Proton-Tun-Mahathir-Interview-3

Tun Dr Mahathir Mohamad’s resignation from his post as Proton chairman on March 31 has certainly been the talk about town lately. While many have shared their views on the matter following Tun Mahathir’s departure, we haven’t heard what the man himself had to say on the matter, until now.

In a post on his personal blog chedet, Mahathir explains the reason behind his resignation, which many have speculated as a “sacking.” In actuality, Mahathir says he views himself as a persona non grata (an unwelcomed person) with the Government, which could potentially jeopardise the future of Proton.

Mahathir also shares his insights in an attempt to clear the air regarding the carmaker’s financial standpoint in regards to grant, taxes and localisation incentives. According to him, “Proton has paid more to the Government than the Government has to Proton.”

Additionally, the former Proton chairman describes the importance of Proton at providing jobs to Malaysians, be it directly, or indirectly (vendors). He also goes on to detail the difficulty Proton has in accessing foreign markets, due to the various tariff and non-tariff barriers set up there.

Mahathir’s blog post is sort of an indirect reply to a lengthy statement by international trade and industry minister Datuk Seri Mustapa Mohamed. In the statement dated April 1, 2016, Mustapha stated that Proton’s current business model adopted simply wasn’t sustainable.

The following is the blog posting by Tun Dr Mahathir Mohamad in full:

I feel I owe you all an explanation as to why I resigned as Chairman of Proton.

I was not expelled by Proton management or owners. I decided on my own, for the sake of Proton I should leave. I therefore have no grudge against Proton nor do I want it to fail after I leave.

This is because Proton seems to be having difficulties with the Government, and for some unknown reason, sales of Proton cars have plummeted.

I know I am persona non grata with the Government. I do not want to be the cause of Proton’s inability to recover because of my presence.

I would in fact like to see Proton recover and do well.

So, please, Proton owners and buyers, don’t take it out on Proton because I am no longer the Chairman. Please continue to support Proton.

Proton has great ideas about introducing new models which are of good quality. This month, it will launch the new Perdana. Later in the year, it will launch the new Persona and Saga.

Proton cannot expect any help from the Government.

Only Proton owners and fans can help Proton. So please help Proton, your national carmaker.

1. I am no longer the Chairman of Proton. However I feel a need to merely state the facts.

2. Firstly Proton is now privately owned after it was bought at RM5.50 per share (originally priced RM2.95 but bidding pushed the price up), largely from Khazanah and a few other shareholders. Khazanah was supposed to hold shares for Bumiputras but is now representing the Government. Proton is not a GLC (Government Linked Company).

3. The Government’s policy previously, was to encourage (the use of) local content. All cars manufactured or assembled in Malaysia are entitled to rebates on excise duty based on the percentage of local contents used. Most foreign cars assembled in Malaysia has 30–40% local content. Proton has almost 90% local content. Therefore the rebate for Proton is higher. It is not a privilege for Proton alone. All foreign and local cars enjoy this privilege. Local content increases the cost of producing the car. This is because the deletion allowance by the foreign company is invariably lower than the cost of the local component.

4. The Government claims to have provided grants, various forms of assistance as well as tax foregone to the take of about RM13.9 billion in total.

5. Most of this is made up of taxes foregone. Proton records show the following:
(1) RM1,320 million as tax incentives to Proton also eligible to non-national cars
(2) RM773.8 million in R&D Grant, Special grant, Stimulus package, eligible to all automotive manufacturers.
(3) RM12,532.6 million in customized incentives, also eligible to all automotive players.

Total Government contribution from 1985 – to date amounts to RM14,631.4 million.
Details of (1), (2) and (3) are appended.

Total contribution by Proton to the Government since 1985 totals RM24,905 million.
These are made up of the following:
(i) Excise duty from 1985 onwards – RM11,785 million
(ii) Sales tax from 1985 onwards – RM9,470 million
(iii) Corporate tax from 1985 onwards – RM1,410 million
(iv) Import duty from 1985 to 2008 – RM1,403 million
(v) GST from April 1, 2015 – RM28 million

Total: RM24,095 million

Clearly, Proton has paid more to the Government than Government to Proton.
Capital injection by Government in two seed funds total RM400 million. These have been fully paid up. On top of this, Proton had fully funded the RM1.8 billion Tanjung Malim Plant from its internal coffers, which at that point had a staggering total of RM4 billion.

6. In addition, Proton provides jobs for about 12,000 workers at any one time directly, and more than 250,000 souls indirectly. Proton reduced the outflow of funds probably amounting to more than RM100 billion.

7. Vendors also create jobs and reduce outflow of funds.

8. We can forget the development of engineering capability as our policy now is to encourage imports.

9. Incidentally, all the countries exporting cars to Malaysia implement tariff and non-tariff barriers, resulting in Proton’s exclusion of importation into their countries. This contrasts with our policy of allowing foreign cars to enter Malaysia with minimal or no restrictions.

10. It should be noted that Proton has to compete in its own domestic market against the likes of Toyota (10 million cars p.a.), South Korean car makers (5 million cars p.a.), German car makers (6 million cars p.a.) and others.

11. These companies can afford to lose on their cars in Malaysia and recoup in other markets. Apart from economy of scale, Proton cannot access foreign markets except those of poor countries with low Total Industry Volume.

12. Today the Government has no pride in national products. Imports are cheap and there are more consumers than producers. In a democracy, numbers count. So pleasing the more numerous is more important than national capacity of develop.