The Asian Voice

Failures of Malaysia's companies show that govt aid won't last forever: Sin Chew Daily columnist

The signage for 1Malaysia Development Bhd (1MDB) displayed at the site of the Tun Razak Exchange financial district in Kuala Lumpur.
The signage for 1Malaysia Development Bhd (1MDB) displayed at the site of the Tun Razak Exchange financial district in Kuala Lumpur. PHOTO: BLOOMBERG

The failures of Proton, 1MDB and Rayani Air illustrate the fact that government protection, subsidies and assistance cannot last forever.

By Lim Sue Goan

Sin Chew Daily/Asia News Network

Proton, 1MDB and Rayani Air are some of best instances of how things can go very wrong.

Former Malaysian prime minister Mahathir Mohamad made the decision to venture into automobile manufacturing in the 1980s and the mistake was committed right from the very beginning.

For a small country with less than 20 million then and lacking sophisticated production technology, it was impossible for us to compete heads-on with established automakers in Japan and the West.

As a result, Proton could only rely on government protection and subsidies for survival.

Without its own national car project, neighbouring Singapore has eventually evolved into a high-income country because it understands its own core values and has given itself to continuously boost its national competitiveness instead of mobilising its limited resources to assist non-performing companies.

Tun Mahathir insisted on developing the heavy industries because of his stubborn belief that Malaysia and the Malays "boleh".

Unfortunately we did not have the infrastructure and management expertise to support such an immense industry.

Instead, we have opened up the way for opportunists to scoop handsome benefits at the expense of the rakyat.

Take Perwaja Steel for example, the company was suffering a tremendous loss of RM10 billion (S$3.4 billion) , and despite the fact the prosecutors had collected evidences from places as far as Japan, Switzerland and Hong Kong, the court ruled that former managing director Eric Chia was not guilty of CBT charges.

As for Proton, the government had pumped in RM13.9 billion into the company but the company wanted more help shortly after Mahathir quit as the chairman.

The Proton and Perwaja Steel experiences tell us we don't actually need to develop our automobile and steel industries even though we need them because of the tremendous risks associated with them.

Even if Proton has been sold to a private company, the government still cannot shed this burden and is compelled to extend more loans to the carmaking company simply because it has some 12,000 on its payroll with another 50,000 working for Proton suppliers. 60,000 out of jobs is a too tacky a political issue for the Malaysian government to handle.

Proton has grown to such a proportion that the government can no longer afford to let it fall.

Even though the government will set up a task force led by Pemandu CEO Idris Jala to help transform Proton, the government may not be able to continuously provide the protective shield or lower the car tariff against the backdrop of a sluggish national economy and dampened auto sale.

In the end, the Malaysian public will have to take the brunt.

The country also needs to pay a very heavy price for 1MDB's flop, with its RM50 billion debts.

When there is no more asset to dispose of, it is very likely that the government will need to pump in more money to keep it afloat.

Still very much in the dark over its own positioning, 1MDB acquired independent power producers at exorbitant rates and had plans to develop ambitious commercial and residential projects in the likes of Bandar Malaysia and TRX.

There have been many other companies in these sectors but 1MDB chose to go into them and did it on much grander scales although these projects might not benefit the country much.

Thanks to poor management, excessive loans and lack of transparency, 1MDB's economic failure has since snowballed into a precarious political crisis.

And since we have had a vision to become a fully developed country, 1MDB should have positioned itself as a highly efficient fund right from the very beginning, bringing in foreign partners for value-added and high-tech investments.

As for Rayani Air, the termination of its business merely four months into operation has now become an international laughing stock. Sticking to its halal principles, the airline has failed to see this as a selling point and competitive edge.

The failures of above-mentioned companies illustrate the fact that government protection, subsidies and assistance will not last forever.

These companies must still go back to the basics: improve on their management and competitiveness.

For so many years our precious resources have been squandered on these highly inefficient entities.

As if that is not enough, we find it impossible to let them fall.