly because it was slow in producing
new models, Deputy Trade Minister Ahmad Husni Hanadziah told
parliament.

He said Proton must follow trends in the automotive industry
for local car firms to merge with global giants.

"We have asked Proton to find joint-venture partners to
penetrate the international market," Husni was quoted as saying
by The Star.

Proton has received proposals from three foreign car companies
but needed to study them thoroughly to ensure that the national
interest was protected, he said, without elaborating.

The New Straits Times quoted Husni as saying that Proton can
compete in the increasingly tough domestic and global markets if
it can lower production costs and come up with new models every
six months.

Set up in 1983 as part of Malaysia's drive into heavy
industry, Proton used to sell six out of 10 new cars in the
country but its market share fell to 49 percent last year as
sales tumbled to 155,420 units.

Following the recent withdrawal of its Japanese partner
Mitsubishi Motors, its single largest shareholder, state
investment arm Khazanah Nasional is said to be considering plans
to allow a foreign carmaker to hold up to 20 percent of Proton.

Chief executive Mahaleel Ariff recently said Britain's MG
Rover group was one of the foreign firms keen on potential
"technical exchanges" but Proton would not rush to sign on a
strategic partner.

Former premier Mahathir Mohamad, who was recently appointed
adviser to the carmaker after retiring last October, has said a
foreign partner was crucial but warned Proton must not be
surrendered to foreign control as it would jeopardize Malaysia's
status as an auto manufacturer.

Analysts have said it could be a long hunt for a Proton
partner unless the government is willing to trade in its dream of
a national car industry for a pragmatic foreign tie-up ahead of
market liberalization in 2005 under the Association of Southeast
Asian Nations (ASEAN) Free Trade Area (AFTA).

Under AFTA, import tariffs for most products in the region
were cut to below five percent in the past year. Malaysia
obtained a two-year reprieve for its auto industry until 2005 but
has said it would defer reducing duties to the required level
until 2008.