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New auto policy fails to convince: analysts
Author : Rahmat Zukuan Rahman; Nov 7, 2005. 1.21am
KUALA LUMPUR, Oct 30 - New automotive policy has failed to convince doubters who say the government must do more if it wants to attract investors and snatch Thailand's mantle as the "Detroit of Southeast Asia".The highly anticipated blueprint unveiled earlier this month sets out the government's strategy to enhance the competitiveness of national carmakers Proton and Perodua, and become a regional auto manufacturing and assembly hub.But analysts say the framework will not inspire foreign carmakers to invest here instead of neighbouring Thailand, and that they are keenly awaiting the fulldetails of the policy due to be unveiled within three months.The impact on the national Proton car, the pet project of former leader Mahathir Mohamad which some say is in terminal decline with falling market share andpersistent complaints about quality, remains unclear.Observers say if the auto policy really does create a level playing field, the heavily protected Proton will be disadvantaged, but despite losing an excise rebate it could end up being cushioned by a grants system skewed in its favour."Absolutely, Malaysia has to create a level playing field. No one will invest inMalaysia with one hand tied behind them," said John Bonnell, director of Automotive Resources Asia, a Bangkok-based automotive consulting firm."Right now it is not perfectly clear what the incentives are... The devil is inthe details and how it will be implemented."Bonnell said investors want clarity on issues like the size of tax cuts they are eligible for, what grants are available for research and development programs and whether there will be rebates on investment in machinery.But although the policy is a case of too little, too late, he said it would nonetheless make auto players "stop and look" at what Malaysia has to offer."The auto plan will not make investors rush into Malaysia but it will allow Malaysia to be taken into consideration. In Thailand, these details are transparent and are carried out as detailed," he told AFP.Total investment in Malaysia's automotive sector plunged 66.7 percent to 1.1billion ringgit (290 million dollars) in 2004, a decline blamed on the lack of an auto policy and fears Proton will continue to be shielded from competition.AmSecurities economist Suhaimi Saidi said Malaysia must end its costly protection of the domestic auto industry which has been cosseted by high tariffs on imported cars that are slowly being cut under a regional free trade pact."That obsession has to stop. They also need to make the incentives attractive and transparent to investors, failing which they will give Malaysia a miss," he said.An auto analyst with a local brokerage said Malaysia has to come up with the details of the auto policy quickly or continue losing out to Thailand, which has no difficulties luring foreign auto and parts manufacturers."Proton has been stripped of the 50 percent excise rebate. But government grants(could) replace the tax privileges," she said."Also the tax cuts announced in the plan of between two to three percent in some passenger cars will not have much impact on car prices and industry players have said that they will need to offset reductions in taxes."There are loud calls for Proton to quickly find a foreign partner to improve its reputation, enhance its ability to produce new models, and help secure new foreign markets which are vital to lifting production.Proton has been in protracted talks with Germany's Volkswagen over the sale of an equity stake, but the Malaysian car maker is believed to be reluctant to relinquish control.
Sukhairul Nizam Abdul Razak, a branch manager with Proton's marketing arm, said it had to improve customer service, produce fuel-efficient models and increase exports to create economics of scale."The message in the auto policy for Proton is very clear: Proton do your work,"he said.Proton had pinned its hopes on the 1.2 litre Savvy, its first new model in 16months which went on sale in June, but it has been shunned in favour of the MyVi produced by its more skillful Malaysian competitor Perodua.Sukhairul said Savvy had only obtained some 6,000 bookings compared to about 50,000 units for the Myvi."We came out with our Savvy model late. It is a good car but Myvi was first and they became successful," he said.Proton has also been rudderless since July when its chief executive left under a cloud after eight years in the top job, and Sukhairul said he fervently hoped they would quickly find a capable person to fill the post."I pray Proton will get a good CEO to drive us forward. I hope Proton can be like Toyota one day," he said. - AFP/mks.
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