Malaysia: for long-term investors only

Malaysia's national carmaker illustrates perfectly why any progress in the country is going to be two steps forward, one step back - and why it is a long-term play for patient investors only.

It's not just the US that has trouble putting its car industry out of its misery. Mahathir Mohamad, Malaysia's blogging ex-prime minister, is once again talking up the prospects of Proton, the country's floundering national carmaker.

Mahathir has personal pride at stake in this: he set up the firm in 1983 (Proton stands for Perusahaan Otomobil Nasional or 'National Automobile Enterprise', which gives you a clue as to how much of a role business sense played in the decision next to none). But as you can tell from the comments on his blog, most of Malaysia thinks he's barking up the wrong tree.

And they're right. There's absolutely no sense to a country with a population of 28 million trying to support a mass-market car manufacturer that designs its own products. And the high tariffs that the government slaps on imported cars to force Malaysians to buy Proton's shoddy products only harm the economy.

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Contrast Proton with Malaysia's second car firm. Perodua doesn't design its own vehicles; its products are simply rebadged Daihatsus, which is the right strategy in a market like Malaysia. These cars are reasonably popular with customers and Perodua has become one of the largest compact car manufacturers in Southeast Asia.

A couple of weeks ago, I wrote about prospects for a turnaround in the Malaysian economy and some of the trends we should be watching to see if things are going in the right direction. An end to support for incompetent national champions like Proton would be another good sign.

Unfortunately, the new national automotive policy released last week contained nothing encouraging on this score. In case it wasn't clear enough in my original piece, I should stress it again: any progress in Malaysia is going to be two steps forward, one step back. This is a long-term play for patient investors only

Cris Sholto Heaton

Cris Sholto Heaton is an investment analyst and writer who has been contributing to MoneyWeek since 2006 and was managing editor of the magazine between 2016 and 2018. He is especially interested in international investing, believing many investors still focus too much on their home markets and that it pays to take advantage of all the opportunities the world offers. He often writes about Asian equities, international income and global asset allocation.

Cris began his career in financial services consultancy at PwC and Lane Clark & Peacock, before an abrupt change of direction into oil, gas and energy at Petroleum Economist and Platts and subsequently into investment research and writing. In addition to his articles for MoneyWeek, he also works with a number of asset managers, consultancies and financial information providers.

He holds the Chartered Financial Analyst designation and the Investment Management Certificate, as well as degrees in finance and mathematics. He has also studied acting, film-making and photography, and strongly suspects that an awareness of what makes a compelling story is just as important for understanding markets as any amount of qualifications.