AP system needs overhaul?


  • Business
  • Wednesday, 06 Jul 2005

Comment by Sidek Kamiso

THE comment by Proton Holdings Bhd advisor Tun Dr Mahathir Mohamed on how approved permits (APs) are given out should send a strong signal for the Government to review the current system of issuing these permits to car importers and manufacturers. 

At a press conference yesterday, Dr Mahathir said the AP system did not nurture bumiputra entrepreneurs as it had intended since its introduction in 1970. Although it was reviewed in 1987, the current system benefited only a few companies rather than a large number of bumiputra companies. 

According to statistics issued by the International Trade and Industry Ministry, there are 116 companies receiving APs. Of this number, 76 are allowed to import any brand of car from any country while the other 40 are franchise holders who are allowed to import specific brands and makes from their principals. 

Dr Mahathir had expressed surprise that of the 67,000 APs issued last year, only 12,600 were given to 82 companies, while 54,000 were given to 20 companies. “It should benefit a big number of people rather than concentrate on a few,” he said. 

The question now is whether any revision to the AP system will benefit these entrepreneurs, or even Proton. 

The current system did not benefit a large number of AP holders. In Proton's case, it now has to compete with more cheaply-priced imports, particularly from South Korea. 

So, if the system benefited neither one of the two parties it was intended to serve, shouldn’t it be dismantled completely? 

Before we can see the end to the system, it is probably worthwhile to look at why it rankles Proton so much. 

In the case of Korean cars, some models have proved to be so successful that Proton's standing as a top-selling brand was threatened. 

Previously, the AP system was used to protect Proton's position. The number of APs issued was limited to 10% of total local car production and no AP was given for cars that directly competed with Proton. 

The system worked well until recently when Naza Ria was conferred national car status. Its local assembler, the Naza group, subsequently brought in more Kia models, priced much lower than Proton models of similar engine capacity. 

Although there are many allegations that these Korean cars are being dumped in Malaysia, their prices had been approved by the authorities.  

The AP system allows for the Government to exert certain control over the pricing of cars. 

Before APs are issued, applicants are required to submit sale invoices and import declaration forms from the Royal Customs, among other documents. The Government can then check with the manufacturers on these invoices or obtain independent pricing information for the cars to determine the rightful price.  

What about the requirement for assemblers that compete directly with national cars to export 80% of their production? 

According to Dr Mahathir, this ruling appears to have been overlooked by the authorities. 

On the other hand, in light of the Asean Free Trade Area, national carmakers like Proton and Perodua should be gearing up to compete more aggressively in the global arena and not merely looking to protect their home turf. 

With both companies showing dismal export figures, it is not easy to see who will suffer or benefit most if the ruling under the AP system were enforced diligently.  

For International Trade and Industry Minister Datuk Seri Rafidah Aziz, the AP controversy could be the biggest test for her. There is much she can do to resolve the issue and she certainly will not want to go down in our history books as the one who killed the dream of having the national car achieve international recognition. 

 PROTON :  [Stock Watch]  [NewsPROTON-CA :  [Stock Watch

Related Stories:Analyst: National carmaker will bounce back Tengku Mahaleel still in control at Proton Proton to make gas-electric engine car in 5 years Passenger car output up 11.4% Dr M to shed some light on Proton developments Proton Jumbuck first half sales in Australia up 57% 

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