Industrialisation through State-MNC Partnership: Lessons from Malaysia’s National Car Project

Abstract

This paper examines the growth trajectory and the current state of the Malaysian automobile industry, with emphasis on the fate of the national car (Proton) project. The cause of the tragic ending of the Malaysian dream of building an internationally competitive national automotive industry was rooted in the very conception of the project. The project was designed primarily with an intrinsic import-substitution bias. The subsequent attempt to expand exports failed because of lack of a firm commitment on the part of its joint-venture partner, Mitsubishi. Given the export failure, Proton continued to remain a high cost producer whose survival depended crucially on government support through tariff protection, tax concessions, and other preferential treatments, including periodic capital injection on concessionary terms.