Malaysian PM promises to reduce Proton protection

Malaysian PM promises to reduce Proton protection

Agence France-Presse, Kuala Lumpur

Prime Minister Abdullah Ahmad Badawi on Thursday said Malaysia
will gradually reduce protection measures for national carmaker
Proton and urged it to improve quality and become more
competitive.
"Yes, we have been protecting Proton. The protection is being
gradually reduced because this is the right thing to do,"
Abdullah told reporters.

"They need to work hard to be competitive. There is no other
way but to work hard to ensure the car quality is high and the
price is reasonable," he said.

Abdullah did not specify which protective measures would be
stripped back but they could include tax rebates and a mooted
request for a longer grace period before having to comply with a
regional trade pact.

The premier was commenting on recent remarks by Proton's chief
executive officer Tengku Mahaleel Ariff who said that the
20-year-old carmaker was receiving "poor treatment" from the
government.

Following his outburst, a war of words erupted between Trade
Minister Rafidah Aziz and former prime minister Mahathir Mohamad,
who was the architect of the Malaysian national car scheme and
remains an adviser to Proton.

"What hurt us is accusations that Proton is not selling
because it is of inferior quality. It is not," Mahathir said
Tuesday, adding that the real problem was an unchecked flow of
underpriced imports.

"When people start saying that our cars are of poor quality,
naturally it undermines the sales of our cars, especially when
the person making that statement is very high up and
responsible," he said.

His comments were an apparent reference to Rafidah who said
last week that Proton must look at its own weaknesses and not
blame other factors for declining sales.

"Do not blame anybody else. Look inward into your own company
and see what your shortcomings are and find your own market
segments," she said.

Abdullah said he had instructed Rafidah to reply to issues
raised by Mahathir, including a call to review the permit scheme
which allows companies to import cars into Malaysia, claiming
that many under-declared the value of the vehicles.

The national carmarker used to sell six out of every 10 new
cars in Malaysia but growing foreign competition is eating into
its market share, which fell to 44 percent in 2004 from 48
percent in 2003.

Malaysia's state investment arm Khazanah Nasional has a
majority 42 percent stake in Proton.

Malaysia, one of the region's top passenger car markets, cut
import duties to 20 percent on ASEAN cars on Jan. 1 under the
Association of Southeast Asian Nations (ASEAN) Free Trade Area
(AFTA) agreement.

However, it would delay reducing duties to the required level
of below five percent until 2008.

Abdullah also said that Rafidah presented the country's highly
anticipated auto blueprint during the weekly cabinet meeting
Wednesday. He declined to reveal any details or release date, but
said it required some fine tuning.

Rafidah last month said the new auto policy is designed to
make Malaysia a regional hub for automotive manufacturing and the
manufacturing of auto parts and components

Total investment in Malaysia's automotive sector plunged 66.7
percent to 1.1 billion ringgit (US$290 million) in 2004, the
government said in May.