Over the past few months, the media has painted an ominous picture of the third national car project which is one of the Prime Minister Tun Dr Mahathir Mohamad’s overarching vision to have a new national car.
The idea of a new national car was mooted by the PM just weeks after he returned to power following the GE14 election. He claims that Proton can no longer be considered as the national car since a Chinese automaker, Zhejiang Geely Holding Group, has bought 49.9% stake in Proton in 2017.
On Aug 2019, DreamEdge Sdn Bhd was cherry-picked as the “anchor company”, leading the project whilst Daihatsu Motor Co Ltd will provide the technology support. However, Daihatsu will not have any equity in the project.
It was announced that the new national car would be a plus-sized B-segment sedan equipped with a regular ICE or hybrid powertrain, and will be built via contract manufacturing. The company will show the first model prototype of the car in March 2020, with the final product set to make its market debut in March 2021.
The Minister of International Trade and Industry (MITI) Datuk Darell Leiking claims that DreamEDGE was chosen because the company has a good business model that the government believes can work.
“They presented their proposal to the PM and he is convinced, as long as it is privately-funded and is run by experts from DreamEDGE”.
How Expert is DreamEDGE?
DreamEDGE, a Cyberjaya-based company, was incorporated in March 2007. It is involved in innovation and digital engineering services and its share structure is shown below:-
Source: SSM Search
DreamEDGE is mostly owned by Khairil Adri Bin Adnan (91%) together with Azhan Bin Abdul Aziz (9%) whilst Venturetech Sdn. Bhd. owns shares in the form of Redeemable Convertible Preference Shares (RCPS), which in future, can be converted into common stocks and thus increasing its ownership in DreamEDGE.
Venturetech is wholly owned by the Malaysian Industry-Government Group for High Technology (MIGHT). MIGHT is a government linked company which is wholly owned by the Minister of Finance (Incorporated) [MOF (Inc.)].
Conflict of Interest an Ugly Reality?
Khairi Adri, the director and shareholder of DreamEDGE, was also appointed as a director of MIGHT on March 2017.
This raises the question as to potential conflict of interest with Khairi Adri holding positions in both the company, ie as the Chief Executive Officer (CEO) of his private company which is leading this car project as well as a director of a government linked company overseeing the funding of this car project.
Khairi Adri acting out of private self-interest may exercise an undue influence over this project which may undermine accountability and erode transparency.
Public or Private funding?
Datuk Darell Leiking has stressed that the project will be privately-funded.
“There is no government funding at all. Like any other company, they can apply for tax breaks and the government will see if they are entitled”.
However, early this year, the media quoted Entrepreneur Development Minister Datuk Seri Mohd Redzuan Yusof as saying that part of the RM20 million research and development (R&D) fund will be used to develop the third national car prototype.
In addition to this, it is stated in the MIGHT website (www.might.org.my):
“New National Car – It is a Public Private Partnership initiative driven by industry which is aspire to drive a new economic growth via sustainable knowledge and technology acquisition.”
Shedding some light via Budget 2020
DreamEDGE, being a private limited company with a small-cap equity fund would certainly require a government guaranteed debt to proceed with such a mega project. If indeed it has secured a government guaranteed debt and should the project fail, then the government will be forced to bear its’ costs and liabilities. In the past, Proton has costs taxpayers billions of ringgits due to tariff protections and bailouts.
Given the fact that the third national car involves national concern and pride, C4 hopes that the Budget 2020, scheduled to be tabled in Parliament on October 11, would address the following issues:-
(a) whether a thorough cost-benefit analysis was conducted on this car project to ensure that the government gets value for money;
(b) the actual or estimated amount to be incurred on developing the third national car prototype using the government’s R&D fund; and
(c) if it is indeed a Public Private Partnership initiative, then pertinent funding data should be made public.
The proliferation of mega projects in Malaysia are clearly a cause for concerns for taxpayers especially with limited transparency which could lead to increase in the likelihood of corruption and undermine democratic accountability.
Cyhthia Gabriel, Executive Director, C4 Center
Lalitha Kunaratnam, Sr Researcher, C4 Center