PUTRAJAYA needs a clear plan for Malaysia’s automotive industry, said the Institute for Democracy and Economic Affairs (IDEAS).

Its economist, Adli Amirullah, said while IDEAS supports the proposal for another national car project, it is concerned that government involvement may hamper competitiveness.

“We should not prevent any market player from entering the industry, but the government needs to stay away from the market,” he said in a statement today.

He urged Putrajaya to explore other avenues to encourage a competitive car industry, such as reducing excise duties on imported vehicles.

He said this could force local producers to come up with better, cheaper cars.

There has been debate over plans for a new national car project, pushed by Dr Mahathir Mohamad.

The prime minister has mooted the idea several times since returning to power, and even vented his frustrations over the lack of support for Proton in a blog post.

In Parliament yesterday, Dr Mahathir announced plans to review current rules on imported cars, complaining that “anyone who makes cars can enter”, letting “Milo tins” in to compete with local manufacturers like Proton.

Adli warned against high barriers to trade, saying: “Technical standards on imports to ensure passenger safety are welcomed, but other barriers to trade… should be avoided.”

He is sceptical of Dr Mahathir’s claim that Malaysia’s car industry is still in its infancy, pointing to Perodua’s large market share as evidence of a mature industry.

Local companies Proton and Perodua are two of the three largest producers in the market, with more Perodua vehicles sold nationwide than all foreign imports combined.

Nearly 40% of all cars sold in Malaysia are by Perodua, more than twice the number sold by its nearest rival, Honda.

Dr Mahathir has accused the previous Barisan Nasional government of neglecting the local car industry, and failing to protect Proton from unfair foreign competition.

He said foreign competitors had forced Proton to lose out, and has mooted the idea of higher import duties to allow the local carmaker to compete.

Adli, however, suggested that government policy should not lead Malaysia’s car industry, and that foreign competition is necessary.

“Malaysia should be open to trade and look to competition, rather than direct government policy, to develop a competitive car industry.”

Last night, former prime minister Najib Razak criticised Dr Mahathir’s announcement on plans to impose rules on car imports, saying such protectionist policies are regressive and a burden to the people. – July 31, 2018.