December 14, 2011

My answer to syedoutsidethebox blogspot

This is my response to OutSyed The Box blogspot regarding his article on proton/AP. That article can be read here :


I've tried to reply to the blog directly, unfortunately it didn't get through. Maybe it's because the comment is very long. Anyway, I've written the reply here because I feel it is very important to correct some mistakes in his article. There are several factual mistakes, misleading information and unfair comparisons in that article. I've addressed all of them in the following section which is supposed to be my reply in his blog.

1. Tuan syed, Most of the time I will agree with your articles but not this one. It has so many mistakes. Perhaps you have some confusion.

2. Maybe you are confuse between AP and import duty. AP is the Approval Permit or permit to import cars and import duty is the duty imposed by the government to all imported cars (CBU).

3. Even without AP, the government can still impose the import duty. If you are angry with the higher imported car prices in Malaysia, you should blame the import duty and not the AP. If you want to blame the misuse of AP system (those who sell the AP), then you can blame the AP system or the AP holder. And perhaps you should try to understand the whole concept of AP and import duty and why they are proposed by Tun M.

4. I would suggest you to read about proton and what is the main objective of that industry. Please refer to this link : http://chewal.blogspot.com/2008/07/selamat-hari-lahir-proton.html. I've done a bit of research myself since 2003 and have written about it in the BN backbenchers forum 9 years ago. The forum has died.

5. In that article, I've written the history of automotive industry in Malaysia and why Tun M proposed the proton project.

6. The most important thing is, Proton is not purposely made to just produce car. It is far beyond that. It is about complete development of a nation, people and the country. In a simple word, what Malaysia has achieved today is because of proton. The reason why we can escape from the 1997 economy crisis is because of proton. The reason Tun M's recipe to solve the 1997 economy crisis works is because of proton. As always with all Tun M policy and ideas, you have to think outside the box to understand it. Ironically,  its the name of your blog. You have to think far ahead to get the gist of his idea.

You can read about Proton and its objectives here :- http://chewal.blogspot.com/2008/08/kepentingan-proton-kpd-bangsa-agama-dan.html

7. With Proton, Tun M is not developing an automotive industry but he is developing a nation.

8. Now, back to proton as automotive industry. does it fail? the answer is big NO. you can read that article, why proton is a big success. In that article you can see how proton was developed inline with international automotive industry roadmap. everything since the IMP 1 is in accordance to the international roadmap. Even the import duty as the means of protection is inline with international automotive roadmap and this is a common practice with ALL automotive industry in the world. Refer to the article the meaning behind direct and indirect protection.

8. Regarding, AP, in that article I've mentioned why it was imposed. Actually, it has nothing to do with proton because even without AP, the import duty can still be applied to protect proton. However, if the AP is misused and the imported car is undervalued, it can affect proton.

9. In your article, when you compare the price of passat with waja, you are not being fair. first of all, you are must making direct conversio without any CIF cost and minimum import duty. Please note, even with free trade zone (fta), the government can still impose at least 5% import duty. So the price for that passat can be around RM 78,000. Now, you must also know that proton cars sold in Malaysia are subject to sales and exsais duty. If you want to compare duty free waja, please refer to the price in Langkawi. Langkawi is fta where only minimum duty is applied. the price for waja is RM45,000. Now, you can see the different between passat and waja price on the same level playing field. The different is about RM 30,000.

10. Btw, the import duty tariff for imported cars have been reduced according the industrial master plan. the import duty 5 or 10 years ago is higher compared with what you are paying now.

11. Proton development is nicely following the plan except during the blunders made by Pak Lah regime. That 5 years has turned everything backward.

12. Some facts about proton... Proton is the only GLCs bar Petronas that did not asked any help from the government during 1997 economy crisis. Please note, KIA of korea has gone bankrupt during 1997 crisis and almost being sold to outsiders if not with the help of korean government through Hyundai. Proton is the only GLCs that has paid all the government loan earlier than expected. Proton built the Tanjung Malim plant with its own money without any help from the government. Even with tanjung malim plant, Proton still has substantial amount of cash reserve. and...Proton does not need to buy condo to support its business model.

12. Actually, there are a lot more that I can write about Proton and the big picture of people development through the project but I will stop here.

13. I really hope that you can read and understand and make correction where necessary in your article.
 

13 comments:

Fadzli Fuzi said...

Salam CheWal,
At last,someone makes a clarification.Thank you for the post and I am moved by the notion that Tun M was trying to build a nation,not just an automobile industry.Keep writing and educating young voters like me.We do read.

CheWal said...

Salam Fadzil,

Thanks for the support and congrats for understanding the notion behind Tun M master plan.

Indeed, those who can think outside the box can see the vision.

Since the beginning, Tun M intention is to transform the mindset of the people especially the malays. The development of human capital has started long before Pak Lah or Najib without we noticing it.

By changing the mindset and paradigm, Tun M is developing a nation and country.

To those who can think and see, Proton is not just a car. It is the symbol of this transformation that layout the landscape of the country.

tydell said...

Hi Chewal.

So what is the purpose of AP then?
Is it an important thing to have?

Anonymous said...

AP is the "approved permit". Not only applied to cars but to other imported items as well.

AP used to protect the industry in Malaysia. applies to Steel, sugar, Flour & other products.

Without AP you cannot import these things from outside Malaysia.

tsyhll said...

Anonymous. I know what AP stands for. What i dont get the purpose of it.

CheWal said...

@tsyhll,

sorry for the late reply. I was quite busy lately.

If you refer to comment no.5, I've given a link to my old article. In that article, I've explained the reason behind AP for automotive industry.

In general, it is to overcome the problem of only having one particular race to have 100% control over malaysian automotive industry as what happen before 1980. It is a way to let the bumiputra to have a small portion of the share.

You can read the detail in my old article mentioned above.

CheWal said...

@tsyhll,

sorry no point no. 5, its point no.4 (selamat hari lahir Proton).

the link to the article:-
http://chewal.blogspot.com/2008/07/selamat-hari-lahir-proton.html

anyway, in that article, I didn't mention anything about AP but it shares the same reason behind Proton objectives. Please refer to the history since 1960.

tsyhll said...

Chewal,
I've read selamat hari proton article. I understand the reasons for protection. Tan Chong with their Nissan, UMW with their Toyota, Proton with their Proton.
But please take note, even if the helm of this company not 100% Bumiputra, most of the workers including engineers is Malaysian.

Like many other things, the reasons is pure with good intentions. Like everything else, it is open to abuse. In the early years it served Malaysia well, but now it is not.

It is an open secret that AP is severely abused.

Malaysians have evolved from a poor country to a sort of advanced country. We could afford things that our fathers and mothers could only dream during their time.

I myself could bear driving a national car even with mediocre quality, only if the protection in place does not profit the few.

Reality is the protection, in this case the AP make few lazy people in Malaysia very rich for just filing some paperwork.

CheWal said...

@tsyhll,

It seems now, you know the purpose of the AP system.

there is no bullet-proof system in the world. Of course, the AP system can be abused. The system is in place for a purpose but given human nature, some people (bad people) will find a way to abuse it.

The rules and regulations to get AP from MITI stated that you must have a company with a showroom. Even this can be abused. You can open up a company easily or you can ask some of your chinese friend to lend their showroom for you to get the AP and once you got the AP you can sell back to them. This is happening.

However, should we totally abandon the system due to these behaviours or should we make improvements to it ?

Btw, AP will not increase the car price (unless you are buying imported cars from abuser shops). The thing that increase the car price is the duty and even this is only applied to CBU. CKDs have no import duty at all. However excise duty and sales tax are still applied. Even Proton face the same duties and tax with CKDs (local and Asean).

Therefore blaming AP for the inflated car price is wrong.

tsyhll said...

Yes, we should totally abandon AP because is has been abused severely and yet no body even MITI did anything about it. Nothing that effective.

You see, it is not about the car price. It is actually paying more for less. For a certain amount of money that should get me a decent car with international standard of quality, I could only get a mediocre quality of car.

It is good that Proton has improve on their quality, kudos to them. But it only came after torrential of complaints, and it is way to late.

CheWal said...

@tsyhll,

AP has nothing to do with `paying more for less'. If you are too concern with buying decent car with less money, why you want to abolish something that will not affect it ?

abolishing AP will not change the price of imported cars. To change the price (lower the price), you have to abolish the import duty and excise duty and not the AP.

blaming AP for the car price is totally wrong. I repeat, AP has nothing to do with car prices.

and for your information, paying more for less in case for CKD cars is not due to the taxes. It is due to the dealers (UMW for example). This only applies to the CKD cars.

for CKD like vios,city, there is no import duty. They have excise and sales tax. Proton also is subjected to excise and sales tax. (I've made a comparison in the year 2002 between Waja and vios in Langkawi (duty free zone). Vios is priced at 41k and waja is priced at 45k. (bear in mind, vios is 1.5 and waja is 1.6.) see, without any taxes, proton offer more for less.

The problem is UMW jack up the price ridiculously. The rule fromt he government is, they can't sell cars that compete at the same price level as proton. for example, if proton is sold for 60k, they can't bring in 60k toyota. They can bring in higher price toyota. The problem is, UMW should bring in higher specced toyota that priced at 80k (for example). However, they don't do this, They mark-up the price for basic spec toyota so that it will not fall in the proton price range. That is so irresponsible behaviour from UMW.

tsyhll said...

AP is a privilege to few. That is why the term AP kings are created.

You're right. AP is not directly related to paying more for less. It is indirectly.

The monopoly the AP created in the imported car industry is what making the price go sky rocket, plus the tax.

When the imported car price are too expensive for a common Malaysian like me, we are resorted to local made cars. By force not by choice.

If there is no monopoly in AP holder, which means any Malaysian with enough capital could import cars and sell them, the price will be even out. The best man wins, the buyer makes the decision to pay more or less.

Again, there is give and take. Local automotive industry will suffer. So AP does have indirect effect on local automotive industry, hence the purpose of it.

Another point i would like to make is the value of a car is not dependent on capacity alone. Most of it is on the brand. You could probably get the same comfort from a Camry opposed to a C class mercedes. But off course Mercedes cost more because of the name. Technology also played a major role.

If Waja and Vios is priced the same, with the same engine capacity, which one would you choose? Common people like me would choose vios, the government is fully aware of this, hence the rules you mentioned.

So you said UMW jack up the price ridiculously. Why this happen? Because UMW is the only AP holder for Toyota. A monopoly. The could do whatever they like.

CheWal said...

some co. abuse the AP by indirectly increase the car price like UMW but there are other co. don't do that.

Look at ford fiesta, they are reasonably priced with all the technology they have compared to toyota brands.

Look at Mercedes, go to cycle and carriege or Hap Seng Star, you will see their price is based on duties and tax. You can do the math. Take the selling price in Uk for example and add the import duty, excise duty and sales tax...you wil get the price hap seng star and cycle&carriege giving in Malaysia.

There is no additional price included even though they are the AP holder.

AP is being abused by some (e.g. UMW) if you want to look as that.... but the rest don't do that. We are supposed to boycott UMW rather than blaming the AP.

I beg to differ with the statement about the value of the car. It must not depend on the brand. Those who are valueing the car based on brand are blind.

If you asked me to choose between Proton preve and vios and both priced the same, I will surely choose Preve. Why ? because preve is giving me more bang for buck. You should compare the spec rather than blindly based on the brand.

If you asked me to choose between Mercedes C class and camry, I will surely choose Mercedes C class. Why, I prefer mercedes spec over camry.

I'm driving E240 and previously C240 and my sister is driving camry (new)... Ther merc is way better than the camry.

If people are wise enough to boycott those who abuse the system like UMW, surely they will realise their mistake and bring the price down.