KL won't force Proton to take on foreign partner

KL won't force Proton to take on foreign partner

Agence France-Presse, Kuala Lumpur

The government will not force Malaysia's Proton to accept
foreign shareholders despite considerable interest from abroad in
the national carmaker, Trade Minister Rafidah Aziz said in
remarks published Wednesday.

Rafidah was quoted by the Business Times as saying that the
government was aware that many parties were keen on joint
ventures with Proton, not just to make cars for Malaysia but for
the fast-growing region and other global markets.

"We cannot direct Proton to do it (sell a stake) because this
is a business venture," she was quoted as saying by the Business
Times, when asked about renewed prospects of a new strategic
shareholder to help Proton expand its operations and stay
competitive.

Talks of a strategic investor followed Prime Minister Abdullah
Ahmad Badawi's recent statement that the government was open to
the possibility of selling a major stake in Proton to foreign
parties, the report said.

"It is up to the (Proton's) board and it has indicated to me
that it is talking to a few parties," Abdullah was quoted as
saying.

"It has to be on a commercial basis and as long as it doesn't
sacrifice our interest... it's something that Proton has to think
about."

State investment arm Khazanah Nasional, which is now the
single largest shareholder in Proton after buying out the stake
held by Japanese giant Mitsubishi Motors, is said to be
considering plans to allow a foreign carmaker to hold up to 20
percent of Proton.

The government is pushing Proton, which said it had received
proposals from three foreign car companies including Britain's MG
Rover, to tie-up with foreign auto giants to remain competitive
and to penetrate global markets.

Set up in 1983 as part of Malaysia's drive into heavy
industry, Proton used to sell six out of every 10 new cars in the
country but its market share fell to 49 percent in 2003 and
dipped further to 45 percent in the first half of this year as
sales tumbled.

The carmaker is facing increasingly tough competition ahead of
market liberalisation 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.

Analysts have warned it may be tough for Proton to woo a new
partner unless the government is willing to trade in its dream of
a national car industry for a pragmatic foreign tie-up.