Friday, January 10, 2014

AUSTRALIA’S AUTO INDUSTRY


As posted by Dr. Mahathir Mohamad at Che Det on January 09, 2014

1. While in Australia recently I got to read a lot about their automotive industry. It seems that Australia’s own car, the Holden is about to cease production. And this despite Australian Government support of AUS$200,000,000 (600 million RM) a year to GM, the U.S. owners of Holden Company.

2. It seems that GM is asking the Australian Government to guarantee support for five more years beyond 2015 with more than AUS$200,000,000 per year. The Government is not willing to do this.

3. The Holden is just not selling well. Australians prefer foreign made cars.

4. Once Japanese cars entered Australia the sale of the Holden went down. Then Australia decided to liberalise import through FTA. The expectation was that the FTA would result in bigger markets for Australian products.

5. But Australia found that its products could not compete with the products of its trading partners in terms of quality, design and price in the Australian market, much less in foreign markets. Holden cars were once sold in Malaysia. None is imported now.

6. Australia like the European developed countries believe in socialistic ideas including increasing wages and pay every year even when the businesses are not making profits. The productivity level relative to the wages is low. Price-wise the Australian products are not competitive even in Australia. The FTA aggravates the situation as foreign goods flood the Australian market without Australian goods penetrating foreign markets. Fortunately for Australia it has large reserves of iron ore, coal and other raw materials for export to China.

7. With the demise of the car manufacturers, the Australian vendors of components and parts have lost their market.

8. Not to worry. Malaysia has come to the rescue of these vendors. We have invited them to come and set up components manufacturing in Malaysia.

9. They will compete with Malaysian vendors. With cheap Malaysian labour, the Australians will become competitive. Malaysian vendors will lose their local market especially after TPPA (Trans Pacific Partnership Agreement).

10. Australian investments will qualify as FDI. Malaysia welcomes FDI and will give incentives. Local investors need not be helped.

11. Malaysia encouraged FDI even before people knew the meaning of FDI. Our purpose in those early days was to create jobs for our people. We concentrated on labour intensive industries. We created so many jobs that we had to use foreign labour. Every year billions of Ringgits are remitted to their countries. Someone should study what this means to our economy. I don’t know.

12. A lot of FDI today is for the construction of buildings. They are huge but I don’t think they benefit Malaysia much. I don’t think they bring in technology which we do not have. We do not have workers so the benefit will go to foreign workers who will increase remittance out.

13. What we need to improve our income is to have investments in hi-tech industries, particularly by Malaysian investors. Better qualified Malaysians can work in these hi-tech industries. There must be many of these Malaysians as a few thousand vacancies in the Government attracted more than one million applicants.

14. For a country to become developed we need to diversify. Building spectacular buildings and shining skyscrapers alone will not make us a developed country whatever may be the per capita income or the GDP.

15. Our stress now is on making foreign goods cheaper for our consumers. This leads to outflow of funds, contributing to deficits. The diminished market for local products including cars may result in the cessation of production locally. The purchase power of the people will decrease and there would be less money to purchase imported goods. There would be less consumers and this will affect adversely the per capita and GDP. I don’t know whether this is good for growth.

16. It is time we define our objectives. Do we just want high income for some but low per capita as seen in some oil producing countries or do we want growth and development so as to qualify as a developed country?