Trees missed for the woods in AP policy - KJ John

The controversy over the issuance of Approved Permits (APs) - including the public disclosure of the full list - hides more than it reveals about the real issues raised by Tengku Mahaleel, the CEO of Proton Bhd.

While the disclosure is a good and transparent action, it is not the real core issue raised and argued by the Proton CEO in his protest of discriminatory treatment of the national car company.

The real issue is a more fundamental question about our values and what we view as the real value-added in making Malaysia a vibrant and competitive economic base, especially for the automotive manufacturing industry of the region.

Thailand has positioned herself very well as an assembly centre and the new ‘Detroit’ of Asia especially for components and parts manufacturing.

But, what is the potential and possible positioning for the Malaysian automotive industry in the region and the world? Is that not the real question behind Mahaleel’s comments and protest against the automotive policy on APs?

Framed in another way, is not the real question: In the era of the World Trade Organisation and Asean Free Trade Area (Afta), when all kinds of barriers are being dismantled, why is there a need to use APs as a back-door policy to allow ‘continued assembly operations’ in Malaysia, which is only a limited market and within which even Proton cannot survive without exports?

Are the so-called Malaysian ‘new assemblers’ designed to become exporters for the Asean market, or are they merely being used as entry point for the Malaysian market share by foreign competitors of the Malaysian cars?

Back-door competition

I thought that Mahaleel’s basic contention was that the APs were being used for back-door competition against Proton, which is now a manufacturer and no more merely an assembler of foreign-manufactured cars.

Therefore, his real questions to the Ministry of International Trade and Industry (Miti) were:

1. What is the real automotive policy of Malaysia? Is it to promote assembly operations or to encourage manufacturing operations and increased value-added from within Malaysia?

2. How are Malaysian-owned producers of components and parts being readied for the Asean market beyond Afta or are they going to fail, even as suppliers to the national cars in their home markets?

To me, these questions address the real and substantive issues behind both the comments and concerns raised by former premier Dr Mahathir Mohamad and Mahaleel.

Two-plus tagline

Under the Second Industrial Master Plan (IMP2), the strategic framework is the ‘manufacturing plus plus’ tagline. If it is well understood, the central thesis is that Malaysia is no more a cheap cost land and labour-based assembler of various components and parts.

Therefore the IMP2 strategised the movement up the value-chain; both upstream into new product development and research and development and downstream into distribution, marketing and branding. These were the two ‘pluses’.

When this basic strategy is applied to the automotive sector in Malaysia, it becomes very obvious that the “policy direction for the automotive sector” is obviously to move into the plus-plus domains.

It would therefore appear inconsistent, not just to Mahaleel but also to any rational person, if the national automotive policy then encourages the distribution of thousands of APs to any and every automaker in the world to bring in their models merely to ‘undertake assembly operations in Malaysia’.

Unless of course, they have a clear and obvious production and utilisation policy regarding locally manufactured components and parts from Malaysia for export into the Afta market - that is, a 100 percent export requirement.

I suppose it is within this strategic framework of IMP2 that the Malaysian automotive policy is being reviewed and commented upon, and how the AP policy has become an issue.

I would be curious to know what percentage of Naza-KIA for instance, now a so-called Malaysian assembled car, is made up of Malaysian components and parts? Are components and parts sourced from local producers or from Thailand or Korea?

All these are key issues in deciding whether the AP controversy is merely about who got what. Is Naza-KIA going into local manufacturing (not merely assembly)?

Or, for that matter, is BMW developing local capabilities in manufacturing and distribution or is it merely using Malaysia as an assembly centre but focusing all the value-added in their home country?

Herein lies the real controversy surrounding the Proton versus AP issue. Let us not miss the trees for the woods.

Real issue

It is within this context that I believe Mahaleel contends that Miti is “inconsistent” in terms of the automotive policy and appears to be back-stabbing the Proton.

The national car was originally designed to become the Malaysian-branded automotive, with a development market space and home ground advantage so that it can competitively attack the rest of the world.

If that undertaking and framework is undermined by the creators of Proton, it is no wonder that Mahaleel, as CEO of Proton, must address the issue even if his board has no capacity or courage to address it.

I believe that this is the real concern for Mahaleel and Mahathir - it is not about who got APs and why, but rather why are APs being so lavishly dished out even when this directly contradicts the IMP2 strategy of creating and developing the Malaysian car.

The situation, however, could become worthwhile by asking how the nation really benefits through the AP policy. Maybe if we auction APs, the income generated could be used to subsidise needs of those in the lower end of society who still may not be able to drive their own Malaysian car.

At the end of the day, a car is only a moving machine with four wheels to get us safely from one place to another.

As Zainul Arrifin asked in his column in the New Straits Times today, “why not me?” as a recipient of APs?

Surely business entrepreneurship is more than ‘who you know’. One must equally ask and answer the question: what is the real value-add of your role in the real business of the nation’s life?