The Economist: Malaysia Plays Catch Up

Malaysia is good at starting something but lack the will and impetus to follow through, a management sickness faced by many GLCs.

January 23rd 2014| 

Malaysia's new automotive policy aims to prepare the market for trade liberalisation, while easing the pain for its local carmakers.

In the second half of January, Malaysia's government unveiled the long-awaited revisions to its National Automotive Policy (NAP). The changes are designed to prepare domestic automakers for the imminent creation of the ten-member Asian Economic Community (AEC) and to carve out a role for the country in the regional automotive industry. However, the NAP 2014 also extends some of the protectionist measures that shield Malaysia's two indigenous manufacturers, Proton and Perodua, from international competition.

The most positive aspects of the new NAP 2014 aim to boost inward foreign investment by promoting Malaysia as a future hub for energy-efficient vehicles in the AEC. The new document broadens the definition of a green car, which is no longer tied either to a specific technology, such as petrol-electric hybrids or plug-in electric vehicles, or to engine size. The government will now start issuing licences to foreign producers to make small, energy efficient vehicles in Malaysia, hoping that such vehicles will also be exported elsewhere in the region.

The policy includes incentives and direct financing measuring M$2bn (US$600m). The ultimate goal is to boost exports of green vehicles to at least 200,000 units by 2020, with exports of automotive components reaching M$10bn at the same time. Instead of trying to compete in the mass car market, therefore, the Malaysian government is aiming to develop a market niche that could become a key driver of the automotive industry in coming years.

Yet Malaysia will face stiff regional competition even within this niche. Indonesia also has its low-cost green car programme, which is helping to attract foreign investment into the sector. Thailand has an eco-car programme, which aims to turn the country's into the ASEAN region’s main production hub for small, fuel-efficient city cars. It is also targeting green-car exports to countries outside the ASEAN trade block.

These two countries already outgun Malaysia in terms of both auto production and car exports. Thailand's policy of market liberalization has attracted investment from Japanese manufacturers and parts suppliers, which have built factories there over the past decade and a half. Vehicle production in Thailand is now around 2.5m a year, while Indonesia's output has reached 1.2m. Both those countries have also emerged as major regional vehicle exporters. Malaysia, meanwhile, produces fewer than 600,000 vehicles a year, with exports low.

History lessons

Part of the blame for this lies with Malaysia’s comparatively small market size and lower population. But part of the problem lies with its government's ambivalent attitude towards international trade in the auto industry. Malaysia's car industry was the brainchild of long-serving Prime Minister Dr. Mahathir Mohamad, who established Proton in the early 1980s, producing vehicles designed by Mitsubishi (Japan). The second car company, Perodua, emerged a decade later. The original NAP was published in 2006 with a goal of tilting the playing field in favour of domestic carmakers within a framework of controlled industry liberalisation. The first revision to the NAP was effected in 2009.

Initially, protectionist policies benefited the country’s automakers, making Malaysia a regional automotive leader in the 1990s. Without competition and trade opportunities to push the companies' development, however, the quality and technological sophistication of their vehicles suffered. Proton saw its market share drop sharply once it shifted to making proprietary vehicles. Perodua, in which Japan's Daihatsu owns a 20% stake, has been the market leader for over a decade, even though its vehicles are not competitive in international markets either.

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Time On Whose Side?

Hantu Laut

I concur ! 

The Economist is always closest to the truth, unlike the half-baked professors in our local universities, can never get their equations right.
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Time On Whose Side?
The Economist

IN JAIL, Anwar Ibrahim read a lot of Shakespeare. To understand Malaysian politics, the opposition leader says, you have to know Macbeth, a tragedy of overweening political ambition. For the government, the ambition defacing the country’s politics is that of Mr Anwar himself, to become Malaysia’s prime minister. He had promised to retire if he lost the general election held on May 5th. “But we won,” he says.

That is not how the government sees it. Though the opposition coalition which Mr Anwar leads, Pakatan Rakyat, got 51% of the votes, it won only 40% of the seats in parliament. Years of gerrymandering favour the Barisan Nasional coalition that has ruled Malaysia since independence in 1957. Mr Anwar also alleges outright electoral fraud. He has been leading protest rallies around the country against the “theft” of the election.Read more.

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Asia

Asia view -The Economist

You're fired. No, I'm not

MUHAMMAD YUNUS, who won the Nobel peace prize in 2007 for founding Grameen Bank, insists that he is still its managing director. The public image of Grameen, a pioneering microcredit agency with 8m borrowers, is practically inseparable from Mr Yunus, the man. But on March 2nd Bangladesh’s central bank announced that it had sacked him.

On March 3rd he was back in court, fighting to have himself reinstated. The most recent attempt to force Mr Yunus from the bank he founded more than 30 years ago is the culmination of three-month campaign of sustained media and legal harassment by the Awami League (AL) government. The siege began soon after a documentary was broadcast on Norwegian television broadcast last November. (Norwegians, naturally, take a special interest in the peace prizes’s honorees.) The programme claimed that 15 years ago millions of dollars had “disappeared” from Grameen Bank.

Never mind that the Norwegian government’s official inquiry found the documentary’s allegations to be baseless. This provided Sheikh Hasina, Bangladesh’s prime minister, with the perfect pretext for making good on a carefully nurtured vendetta.

Fourteen years ago, in Sheikh Hasina’s first term of office the situation could not have been more different. In February 1997, as co-chair of the Microcredit Summit Council of Heads of State and Government, she declared that “We in Bangladesh are proud of the outstanding work done by Professor Muhammad Yunus and the Grameen Bank he founded.”

He has demonstrated to the world that the poor have the capacity to productively use even a small credit and change their fate [sic]. The success of the Grameen Bank has created optimism about the viability of banks engaged in extending microcredit to the poor.

So one might have expected her to be pleased when, nine years later, Muhammed Yunus won the Nobel peace prize for those very achievements. But as it happens Sheikh Hasina had long before come to think that she herself was due the prize: not for microcredit-anything but for signing the Chittagong Hill Tracts treaty, also in 1997, which brought an end to almost two decades of fighting. Egged on by sycophants, she sent senior civil servants around the world to lobby for her nomination, unsuccessfully.

Instead, suddenly, Mr Yunus had become by far the most famous Bangladeshi in the world, usurping even the prime minister’s late father, Sheikh Mujibur Rahman, who led the country to Independence in 1971. According to those who know her personally, this was a bitter pill for Sheikh Hasina to swallow.

Her resentment turned into open hostility when Mr Yunus announced, five months after he received his Nobel, that he was going to set up a political party. This came at the beginning of a two-year period of rule by a caretaker government installed by the army. The generals’ hope had been to free the country’s politics from the axis of sparring civilian women, Sheikh Hasina and Khaleda Zia, round which it had been spinning unhappily. Mr Yunus stepped in with a call for a “complete emasculation of the established political parties” in order “to cleanse the polity of massive corruption”.

Whatever Mr Yunus’s actual intentions, Sheikh Hasina saw his intervention as personal affront against her and the AL. “She thought that he was involved with the army in trying to remove her from politics. That the army’s plan to remove her was also his plan,” said a former senior bureaucrat who knows the prime minister well.Read more.