Malaysia on course to realise a dream with millionth Proton car

Malaysian prime minister Mahathir Mohamad's dream of creating a world- class industry took a step forward yesterday when he presided over a ceremony marking the production of the millionth Proton car.

The landmark event came after 11 years of manufacture and was celebrated as something of a national achievement. Proton has ambitious plans to export 40 per cent of its output.

At present, however, only the British market has shown real enthusiasm for the low-priced, high-specification Proton range, which is based on models developed by its Japanese partner, the Mitsubishi Motor Corporation.

In October Proton made a large investment in improving its technology by spending pounds 51m to acquire the Lotus Group which makes sports cars but also gives Proton access to engine and transmission technology which it has been buying in from Japan

The relationship between the state-controlled company which owns Proton and its Japanese partner has been far from smooth. At one point Mitsubishi executives were so exasperated by the local management that they virtually took control of the whole project despite the fact that it was supposed to be a Malaysian flag-waving exercise

Relations have since improved but there is lingering resentment in Malaysia about the Japanese company's reluctance to transfer technology. This was particularly disillusioning for the prime minister who was then advocating a "Look East" policy to learn from Japan rather than the West.

Dr Mahathir is, to put it mildly, a car enthusiast. He steam-rollered the plan to establish the Proton company, to create Malaysia's national car programme, against considerable scepticism from the motor industry.

The first Proton Sagas were indeed little more than locally assembled Mitsubishi models but local content has increased significantly and a higher level of local design has been incorporated in more recent models.

However, the development of Proton has taken a heavy toll on the rest of the Malaysian car industry because it enjoys a preferential customs duties regime, making Protons far cheaper than rival locally assembled cars.

A second national car programme has been launched to produce compact models. This too poses a threat to other parts of the local industry.

However, next year the tariffs on other models will have to be reduced if Malaysia is to comply with international trade agreements.

This means that Proton will need to reduce costs if it intends to maintain its policy of competing on price. Dr Mahathir called on Mitsubishi to reduce the cost of components and other supplies to help in this objective

Proton announced yesterday that it plans to turn out 2 million cars in five years' time.

Annual production will be increased from 180,000 to 230,000 by the end of next year.

The national car programmes were seen by the government as part of a strategy to upgrade Malaysian industry.

Dr Mahathir said that they had demonstrated their ability in this respect because their output demonstrated that Malaysian workers were able to produce cars comparable in quality to those sold in demanding markets such as the United Kingdom.