Malaysia's government is committed to removing its protections for national car maker Proton and demands that the company improve its quality to better compete with foreign manufacturers, the prime minister said yesterday.
Prime Minister Abdullah Ahmad Badawi's comments were a clear rejection of complaints by his predecessor and Proton adviser, Mahathir Mohamad, that the new government policy is hurting the company and national interests.
"Proton is our car. We want Proton to succeed. We have been protecting Proton. The protection is being reduced gradually because that is the right thing to do," Abdullah said.
"While we gradually reduce protection, Proton must improve quality and capability so that it can compete with other cars," he said.
Proton, which began manufacturing cars in 1985, was a pet project of Mahathir and one of the cornerstones of his industrial policies during his 1981 to 2003 term in office. Proton has long enjoyed cost benefits over competitors through a government policy of imposing high tariffs on foreign cars. Also, Proton paid lesser excise tax. This made foreign cars unnaturally expensive and left Proton the only affordable car for most Malaysians.
However, the tariffs on foreign makes have been reduced gradually during the last few years in line with a regional free-trade agreement, slashing Proton's market share from a high of 65 percent to about 45 percent last year.
The issue has put Mahathir and the government at loggerheads in recent days with the former prime minister making bitter remarks against his former Cabinet colleagues who once served under him.
Last week, the company's chief executive, Mahaleel Ariff -- a Mahathir loyalist -- criticized the government's auto policy, saying it had forced Proton into a corner. The comments did not go down well with the government, the majority shareholder in Proton. Mahathir has defended Mahaleel, saying he was "duty bound" to protect Proton's name.
Mahathir has also criticized the government for allowing a selected few companies to import foreign cars at vastly under-declared prices to escape excise duties, saying this has further undercut Proton's market. He has blamed International Trade Minister Rafidah Aziz for issuing the import permits indiscriminately. Under government policy, the names of the license holders are not made public.
Abdullah said he has asked Rafidah to write to Mahathir to "reply to all issues that were raised" by him.
But for now, Abdullah said, the government will stick to its policy.
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