Budget 2019:Tough Times Ahead for Malaysia


Budget 2019:Tough Times Ahead for Malaysia–The Price of UMNO’s Fiscal Indiscipline

Domestic Demand to grow at 5 and 4.8pct in 2018 and 2019

by Bernama@www.malaysiakini.com

Image result for lim guan eng

BUDGET 2019 | Domestic demand growth is expected to remain resilient at five percent and 4.8 percent this year and in 2019 respectively, steered by sustained private sector expenditure.

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https://www.malaysiakini.com/news/450171

According to the Economic Outlook 2019 report released by the Ministry of Finance today, private sector growth expenditure is expected at 6.5 percent this year and 6.4 percent in 2019, constituting about 72 percent of the Gross Domestic Product (GDP).

Meanwhile, the report said public sector expenditure is anticipated to further decline to 0.9 percent in 2019, after recording a marginal growth of 0.1 percent this year, mainly due to lower investment by public corporations.

“Private consumption will remain the major growth determinant, expanding by 7.2 percent and supported by a stable labour market, benign inflation and conducive financing conditions.

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“Other factors such as the zerorisation of the Goods and Services Tax, subsidised pump prices, the general elections, FIFA World Cup season, and termination of toll collection on two highways, provide further impetus to household spending,” the report said.

Private investment, the report said, is expected to grow 4.5 percent this year, accounting for 17.3 percent of GDP with capital outlays concentrated in the services and manufacturing sectors.

It is expected to post a higher growth of five percent next year, attributed to capital spending in technology-intensive manufacturing and services sectors, it added.

According to the report, as Malaysia moves towards digital technologies and the Industrial Revolution 4.0, investment will focus on catalytic industries.

These include the Internet of Things (IoT), software, advanced electronics, smart machinery, automation and robotics, automated guided vehicle, aerospace and medical devices.

On the other hand, public consumption is anticipated to expand marginally by one percent this year, in line with the continuous efforts by the government to rationalise and optimise expenditure without compromising the quality of public service delivery.

In 2019, the report said, public consumption is expected to expand 1.8 percent on account of higher spending on emoluments as well as supplies and services.

As for public investment, it is expected to decline 1.5 percent and 5.4 percent in 2018 and 2019 respectively, mainly weighed down by public corporations’ lower capital spending.

Nevertheless, sustained federal government capital formation is expected to continue to support overall growth of public investment. Despite lower capital spending by public corporations, some of the ongoing projects are expected to continue in the oil and gas industry.

The report said capital spending in the utilities and transport segments is projected to continue to expand capacity and upgrade services.

Meanwhile, federal government development expenditure will be channelled mainly to upgrade and improve transport, infrastructure and public amenities, as well as enhance the quality of education and training.

“In line with steady economic growth, Gross National Income (GNI) in current prices is expected to grow 5.6 percent in 2018 to RM1.4 trillion, while gross national savings (GNS) is anticipated to increase marginally by 0.4 percent to RM387.8 billion with the private sector accounting for 82 percent of total savings.

“With the level of GNS continuing to exceed total investment, the savings-investment gap is expected to record a surplus between 2.5 percent and three percent of GNI, enabling Malaysia to continue to finance its growth primarily from domestic sources.

‘’Growth momentum in GNI is also expected to continue next year expanding 7.1 percent to RM1.5 trillion, with the private sector accounting for 86.9 percent of total savings, while GNS is anticipated to grow 3.4 percent,” the report noted.

Total investment is projected to increase five percent to RM366.8 billion, leading to lower savings-investment surplus, ranging between two percent and three percent of GNI.

Malaysia: Pakatan’s First Budget will be a tough one


October 19, 2018

Malaysia: Pakatan’s First Budget will be a tough one

by P. Gunasegaram

http://www.malaysiakini.com

Image result for Lim Guan eng

Malaysia’s Finance Minister Guan Eng

QUESTION TIME | Pakatan Harapan’s first budget to be announced on November 2 is going to be a terribly tough one because there are not going to be many sources of extra revenue nor many avenues for cost-cutting.

There is a reason why the Harapan government does not have enough money – and it isn’t debt that they claim they didn’t know about until they came to power. The real answer is the scrapping of the goods and services tax.

The cash crunch that resulted from the abolition of the GST in favour of the inferior sales and service tax will result in a yearly tax revenue loss of a massive RM22 billion initially, rising as the economy expands. Add to this the cost of fuel subsidies of RM3 billion, and the yearly shortfall is RM25 billion at least.

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That is the kind of yearly gap in revenue that Putrajaya faces. Using projected 2018 figures, according to 2018 Economic Report, the RM25 billion loss of revenue represents 10.7 percent of the projected operating expenditure of RM234.3 billion for 2018.

No tax that the government imposes will come anywhere close to breaching the RM25 billion gap. If it were to impose substantial taxes to recover this money, it will result in hardship to the people along with rising prices – which Harapan said it intended to contain with the abolition of GST in the first place.

A wrong move

The truth is, the abolition  of the GST was a terribly wrong move, and has needlessly strait jacketed the Harapan government and led to a deterioration of its financial position.

As I have said before, it should not even have been a campaign promise as the consumption tax was no longer contributing to higher prices, having been implemented with considerable difficulty back in April 2015.

Also, the GST affected the poor very little because there was a very large list of exemptions which ensured that the prices of essentials would not rise as a result. It is a tax on consumption, and therefore those who consume more (the rich) will pay more, catching in the tax net those who evade income tax. Also, GST records can be used to investigate tax evasions.

If there was one manifesto promise that Harapan broke, it should have been the abolition of GST. That would have ensured that the government finances are in good shape as reforms are being implemented – which could even have included more targeted benefits for the low-income group.

The main reason for higher prices was currency depreciation, a problem that continues to plague us despite the removal of a kleptocratic government. In fact, abolishing the GST may have contributed to currency weakness because analysts and funds view the revenue shortfall as negative in terms of the financial condition of the country.

Finance Minister Lim Guan Eng actually said last month that the ringgit strengthened relative to most countries, despite the transfer of power and weak external demand, but the period he used was incorrect – beginning with end-2017. He should have used May 9, the date of the election.

The table below shows how the ringgit performed relative to the currencies of the Asean-5 from May 9 to yesterday.

The table clearly indicates that the Malaysian currency significantly under performed all the ASEAN-5 countries – barring Indonesia, which has considerable economic problems of its own.

Tightened belts?

Hopefully, the new government and Finance Minister can demonstrate through the budget that they have a proper grasp of the issues at hand and how to handle it to reverse the currency trend.

It won’t be easy. While Lim has argued that the national debt exceeds RM1 trillion – and this has become wrongly used as the debt figure now – it is not. The debt as revealed in the 2018 in Accountant General’s Report for 2017 is still RM687 billion, and increases to over RM1 trillion only if contingent liabilities and guarantees are included, as I have previously explained.

Even if some of the contingent liabilities and/or guarantees have materialised as debt and are not classified as such, the interest on them will still have to be paid. Therefore, there will be little material increase in the overall costs of interest, even if they are reclassified into debt. The problem remains the RM25 billion shortfall.

Some potential positives include increased oil prices and more dividends from government companies, but these are likely to be well under RM10 billion incrementally.

An examination of government costs shows that salaries, retirement benefits and debt service charges account for 57.6 percent of total operating costs of RM234.3 billion. These can’t be cut.

There is more room to cut ‘supplies and services’, and ‘subsidies and social assistance’ accounting for a total of RM60.2 billion, or 25.7 percent of total operating expenditure, but the cuts will have to be pretty sharp. Also, this will probably take away targeted aid to the poor if cash grants under the old BR1M are cancelled.

Harapan is finding out too late that they left themselves too little wriggle room when they abolished GST. Unless they reinstate it – and they aren’t likely to do that because it will be an admission of a major blunder – they have to find other ways to raise revenue or cut costs.

Since the best, broad-based, value-added tax which goes by the name of GST here and implemented in over 160 countries around the world seems no longer available to them, and revenue-raising measures are limited, tightening the belt and prudent cost-cutting may be the order of the day.

If they do a good job of it, and come with a plan of also stimulating the economy to put growth on an upward trajectory again, analysts, fund managers, and most of all Malaysians, will show more faith in them and start putting money into the country.

It would also help to put the ringgit back on an upward path and suppress rising prices, or even lower them over the longer term. That entails honesty, openness, consultation, competency and a willingness to put the country and people above all. Malaysians expect no less from the new government.


P GUNASEGARAM is disappointed that the new government has not always been honest and open. Email: t.p.guna@gmail.com.

The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.

New York Times : Malaysia pushes back against China’s Vision


August 24, 2018

New York Times :Malaysia pushes back against China’s Vision on account of Najib Razak’s stupidity

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Malaysia-China Relations: Guanxi Economics, Daim Zainuddin and Robert Kuok


August 20, 2018

Malaysia-China Relations: Guanxi Economics, Daim Zainuddin and Robert Kuok

by Bob Teoh@www.malaysiakini.com

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COMMENT | Prime Minister Dr Mahathir Mohamad, is set to fly to Beijing after appointing his new special envoy to China but the man behind the scenes is surely Robert Kuok, a formidable exponent of “guanxi” economics, hand-picked by Mahathir himself to be on his Council of Eminent Persons (CEP).

Kuok, 94, made a grand entrance to Kuala Lumpur after flying in from Hong Kong, where he is currently living. He was welcomed by old buddy, former Finance Minister and tycoon Daim Zainuddin, 80, as CEP chair. Both were locked in an embrace reminiscent of an old boy reunion and cameras flashed away furiously.

That’s the enduring guanxi bond between the two, characterised by their penchant to be tight-lipped in public. Both have been given the task to help reset Malaysia’s trade relations with China. The delay in Mahathir’s visit to China may indicate the difficulty in setting the agenda for renegotiating the dubious deals inked by ousted Prime minister Najib Abdul Razak.

Kuok, one year older than Mahathir, was named as one of the five members in the new CEP, three days after Pakatan Harapan toppled the BN government on May 9, 2018, the first ever government change in Malaysia’s history.

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The others are former Bank Negara Governor Zeti Akhtar Aziz and former Petronas chairperson Hassan Marican, who both were previously removed by Najib, as well as noted  Yale and Harvard educated Economics Professor Jomo Kwame Sundaram.

Following Kuok’s first CEP meeting, Chinese Ambassador to Malaysia Bai Tian met with him on the future of China-Malaysia cooperation. Neither men said anything unscripted. The Chinese embassy issued this statement: “During the one-and-a-half-hour meeting, Bai Tian spoke highly of Kuok’s contribution to the development of Malaysia and also on the progress of China-Malaysia relations.”

That’s how Beijing views Kuok. The statement concluded that: “They (Bai and Kuok) recall the sound development of bilateral relations during Dr Mahathir Mohamad’s last service as Prime Minister, and are confident that during the term of the new government, China-Malaysia relations will achieve greater progress.”

Chinese Foreign Minister Wang Yi (photo below), after meeting Daim on July 18 in Beijing said: “The relationship between China and Malaysia is able to stand the test of time and change. Both countries have recently formed a new government and the relationship between the two countries is standing at a new and historical starting point,” he said.

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Daim didn’t say anything but according to the statement on the Chinese foreign ministry website, he said Mahathir understood China and had always been actively developing relations with the country.

Daim went on to meet Chinese Premier Li Keqiang at the Zhongnanhai Leadership Compound in Beijing. That’s as high one can meet as a special envoy to China. Again, Daim didn’t say anything, at least in front of polite company. Neither did the Chinese Premier.

However, Daim did state the obvious: “The Prime Minister looks forward to an official visit to China soon to discuss bilateral relations and development plans with the Chinese leaders.” That’s what guanxi is all about. Speak only if necessary.

Daim was visiting Beijing ahead of Finance Minister Lim Guan Eng’s trip. It was reported that the Malaysian government would be sending a delegation to China to renegotiate the cost of three large-scale projects previously awarded to Chinese firms.

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Fast Talking and indiscreet  Lim Guan Eng was dropped out Dr. Mahathir Mohamad’s delegation to China probably because he “talks too much and often forgets that he’s no more an opposition leader but part of Mahathir’s new government”(Bob Teoh). Traditionally, Malaysia’s Finance Ministers do not talk to the media because  their statements are market sensitive. But not Mr. Lim

 

At the last minute, Lim was dropped from Mahathir’s delegation without a plausible explanation. I can only guess Lim talks too much and often forgets that he’s no more an opposition leader but part of Mahathir’s new government.

Penetrative impact

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I took a whole chapter in my book “The Dragon Stirs, the New Silk Road,” to explain guanxi economics. Guanxi basically means building relationships or networking for mutual benefit. But there’s much more than meets the eye.

Guanxi has its cultural dimensions of building trust where laws cannot always provide a good framework for the Chinese in conducting personal and business matters. It’s a Chinese way of getting things done without either party having to lose face.

One of the enduring instances of guanxi at work is in Malaysia and Singapore among the Chinese diaspora.

There’s a story told of Tan Kah Kee, who was born in October 1874. He emigrated to Singapore to join his father’s business there. By the 1920s, he presided over a huge business empire including rubber plantations and manufacturing, shipping, import and export brokerage, real estate and rice trading – employing over 10,000 people living in most East and Southeast Asian cities.

Tan was acknowledged as a valued and generous friend of Chinese people inside China, Singapore, Hong Kong and then Malaya. When he died in Beijing in 1961 at the age of 87, he was accorded a state funeral. With his philanthropy, Tan had founded the Xiamen University in 1921. Now nearly a century later, the top-tiered university reciprocated by setting up a campus in Malaysia – the first Chinese university to do so.

Xiamen Malaysia is funded by donations from the business communities, both locally and in China. This fundraising is spearheaded by a guanxi exponent, Robert Kuok (photo below with Prime Minister Dr. Mahathir Mohamad), who contributed RMB200 million.

Image result for Bob Teoh's The Dragon Stirs, the New Silk Road,”

 

Both then PM Najib, and President Xi Jinping together with his folk-hero wife Peng Liyuan, turned up for the official launch for the campus project. It was Xi’s first visit to Malaysia. Kuok was there to greet them.

When Deng Xiaoping made a comeback in the 1970s, China’s economic reform programme needed the generous help of overseas Chinese entrepreneurs. Kuok, the “Sugar King”, was the first to respond. He built China’s first five-star hotel – Shangri-La! When China was strapped for sugar supply, Deng rang Kuok.

The Sugar King immediately put together a war chest and rounded up his buyers from Japan to Brazil to enter the global sugar market quietly. In a blink of an eye, they garnered enough sugar for China. Kuok didn’t ask Deng for anything in return. This is guanxi at work without much fanfare. Kuok was the last foreign visitor to meet Deng but the guanxi friendship endures till today.

Unfortunately, Najib never understood the penetrative impact of guanxi economics.

He allowed his bully boys to demonise Kuok by using the race card against him in the run-up to the recent general elections. Among others, Mahathir came to the defence of Kuok. The rest is history as Najib, after losing the elections, now awaits trial on several counts of corruption, money laundering and abuse of power.

Kuok is Malaysia’s richest man and one of the richest in Southeast Asia. He has interests in one of Asia’s largest integrated agribusiness groups, Wilmar International Limited. Its 2017 revenue was US$43.85bil. It has over 500 manufacturing plants and an extensive distribution network covering China, India, Indonesia and some 50 other countries. The group has a multinational workforce of about 90,000 people.

In China, it is one of the largest edible oils refineries, a specialty fats and oleo-chemicals manufacturer as well as a leading oilseed crusher, producer of consumer pack oils, flour and rice and one of the largest flour and rice millers.

Malaysian palm oil has not succeeded in penetrating China’s edible oils market thus far. Maybe joining Kuok’s guanxi network would be a good idea.

Daim Zainuddin has presumably completed his role as Mahathir’s special envoy to China now that DAP chairperson Tan Kok Wai is the new special envoy to China. But Tan is a new kid on the block.

The success of Mahathir’s forthcoming visit to Beijing will very much rely on what both Daim and Kuok have managed to put the table.Thus far, the signals from China are positive but it’s not going to be a walk in the park. Expect some hiccups.

Related: New Silk Road: Too big to ignore but pitfalls aplenty


BOB TEOH is a media analyst and author of the book The Dragon Stirs – China’s New Silk Road.

The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.

Tariq Ismail takes on The Economist for calling Dr. Mahathir Mohamad “Chief of Everything”


August 18, 2018

Tariq Ismail takes on The Economist for calling Dr. Mahathir Mohamad  “Chief of Everything”

By Tariq Ismail

http://www.freemalaysiatoday.com

Image result for tariq ismail ppbm

I refer to the article referencing an editorial in The Economist entitled “Malaysia’s New Leaders Have Found Their First 100 Days Tough”.

The Economist editorial board opined that although Dr. Mahathir Mohamad’s Pakatan Harapan (PH) government has made headway in fulfilling key election pledges, in effect Mahathir is hindered by a “novice” Cabinet.

The article further contends that this has resulted in Mahathir having to become the “chief of everything”, thus reverting to his old autocratic ways. The piece also claims this is why Mahathir is retaining “cronies” such as those in the Council of Eminent Persons (CEP) and Daim Zainuddin.

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Malaysia’s ” Chief of Everything (The Economist)” or a strong crisis Leader ?

Worse still, The Economist is mischievously insinuating that Mahathir has no intention of dismantling racial policies seen as favouring the majority Malays despite his unexpected move in appointing Lim Guan Eng as Finance Minister.

The Economist further, and I have to say very subtly, insinuates that this state of governance is hindering Malaysia’s economic growth, by comparing Malaysia’s expected growth rate of 5% for 2018 against 6% in 2017.

I have to say, this is a very mischievous and almost maligning piece by The Economist. I thus feel compelled to enlighten the public, both local and foreign, of the state of matters as it stands.

The Economist, as influential as it is, must surely understand the nature of change, particularly involving changes in government. Who can forget the case of the Missing W’s when President George W Bush took over from President Bill Clinton? Or even the debacle of the US Cabinet appointments under the leadership of President Donald Trump? Yet, The Economist expects immediate and absolute perfection in the new Malaysian Cabinet line-up despite a game-changing opposition win after 60 years of single-party rule.

The Economist apparently fails to understand that in situations of change, there will be learning curves and gaps in knowledge and experience. That is only to be expected.

I challenge The Economist to undergo an equally momentous change without similar issues, just within its own organisation.

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The Council of Eminent Persons is, in fact, a crisis management team. It is being led by former Finance Minister Daim Zainuddin who took Malaysia out of two serious economic recessions. His leadership of CEP and his steady stewardship of the economy (in 1986 and 1998) is welcome by the international and domestic business community, given the uncertain times ahead as the trade war between America and China heats up. –Din Merican

The appointment of the CEP was made in recognition of this gap in experience and knowledge, particularly given the anticipated challenges in cleaning up after the Najib Razak administration. Professionals in the field of change will know that in such situations of extreme challenges, it is important to establish a team focused on clearing and cleaning up while the existing managers ensure that business runs as usual.

Failure to do so will exacerbate the tremendous problems currently faced.

It is just good change management practice and should be more relevant given the situation the new Malaysia finds itself in.

As for becoming the “chief of everything”, I am surprised The Economist says this. After all, isn’t a CEO a chief of everything? Yes, under normal circumstances, a CEO approves by exception only. However, these are exceptional times for new Malaysia. A new ruling alliance and fresh-faced ministers are confronted with a corruption and money-laundering scandal which has inspired a new field of study in international money-laundering, and these same fresh-faced ministers have to contend with the fall-out of that scandal domestically.

I ask the CEO at The Economist, had you been the incoming CEO in such a situation, would you freely delegate as you would in more normal circumstances? Or would you keep tighter control on the reins of power?

I have to say that despite all this, Mahathir has been admirably receptive and flexible to the suggestions and objections of the coalition ministers in his crafting of policies and handling of issues.

I think The Economist and regrettably most Western commentators on the new Malaysia underestimate the fine balance between the PH coalition and the public support behind it. There is an assumption, especially in the international media, that change was imminent simply based on the change instigated by PKR 20 years ago, and that this meant the PH coalition partners are all cut from the same cloth, so to speak, and are thus of one mind. This is a simplistic and careless analysis of Malaysian politics.

The reality is that Malaysia’s voting demographics, whether by economic standing or ethnicity, is fractious at best. This extends to political party support as well. PKR would never have made it on its own without the other coalition partners who are more modest in comparison but who still commanded crucial support from the section of society that could push PH over the 50% mark to win the election.

At this juncture, everyone would do well to remember that a coalition by definition is “a temporary alliance for combined action, especially of political parties forming a government”. Massive amounts of negotiation and give-and-take are required to make a coalition work, and even more so to make it historically successful. This does not happen without a firm leader guiding the numerous coalition partners in thought and deed, such that everyone reaches a consensus. If this is mistaken for Mahathir reverting to his “old autocratic ways”, I can assure you, a significant number of voting Malaysians are happy for it to remain so for now.

I say this because The Economist, and probably many others, seem to have forgotten the most important lesson of the new Malaysia. It is this: ordinary individuals who share the same universal values and the desire to do what is right by their own selves have the power to effect change regardless of race, ethnicity, economic standing, gender, age and ideology.

As such, The Economist’s pathetic attempts at stoking the fire of dissent and racial enmity topped by a prediction of poorer economic performance will not work in the new Malaysia. The people of the new Malaysia have always been the drivers of our own economic and political fortunes, good or bad. We know this for certain. And we know that as we did before, we can do so again if need be. The power is in our hands.

Tariq Ismail is a member of the PPBM Supreme Council.

The views expressed are those of the author and do not necessarily reflect those of FMT.

Proton 2.0 is a Mahathirian Egotistical Dream


August 9, 2018

Proton 2.0  is a Mahathirian Egotistical Dream

by P Gunasegaram
Image result for Proton 2.0
Malaysia’s Nightmare and Dr. Mahathir’s Egotistical Aspiration. That’s why it will fail.

 

QUESTION TIME | It does not matter if it is manufacturing electric cars or energy efficient vehicles (EEVs), or intelligent cars which drive themselves or a combination of them; any other national car project will fail with further massive losses to the public which eventually underwrites the profits or the losses.

It benefits only the egotistical aspirations of one man – Prime Minister Dr Mahathir Mohamad and the pockets of one of his cronies, Syed Mokhtar Al-Bukhary, who owns a majority 50.1% in Proton Holdings through DRB-Hicom, the other 49.9% owned by Geely of China.

Interestingly, DRB-Hicom recently sold its entire stake in rubbish disposal firm Alam Flora to a related company, Syed Mokhtar-controlled Malakoff for RM945 million cash, which it said will be used to retire Proton debt and to invest in the development of new models. Could one of the new models be an EEV? Time will tell.

The car industry simply does not have the scale and the technological base to compete in the international markets and is a burden to Malaysia and its people. Therefore, it should be slowly wound down as Australia did. It was not competitive in 1983 when it was first mooted and it is not competitive now. What keeps it alive is tariff protection.

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I wrote a feature article on Proton way back in 1983 for The Star (it was different newspaper then) when the idea was first mooted before production started in 1985. There was substantial opposition to the project and in the article, I quoted two individuals. First was the late and respected associate professor Chee Peng Lim and second, Jomo Kwame Sundaram, currently a member of the council of elders. Both were from Universiti Malaya and were known to be forthright in their views.

Mahathir, who was Prime Minister then too, had then maintained that the government considered the capacity to produce vehicles a necessary component of the industrial structure. However Chee, then associate professor at Universiti Malaya, directly contradicted Mahathir saying that undue emphasis should not be placed on heavy industries as there were insufficient supporting industries.

“Unless you have a wide industrial base, too rapid development of certain heavy industries will result in a lopsided structure,” he said presciently 35 years ago, adding that Switzerland, an industrialised country, did not have a car industry. It still doesn’t. Mahathir’s industrialisation policy was a great flop.

 

Jomo called for an open debate then. “Let’s bring out the facts and figures. Then we can have an open forum and the subject can be debated.” That never happened, of course, and probably will not happen now because a new Malaysia is somewhat stymied in some respects. And those who opposed the project got short shrift.

Subsidy of up to RM360 bil

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To understand why it won’t work, we need to understand what Mahathir’s concept of a Malaysian car is. He is not talking about a technology partnership, he is talking about a Malaysian car – developed eventually by Malaysians to be competitive worldwide.

For 35 years, Proton tried and could not do it because it produced lousy, substandard cars when it tried to go on its own without technology partners. These cars could not compete internationally even when prices were subsidised by domestic sales because of poor quality. They sold locally only because of massive tariff protection.

They never got scale because the technology needed to make good cars was non-existent. It’s not about race or bumiputera privileges – nowhere within Malaysia did we have anything near cutting-edge technology when it came to cars. We still don’t and in 35 years, the market is a helluva lot more competitive.

Perodua, the second major national car project, succeeded financially because they produced quality cars with a good technology partner throughout, Daihatsu of Japan. But this is basically a manufacturing operation for Daihatsu, which enjoys tariff protection and access to the Malaysian market.

It is of rather dubious benefit to Malaysia as a whole because Malaysia could have imported similar cars much more cheaply from anywhere in the world and offered its populace lower prices and better quality, and safer products.

Instead Mahathir basically stuffed inefficient, unreliable and even unsafe cars down the throats of Malaysians, who with a terribly inefficient public transport system, then spent more than they could afford on cars; their most conspicuous consumption after houses. Mahathir caused needless hardship to millions of Malaysians, who could have subsidised the national car industry to the tune of at least RM360 billion over the years – and that’s no exaggeration.

This is based on estimated sales of some 12 million vehicles between 1985 and 2016 of which some four million vehicles sold were Protons. I have estimated, conservatively, that the average price per vehicle was RM30,000 higher because of protective barriers. Multiply this by 12 million vehicles for RM360 billion. You may disagree with the exact figure but there can be little doubt that the order of magnitude is in the hundreds of billions of ringgit.

For instance, take the 2018 prices of two vehicles in the US (where taxes on cars are low or zero) and compare those to Malaysia. The first is a Honda Civic, priced at RM75,760 in the US but RM116,733 here for a similar model. This is RM40,973 or 54% higher. For a BMW 530e, the respective prices are RM210,600 and RM343,000 – RM132,400 or 63% higher! And this in a country which has a per capita income one-fifth of that of the US.

If we use the RM360 billion burden Malaysians have borne, Proton and the national car projects have already cost the country and the rakyat 7.2 times the likely maximum loss at 1MDB estimated at RM50 billion. Is that not enough reason to nix this crazy idea?

Ministers, why no guts?

But for that we need ministers who have guts, who must rise up and voice the dissatisfaction they have over the revival of yet another national car project. But instead, there is defence of Mahathir’s plan. How sad! How dangerous!

Deputy Trade and Industry Minister Ong Kian Ming ( from DAP) said the new project won’t be reboot of Proton but will instead go in the direction of energy efficient vehicles. Pray tell us does that mean we are going into the manufacture of EEVs? Does that mean EEVs will become more expensive?

Of course they will, using first the infancy stage argument and assuring us they will be competitive later, for the imposition of punitive tariffs on EEVs from overseas. When after 35 years we could not manufacture conventional cars more efficiently, how can we possibly manufacture EEVs more efficiently now or ever? What do we have now that we did not have earlier?

Instead of adding fuel to Mahathir’s fire of going back to some version of Proton, our ministers, so brave and full of gumption before GE-14, are now telling the new emperor he has clothes on when he is absolutely naked when it comes to Proton and a new car project.

Why no guts, ministers? Especially when many of you had so strongly criticised Proton before? Do you honestly think that Mahathir will miraculously restore a rotten car industry to profitability or do you not care that billions more are going to be poured into a wasteful project, which has already wasted over seven times the wastage at 1MDB? Don’t you have an obligation to the country to stop this project?

Remember it’s not the project cost that counts, it’s the money that Malaysians pay extra every day when they purchase a car, money that goes to subsidise the profit and bear the losses of our national car industry.


P GUNASEGARAM says that engaging in political subterfuge makes many politicians stupid… and dumb. E-mail: t.p.guna@gmail.com.

The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.