Proton needs government aid for 10 more years

Proton needs government aid for 10 more years

Associated Press, Kuala Lumpur, Malaysia

Malaysia's state-owned carmaker Proton will need at least another 10 years of government support before it can stand on its own, a news report said on Tuesday.

The online newspaper Edgedaily.com cited Proton distributor Edaran Otomobil Nasional Bhd.'s outgoing managing director, Adzmi Abdul Wahab, as saying that while the company had progressed in recent years, tough challenges loomed in heightened competition from foreign manufacturers.

The government touts Proton as a symbol of Malaysia's self- reliance in heavy industries. But since being set up 20 years ago, Proton Holdings Bhd. has relied heavily on government subsidies and trade barriers to survive.

A system of high import and excise duties on foreign cars and subsidies for Proton has ensured huge disparities in costs - foreign cars cost at least double and sometimes three times the price of equivalent Proton models.

That has meant about 67 percent of cars on Malaysian roads are Protons, despite their having a reputation as poorer quality than the foreign competition.

Even so, as the tariffs have been lowered in line with Malaysia's commitment to a regional free trade agreement, foreign cars have grabbed an increasingly larger share of the market.

Asked if protection was justified even after two decades in business, Adzmi said "some form of assistance" was needed, the Edgedaily.com reported.

He said even the popular Korean and Japanese carmakers required protection in their formative years and were now still given non-tariff protection.

The Edgedaily report came two days after the afternoon daily, Malay Mail, reported that a group of businessmen has submitted a proposal to the government investment arm Khazanah Nasional Bhd. to buy a controlling stake in Proton in a deal valued as much as 2 billion ringgit ($526 million) .

Khazanah has a 42 percent stake in Proton, and its managing director, Azman Mokhtar, had said in February that the company has no intention of abandoning the car maker.