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.