After RM14b spent, minister says Putrajaya cannot protect Proton forever

Mustapa pointed out that the government has provided RM13.9 billion in grants, various forms of assistance, and taxes foregone to Proton since its establishment. — Picture by Yusof Mat Isa
Mustapa pointed out that the government has provided RM13.9 billion in grants, various forms of assistance, and taxes foregone to Proton since its establishment. — Picture by Yusof Mat Isa

KUALA LUMPUR, April 1 — The government cannot continuously protect Proton, a minister said today amid flagging sales of the national carmaker that holds just 15 per cent of the domestic automotive market.

International Trade and Industry Minister Datuk Seri Mustapa Mohamed pointed out that although other countries like Japan and South Korea similarly protected their automotive industry, such measures were short and medium-term and eventually abolished.

“Proton, which is our national car project, needs to graduate from this protection,” Mustapa said in a statement.

Mustapa pointed out that the government has provided RM13.9 billion in grants, various forms of assistance, and taxes foregone to Proton since its establishment more than three decades ago in 1983.

He also said his ministry injected RM100 million to provide soft loans to struggling Proton vendors who approached him last year, but noted that they may face “serious challenges” if the 33-year-old company continues to operate at the current level of production and sales.

“A few of them might be out of business in the next three to four months,” said Mustapa, noting that Proton’s current share of the domestic automotive market is 15 per cent from its peak of 74 per cent in 1993.

“In view of the very serious nature of the problem, the government believes that the current business model adopted by Proton is not sustainable,” he added.

The minister said Putrajaya has been “seriously deliberating” Proton’s request for grants and soft loans, amid shrinking government revenue due to the global oil and commodity plunge.  

“It is a major request and the government needs to be thorough with its evaluation as a lot of public money is involved. We need to be particularly prudent in allocation of resources at this time when our national revenues have been seriously impacted by falling oil and commodity prices,” he added.

Mustapa said if Putrajaya decided to assist Proton, several conditions would be imposed, including requiring Proton to immediately identify a strategic foreign partner, the company must be professionally managed, there must not be any interference in its business, and some “tough but necessary” measures must be put in place for the carmaker’s long-term sustainability.

“I have been informed that there were instances when Proton appeared to be unprofessional in its decision-making process. In order for the government to consider providing financial assistance to Proton, it is important that a competent leadership team be appointed in the company,” said Mustapa.

The minister also said although Tun Dr Mahathir Mohamad’s contributions as Proton chairman were recognised, “we must not turn a blind eye to challenges faced by Proton and its inability to establish a solid financial footing”.

Dr Mahathir resigned as Proton chairman effective March 31 after setting up the carmaker in 1983, the epitome of the former prime minister’s industrialisation policies.