How arrogance, myopia stalled Malaysia’s automotive dreams

PETALING JAYA : “Arrogant” and shortsighted policies, including an opaque incentive scheme, have undermined Malaysia’s chances of becoming an automotive hub in Southeast Asia, says a seasoned industry watcher.

Veteran motoring journalist Yamin Vong, who has written extensively on the industry since the 1980s, said Malaysia had “missed the boat” in developing its vision of being an automotive hub – a vision nurtured in the 1990s with the emergence of Proton.

The National Automotive Policy drafted in 2006 had been exclusive in nature, he said. “We set too many conditions. We were then a shining star in Asean, with carmakers being fixated on Malaysia due to our relatively huge middle class who had the purchasing power to buy passenger cars rather than relatively low-profit pick-up trucks.

“We could afford to be arrogant and this led to a flawed NAP and the subsequent revisions were also flawed,” he told FMT.

Malaysia’s neighbours are pulling ahead in developing their automotive industry. (AP pic)

Yamin’s comments come in the wake of a report by WapCar, an automotive portal, that Hyundai Training Academy has closed its door to move to Indonesia. Hyundai is also closing its regional headquarters in Petaling Jaya and moving to Indonesia, which has offered favourable investment incentives for the development of electric vehicles.

The company is also reported to be investing RM4 billion in Indonesia until 2030, while Toyota will be pumping in RM8 billion between now and 2023 to build hybrid and electric vehicles there.

Yamin said the lack of transparency about Malaysian incentives was one reason that foreign investors had been put off.

Yamin Vong.

Malaysian policies that benefit our rivals

One example was that of the secretive nature of a customised incentive meant to cater to the needs of carmakers and parts manufacturers.

Yamin said no major carmaker would willingly share their confidential marketing plans with Malaysia’s government agencies in order to qualify for the incentive. However, Thailand provided a “transparent menu” of incentives for investors.

“Our automotive policies actually benefit our neighbours,” he said, adding that the concept of customised incentive was contrary to the nature of investors who demanded transparency from relevant authorities.

Malaysia should consider adopting the Thai method.

He said a review of incentives could make it profitable for those major car brands still in Malaysia, such as PSA Peugeot group, Geely-Proton and Kia, to scale up operations for the regional market.

Geoffrey Williams.

Geoffrey Williams, an economist at Malaysia University of Science and Technology, said while past protectionist policies aimed at propping-up Proton may have led to investors skipping Malaysia, there was now more of a pull factor to plough money into Indonesia.

Williams said it all boils down to the economy of scale and that of skilled workers.

The issue, he said, is whether Malaysia can produce large numbers of vehicles for export and whether Malaysia has enough skilled workers to maintain quality for the export market especially using new technologies.

Indonesia better at cutting deals and more open

“Indonesia beats Malaysia every time on scale and their large workforce is open for skills training in new technology from the start,” he said when contacted.

The republic, Williams added, was better “at cutting deals” and being more open to international investment than they have been in the past, while Malaysia has taken some steps backwards in that respect recently.

Malaysia he also said had been too focused on Chinese investment and may not have paid enough attention to South Korea and Japan , the two nations Putrajaya had very good long-term relations with in automotive partnerships.

“Japan and Korea are showing a lot of interest in Indonesia now.”

Williams also has misgivings about the NAP, especially last year’s revision. NAP 2020 he said was “very optimistic” and ignored likely developments such as Indonesia’s automotive expansion.

“They depended on export sales which are very unlikely under current market trajectory scenarios. They cannot be achieved from domestic sales alone.”

He said Malaysia would continue to lose ground because of scale and low exports. “If the domestic market is protected then there will be a stable local market of around 600,000 units per year but no real growth and no export growth.”

By : Sean Augustin – FMT

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