Proton: A subsidy by any other name…

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Lately, officials have been stretching the definition of ‘subsidies’ and playing around with words – which is why Idris Jala’s figure for total ‘subsidies’  last year (RM74 billion) is vastly different from the Treasury’s (RM18.8 billion).

We are now told that a lot of the regular government spending on essential services for the people (which is the responsibility of any decent government and funded by taxpayers’ money) are ‘subsidies’ which distort the market, blah-blah-blah.

Okay, you want to talk about subsidies, let’s talk about subsidies…

These days, the focus by BN leaders and their media is all about the “subsidies” given to the rakyat. Why don’t they talk about the subsidies given to corporations?

What happens when the government provides assistance to corporations either in cash (public money) or in kind? Then the government and their media refer to these handouts as incentives, tax allowances, soft loans, grants, special funds … anything but ‘subsidies’, which is actually what they are! Of course, where the situation is dire, there are the rescue packages, compensation for cost over-runs, and the infamous bailouts (all using public money of course without being referred to as ‘subsidies’).

I was flipping through the pages of The Edge (7 June) and came across this: did you know that Proton would have been “firmly in the red in the last three of five years without a government R&D grant booked as operating income”?

For FY2008, Proton made a net profit of RM184.5 million, but its Annual Report showed it received a grant amounting to RM193.7 million for the year. If not for this “grant”, the firm would have made a loss of RM9.2 million.

For FY2009, Proton made a net loss of RM301.8 millon. And that was after receiving a grant of RM80.7 million during the year.

For FY2010, Proton posted a net profit of RM289 million. But the firm received grants totalling RM143 million in the last two quarters, which was about half of its net profit for the year.

These days, the focus by BN leaders and their media is all about the “subsidies” given to the rakyat. Why don’t they talk about the subsidies given to corporations?

In Proton’s case, such subsidies coming from government/public funds (that’s our money) are helping to keep the firm afloat.

If you want to talk about market distortions, then these R&D grants are distorting the real financial performance of this car manufacturer. These government grants would be better invested in public transport instead of a firm promoting private vehicle ownership.

More cars mean more tolled highways, which the rakyat not only subsidise (by forking out ever-increasing tolls) but in some cases pay tolls that add up to several times the highway investment cost, resulting in large profits for the concessionaires. So who is subsidising whom?

The other interesting news is that former Proton CEO Tengku Mahaleel has reportedly received a cool RM5 million out-of-court settlement from Proton. “It is understood that the decision to settle with Mahaleel this time was influenced by Proton adviser Mahathir, who has taken on a more active role in Proton since the resignation of (chairman) Azlan,” noted The Edge.

Another development not widely known is that two independent directors – both of them members of Proton’s audit committee – have reportedly resigned.

Proton is also reportedly considering selling a stake in Lotus to the Lotus CEO and his management team as a form of incentive. According to the Edge, the board had received a bid from a Chinese national offering three times the price – but turned it down because it says Lotus is not for sale to outside parties.

Anyway, this is just Proton. What about all those other companies receiving subsidies?

What I am going to do in the next few days is try and compile a little list of corporations receiving subsidies out of public funds whether in cash or in kind. Then maybe we might get a different picture of who the big subsidy recipients are.

Care to help me compile this list in the comments section below?

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MoFaz

Come on, you think it’s easy to build a car? R&D for developing Waja was RM1bil, and another RM1bil to develop engine. then another RM500mil to develop Gen-2, and i donno how many millions more to develop Satria Neo, Exora and the new engines. It’s normal for Gov to provide research grants. Even British, Japan, and German giving R&D grants. tell me, how many new start-up companies in the world could come-up with billion of dollars for R&D? and have you consider how much Gov have earn back from this grants, how much tax has Proton paid? you always thought… Read more »

MrDDR

Then buy a garbage truck and put your family name on it bruce. If that will make your family proud…

Bruce

… Proton. Go make garbage truck better still.
I will never..never..NEVER..buy proton car, if i do, i will put my family name in shame.

Raja

Good article. I never new R&D grant can be classified as operating income. So the last 3 years, RD total grant was more then RM400millon. Anil, can you also find out how much AP money was raked by the cronies? This must be made public. Can’t be going on like this forever.

CL

Ironically, Idris Jala’s former employer MAS is one of the biggest recipients of an annual government cash subsidy.

It’s one thing to say a national airline needs subsidies to operate unprofitable routes (to benefit a country’s connectivity – no doubt) but then flipped the other way around, MAS lobbies to keep these routes exclusive.

Potong

Look at Saudi Proton pricing and it is 50pct markup over Proton price here. That extra RM30K really dubious) by Proton, otherwise same as 5 years of petrol expenses or car repair, maintenance cost. Also, that RM30K hidden tax pricing factored inside hire purchase loan at higher rates making it a (doubly dubious) to Proton buyers. Not only you serve the car loan but also the hidden taxes. No thanks to biased banking sector too that practice double standard loan rates to national and foreign cars. Why the high risk default perception on Proton buyers only when the open market… Read more »

Bankraplah Negara

Here are some types of subsidies/losses/theft – call it what you will: – Giving contract/subsidy/grant/soft loan (a) to the undeserving (b) without supervision of performance. – Failure to recover loans, even from civil servants until retirement. – Lavish use of consultants to cover incompetence. – Non-essential licence/tax/fee…. – Non-essential inspection. – Ruling that equipment must only be bought from a crony, even by the public. E.g. “passport” photo at government offices. – Privatisation completely against the principles of privatisaton, including unnecessary privatisation. E.g. instead of improving bus transport with competition in KL, first 3 LRTs were set up, then “rescued”.… Read more »

Bankraplah Negara

Well said. What about provision for very flexible and friendly Variation orders in contracts given to cronies. This has led to losses of billions. Recent examples: Ipoh railway double-tracking, Bakun. A local manufacturer has come out with a battery (electricity) powered motorbike that has a good speed and range (better than a forweign version) and will save fuel. Why is the goverment not aiding and promoting them? What about tolls operated beyond concession period, and closed down only after protests? Was anyone charged? If you knock out education as “subsidy” (why not also health services and “defence”), the major item… Read more »

Voter

I want a new a government an I want these current corrupt leaders to pay me back what they have taken from me, plus interest.

caravanserai

Give a hand
The Bee Anne goes
With public funds
Backdoor gains

Give a hand
In whatever name
The name of the game
The people deeply regrets

Voting in the wolves
Now they are milking it dry
As the jungle begins to clear
The pictures become transparent

Give a hand
Then swallow through
Spending unjustly
The name of the game

casper

Try this for size Anil ….. early days when Hishamuddin was promoted to the helm the MoE, it was reported that there was an allocation of some RM$400 million dispensed, to be utilised for the teaching of Jawi !!!! A tad off tangent or just blame me for highlighting a matter off topic BUT such blatant misuse of funds must be look at, pronto. I couldn’t make this up even if I wanted to but I remember reading this back then and the article was deeply buried, just a cursory mention on page 9 that many would glance over. The… Read more »

Khobu

Nothing will change as long as the Barisan Nasional is in power.

Ravin Perumal

What about us non-bumi subsidizing bumi house buyers. Why should we pay that 5% or so?

Leithaisor

There has also been talk about the supply chain for parts to Proton. Tales of how say a certain part is (allegedly) supplied at a low price to a well-connected company, which in turn marks up the price in its invoices to Proton. And Proton in turn, marks up the price heftily. One tale had it that apparently the customer may be (allegedly) billed RM250 for a part which had been supplied by the original manufacturer at RM25. How much of the talk is true? If the tales are true, then if Proton had been better at sourcing parts at… Read more »

donplaypuks

For the year ended 31st march 2010, Proton’s unaudited profits of $239 million included Govt R&D Grant of $143 million. For 2008 and 2009 it was $193 miliion and $81 million. That’s over $ 400 million since 2008!

What R&D is a good question!!

dpp
we are all of 1 race, the Human Race

Pauline

Are those ‘grants’ given to Proton considered as bailout ie to bail them out from loss? So, if you want a list of bailouts from the govt from losses and bankruptcy, there’s aplenty.

tan, tanjong bungah

Hi Anil, Congrats on your move to compile the lists of ‘subsidies’ and ‘bailouts’. It’ll give muscle to the fact that subsidies to the poor is not the main problem that the country is heading towards insolvency! When the lists are complete, can you have them translated into Malay as well, that way all sections of the population would have a clearer picture of what the UMNO-led govt is trying to spin and cloud the issue! With English and Malay versions, I believe a very high percentage of Malaysians can be reached. This will put the issue of subsidies in… Read more »

Foo

Enough of talking, make sure everyone gets 10 of his/her friends that have not registered as voters to register ASAP and make sure we vote for change!

ANONYMOUS

Enough is enough we have voted in a Monster UMNO BN Govt.for 53 years, so that they could cheat pillage & mismanage the economy and made all the Rakyats suffer and putting the future generations of the Rakyats at risks of becoming Bankrupts because of the corruptions and wastages of the Wild Spending of the Nation’s Coffer we must get rid of this Monster before they bankrupt the Nation. We must all vote them out soonest possible by next GE so that real change could be made a reality.

logical

Proton is an excellent example of the rakyat’s willingness to be skewered by that fork-tongued.. and the thoroughly corrupted party that he once led.

aca

dont forget the hundreds of millions loaned to Syabas and for good measure the CEO, who has no experience in water management until the piratisation, unashamedly said he is worth the 5 million of remunreation due to him yearly. TRULY Ketuanan Melayu but to whom the bells tolled when 80% of those earning below RM2,000 are the true bumiputeras.

nkkhoo

From Pemandu own analysis, poor rakyat received only 1.9% direct subsidy in 2009 while companies received a lion share of 18%.

MyBlog

Well well, now you got the picture. Probably the subsidies called by many names including grants are probably larger than the so called subsidies that the public receives. I say so called subsidies because as in the price of petrol, we have the so called subsidies calculated from international prices vs our local prices INSTEAD of telling us what is the production cost vs selling prices and I bet you the production cost is far lower than our selling prices. This is what I call paper subsidies as we are a net exporter of oil. I suppose they have just… Read more »

Ganesh

If proton is not making money, it should be closed down. I am sure all Malaysians would like to go back to the old system prior to 1985 where one could buy a good Japanese car for RM20,000. Each and every Malaysian suffer paying car loans that amount to nearly half of their salary. Children are deprived of good food and vitamins because, opportunity cost, parents have to pay a huge chunk of their salary on their car loan repayment. They have no choice. Weather is too hot and public transport are in a horrible state. LRT is perpetually packed… Read more »