A Doctor in The House: A Memoir of Tun Dr Mahathir Mohamad (81 page)

But the catch was in the definition of “national”. When ASEAN decided that any product with only 40 per cent local content would be classified as “national”, foreign manufacturers immediately moved into low-cost ASEAN countries and began to produce cars with the minimum level of local content to take advantage of “national” status for their products. With its 90 per cent local content, Proton cars became more expensive than Japanese, German, French and American cars manufactured in the other ASEAN countries. The export of Proton into the car markets of the ASEAN countries was made quite impossible.

Clearly, developing countries cannot industrialise without some form of protection. I had proposed the production of a national car because I believed it would be protected, at least until its production volume was high, the local market had grown and economies of scale had been achieved. After that, the protection could be reduced gradually. But while the rich were allowed to protect their agricultural products, we were not allowed to protect our infant industries.

Initially Proton cars only had about 18 per cent local content, but the Government pushed for an ever-increasing level of locally-manufactured, component parts. We were prepared to lower taxes to help as we knew we could not do everything ourselves at first. The drive train (engine and transmission), for example, had to be sourced from Japan, but over the years we were able to make more and more of the parts in Malaysia. The 100 per cent local content level would now be technologically feasible if we could only increase our volume of production. But we cannot, because at the moment the domestic market is simply not big enough as we must share it with foreigners. The obstacle is due to the currently unfair rules of international trade. When the Japanese started their automotive industry the local market was theirs entirely, which gave them the necessary volume. It was the same with South Korea, which made sure that foreign cars were not imported. With their bigger population they maintained that advantage for a long time, ensuring they had a strong local market base.

Every country, rich or poor, protects its economy and its industries so Malaysia is doing nothing different when it seeks to protect its national car. Malaysians should stop feeling ashamed of this. Whenever something is proposed by rich countries, no matter how impartial and benign their proposal may sound, one can be sure that it is for their benefit. When they speak in favour of globalisation and a borderless world, when they propose that protection be removed, it is so that they will benefit, not us.

Proton has gone on to produce a number of other models, including the Waja, which was the first locally-designed car, the Satria, Gen 2, Wira, Iswara, Arena, Perdana and Juara. Each model can cost as much as RM500 million to develop and produce, but my favourite is still the first, the Saga. When it was launched in 1985, I drove a dark blue Saga over the Penang Bridge. I remember the look on people’s faces—they were proud to see a national car on the road and many of them gave me the thumbs-up sign as I drove past.

It gave me immense pleasure to drive the Saga that day, especially over the 13.5km-long bridge, which we had officially opened in September of that year. In the past 20 years this dual-carriageway bridge has become one of the most recognisable landmarks in Malaysia. Linking the island of Penang to the rest of the Peninsula, it remains one of the longest such bridges in the world. It is integral to the dream of seeing Malaysia as a country with not only a thriving automotive industry but a strong network of bridges and highways to serve the travelling public. We paid RM800 million to build the bridge, which is not much in relative terms, but traffic has grown so much since then that we now need to build a second bridge.

The Government had invested only RM480 million to set up the Proton factory in Shah Alam before it lent the company an additional RM800 million. Proton has since repaid the loan so the Government’s own investment in Proton amounts to only RM480 million. The tax collected from Proton in 10 years, on the other hand, added up to RM18 billion, which means the Government’s investment in Proton yielded a return of more than 3,000 per cent. And because of Proton, more Malaysians have been able to buy cars. That is a major accomplishment, not just of industrialisation but also in transforming the lifestyle of contemporary Malaysia.

When Proton built a second, state-of-the-art manufacturing and assembly plant in Tanjung Malim in Perak in 1996, it was able to foot the RM1.8 billion construction bill without having to borrow from the Government or banks. The facility is 60 per cent automated and has 180 precision robots and 2,000 workers. The national car project has come a long way in the 23 years since the first Proton plant was built. It has also led to the establishment of over 200 small engineering companies, many owned and operated by Malays. Proton helped us to realise the objectives of stimulating Malaysian engineering industries and the NEP objectives of getting the Bumiputera into business as well.

But Malaysians like to run down their own cars and make them out to be worse than they really are—that is the Malaysian way. Scorn is easy and generously dispensed, but recognition and appreciation only grudgingly accorded. We should be very proud of what we have done, as even other countries are amazed at what we have accomplished. But instead, Malaysians say the cars’ designs are not good, the roof is too low, and so on. I simply do not understand this—we seem to have lost pride in our abilities and insist on running down everything that we do. We proclaim that others are better than we are, and their products and achievements superior to ours. It is the old inferiority complex again.

If our cars are as bad as some people say, how did we manage to sell them overseas? We have even sold cars in established markets like Europe. We don’t sell many units and we don’t make money from this market, but it still proves that we are able to build cars of world standard.

But I must admit that the quality of our cars has deteriorated lately. I was very depressed when I learnt that the Gen-2, which is being marketed in England, was being offered to the public for a deposit of just one pound. That is a painful climb-down from the time when we first exported our cars to England, and they won prizes in the Birmingham Motor Show.
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 Proton used to employ a German firm that checked the cars to ensure they were of world standard, but the new management has dispensed with the services of this company, perhaps to save money. I am told that our overseas sales are now smaller than before, but I have no means of verifying this claim,
 

Proton sales in the local market declined sharply when the Ministry of International Trade and Industry issued thousands of Approved Permits or APs to import foreign cars. Most of those cars were from countries which do not import Proton. Worse, the importers of foreign cars grossly under-declare their landed price to minimise payment of duty. Proton has found it very difficult to compete with the resulting influx of Korean and Japanese cars. Instead of retaining its 80 per cent market share, Proton’s share is now only 40 per cent. Even Perodua, the second national car, sells more.

Perusahaan Otomobil Kedua Sdn Bhd, or Perodua, launched its manufacturing plant on 1 August 1994. I had not planned to have a second car manufacturing company, but I believed there would be a good market for smaller cars, which Proton was not interested in building. I had approached Proton with the suggestion in the early 1990s, but the company believed that such a car would only compete with their existing models. They offered a series of excuses until I grew frustrated and gave up.

I then turned to Daihatsu, with whom I had spoken when I first thought of producing a national car. When they saw Proton’s success they were quick to take up our proposal to build a small car based on a 660cc mini car they had produced. They now agreed to change the appearance of the car they had originally designed. Perodua’s first model, the Kancil, had a tiny 660cc engine, but it was a neat little thing and remains popular. It is also my favourite of all Perodua cars. It did not compete with the Proton cars because the Kancil was seen as a second family car. The same plant is used to assemble Daihatsu cars, which means more revenue for Perodua. The company has since put out other models, like the Rusa, the Kembara, which is the country’s first four-wheel-drive vehicle, the Kenari, the Kelisa, and most recently, the MyVi.

In 1995 Tan Sri Yahya Ahmad
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 bought a controlling share in Proton, changed its management and oversaw the company’s continued progress. After he died tragically in a helicopter crash,
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 Tengku Tan Sri Mahaleel Tengku Ariff,
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 who had been appointed CEO, kept managing the company and helped it to accumulate cash reserves amounting to RM4 billion. After the two car projects were successful I decided we should have a national motorcycle as well. When I spoke about this idea to Yahya, he was very enthusiastic as he was a Kawasaki motorcycle dealer. We went to see the Kawasaki plant and spoke to the management, who agreed to help us manufacture a Malaysian motorcycle. That started Modenas, which was also an engine manufacturing company. The plant was built in Kedah and Kawasaki taught our people to build this motorcycle using quite a lot of automation. This too proved to be a successful venture.
 

The tax on imported motorcycles is very low, so Modenas had to be very good to compete in the market. They wanted to produce a scooter and other products as well. A motorcycle is basically a small engine with two wheels, so by extending the application you can produce things like lawn mowers, electric generators and outboard motors. Modenas has not yet started in that direction because they still have not exhausted the potential of building motorcycles. They started with the four-stroke motorcycle, which sold very well and was exported to other countries. I even spotted a few on a Greek island when I was there on a holiday. They can now design and test scooters and three-wheelers. With engineering, you can develop many different devices if you just learn to apply the technology.

For me, Modenas completed Malaysia’s engineering industry. We started with nothing but we now had saloon cars, a mini car and motorcycles. The next logical move would have been the production of small engines; in fact, that was our intention when we bought a 58 per cent share of MV Agusta Motors, the Italian motorcycle manufacturer, for 70 million euros in 2004. Honda and BMW had started with motorcycles and now they also produce motor cars and small engines for generators and outboard motors. But people who do not understand engineering could not appreciate the rationale of buying Agusta. In 2006, the new management of Proton sold the company for one Euro and just two years later, Agusta’s new owners sold it for some USD109 million.

We have since gone into the aviation industry as well, another area that I hoped would yield engineering expertise and skilled workers for the country. The most successful local company in this field is Composite Technology Research Malaysia (CTRM), which is the main tenant in Malacca’s Composite Technology City. CTRM has won more than RM1 billion in contracts to produce composite component parts for major aircraft manufacturers such as Airbus, BAE Systems and Bombardier Aerospace. It also produced the Eagle 150B, a single-engine, two-seater light aircraft. Today we are also able to manufacture flight simulators and our own unmanned aerial vehicles, all to world-class standards. We have pilots too—I once flew on a Boeing 747 from Kuala Lumpur to London, and discovered that one of the pilots came from Kodiang, a small town in my constituency of Kubang Pasu in Kedah. The town was regarded as one of the most backward places in the state, where the people eked out a meagre income by planting padi. No one thought that someone from this village could become a B747 pilot.

When it comes to aviation, Malaysia’s showpiece event is the biennial Langkawi International Maritime and Aerospace Exhibition (LIMA), which we first held in 1991. I had fallen in love with Langkawi since I worked there as a doctor way back in 1956, and I wanted to promote the island. This meant we needed to hold some activities that would literally force people to go there. I read about the air show in Oshkosh,
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 USA, where people go every year with small aircraft, some of them homebuilt. I decided to have a small air show featuring small aircraft, since Singapore already had an air show with big aircraft. We would also hold the show in between the years of Singapore’s event, to make sure there was no overlapping.
 

The Government did not have the resources to stage LIMA so I turned to a businessman, Yusof Manan. Yusof, who was educated in Germany and could speak German, put the show together with his brother Datuk Radzi Manan. Interest in it was great from the very beginning and soon companies were asking to bring in military aircraft, which we agreed to readily. Then someone suggested holding a maritime show simultaneously, and that’s how LIMA was born. I worried at first that those early promises to bring in aircraft would fall through, because transporting them was an expensive business. But the turnout of participants and visitors at that first show in 1991 was very good.

Although we had been concerned at first about possible competition with Singapore’s air show, the truth was Langkawi had an advantage in that it did not have a busy airport and it was surrounded by sea. That meant aircraft manufacturers could conduct their aerial demonstrations throughout the day without interfering with commercial flights or flying over built-up areas.

The show also received support from some strange quarters—there was Russia, for example, which had hardly ever participated in air shows before. The Russian contingent was perhaps the biggest at LIMA 1991 and they came with aircraft such as the Sukhoi and the MiGs, which most people had previously only read about. The Russians themselves had never been to a place like Langkawi and they were very excited. Malaysia eventually bought their MiGs, which was the first sale of Russian aircraft in Southeast Asia. The Russians went from being a secretive country to one that was keen to sell their aircraft and technology. Their participation was a special draw for LIMA.