Proton, nurture Malaysia's brand or bumiputra entrepreneur

Proton, initially founded by the government, has become one of the leading brand in Malaysia at one point of time. If you ask foreigner which brand they can think of like Sony and Toyota with Japan, Samsung with South Korea. People will think of MAS and Proton as a brand they can remember about Malaysia. Especially at a time when Proton was doing well in UK. However, Sales of Proton in UK has deteriorated.

After some time, government shift it policy to nurture bumiputra entrepreneur. Proton, and its holding company fall in the hand of late Tan Sri Yahaya Ahmad. However, sudden demise of Tan Sri Yahaya Ahmad cause government effort back to square one. Beside, DRB-Hicom group lead by late Tan Sri Yahaya Ahmad has over gear themselves and over diversified into too many area including transport(IntraKota), Banking and Finance etc. When Asian financial crisis hit the country. The company has to dispose off IntraKota and Proton back to government.

AP policy, which aim at nurture bumiputra entrepreneur successfully nurture another automobile entrepreneur.....NAZA group's Tan Sri S.M. Nasimuddin Amin. Tan Sri S.M. Nasimuddin Amin, unlike three other AP King, has his own company NAZA and has make his company into a large business entity.

After sudden demise of late Tan Sri Yahaya Ahmad. There was no visible bumiputra automobile entrepreneur in Malaysia until NAZA was granted national car status.

However, when government has two goal.....National car brand and nurture bumiputra automobile entrepreneur. When Proton was head by late Tan Sri Yahaya Ahmad where two goal was heading in same direction and lead by same person. It still look okay as there is goal congruence. However, when Proton, a Government Link Company (GLC) head by Executive reported to government and another national car NAZA head by a bumiputra entrepreneur. The two goal was in conflict that lead to conflict between present Prime Minister and Ex-Prime Minister.

Solution

The solution should match the two goal together or what we said "Goal Congruence" in management theory. That is to let bumiputra entrepreneur to lead Proton rather than Proton remain as GLC. When entrepreneur spend their own money invest in a company. They have to try their best to run the company. If not, they will lose all their own money. Of course, the government should not bail out the company when the company fail, nor should government enter into a deal with bumiputra entrepreneur like what disclose by Tajuddin Ramli. All buy and sell should done in a willing buyer willing seller free market basis.

When Tun Daim become Finance Minister. He, an ex-businessman nurture a lot of bumiputra entrepreneur. However, those bumiputra entrepreneur was not an entrepreneur or do not run their own business previously. They all are ex-employee of Peremba when Tun Daim head the company. They all are good employee with good qualification. However, if you look at other community like chinese. High qualification good employee might not be successful businessman. Successful businessman might be a school drop out like Bill Gates.

Present Second Finance Minister Tan Sri Nor Mohamed Yakcop policy was different from Tun Daim. As an ex-central banker, he like to run a large group of GLC and like to nurture young executive to run the company. It look like he emulate Singapore style where government lead the economic, rather then Hong Kong style where entrepreneur that lead the economic. However, unlike entrepreneur, the only solution for those Nor Mohamed's executive is price increase, which lead to present high inflation environment.

I feel Hong Kong style more suitable to nurture bumiputra entrepreneur. Further, GLC was classified as share control by non-bumiputra. Only when a company control by bumiputra enterpreneur, not GLC, was classified as share control by bumiputra. Thus, to place Proton under bumiputra entrepreneur would significantly increase bumiputra percentage to achieve New Economic Policy 30% target.

NAZA group's Tan Sri S.M. Nasimuddin Amin. Unlike ex-employee of Peremba, he is a successful entrepreneur himself. Beside not many bumiputra have financial muscle to swallow a large company like Proton. The important point is, he know in and out of automobile industry. This is one of the reason when Ford agree to joint venture with Hyundai's founder.

Integrity

In AP controversial. Ex-Prime Minister Tun Dr Mahathir alleged International Trade Minister Rafidah deceiving him to award national car status to NAZA. It is not sure Tan Sri S.M. Nasimuddin Amin involve or not or only Rafidah was involved. However, Tun Dr Mahathir later attend a function organized by NAZA indicated that he was not involved.

Then, there is allegation of people under declared tax under AP system. It is not sure the allegation was against NAZA or other group. No prosecution was done eventually. Even if he involve in under declaration of tax. Government can purnish him by make him to acquire Proton stake at high price.

Petroleum money

Howard Huges(Aviator), successfully venture into aviation industry or airplane manufacturing because he has fund from profit of an oil and gas company he inheritance from his late father. South Korea LG group and Samsung group successfully enter into highly competitive electrical home appliances market because government award them petroleum refinery license. Another South Korea group SK Group also used profit from their oil and gas industry to venture into telecommunication industry.Like our Ananda Krishnan's Maxis.

Malaysia Petronas, has at one point of time hold share in Proton. However, Petronas has dispose off the shares eventually. Petronas still sponsor R&D of F1 engine. This means there is two team doing R&D in car engine, Petronas and Proton-Lotus. Should government rationalize the two unit?

I feel government should let bumiputra entrepreneur to run Proton. Government can award petroleum refinery license to that particular entrepreneur to finance him to compete in the industry.

Alternatively, if Proton remain a GLC. Government should let it place under Petronas. Or more specifically, both Petronas F1 engine R&D unit and Proton should inject into MISC, which has shipyard like Hyundai and Mitsubishi to form a Mitshibishi in Malaysia.

On Saturday, Edaran Automobile Nasional Dealers Association of Malaysia said there were 800,000 cars for sale in the market, 250,000 more than usual, making it difficult for national car dealers to remain in business.

Thus, Proton and government should act fast to find a solution. However, I opposed merger between Proton Edar and EON as this become monopoly and does not benefit to consumer.

Link: Automobile industries in new economy


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