This article first appeared in The Edge Financial Daily on May 30, 2017

KUALA LUMPUR: Opposition lawmaker Tony Pua yesterday questioned if the Malaysian government is actually paying Zhejiang Geely Holding Group Co Ltd to take up a 49.9% stake in ailing national carmaker Proton Holdings Bhd.

Pua, citing Second Finance Minister Datuk Seri Johari Abdul Ghani, said the government intends to pay RM1.1 billion to Proton — the last of its subsidy for the carmaker — on top of a final RM250 million disbursement from the RM1.5 billion soft loan it provided Proton last year.

“For those who did the simple mathematics, effectively, Geely is paying only RM170 million to acquire a 49% stake in a company which the government is about to inject RM1.35 billion (RM1.1 billion + RM250 million) of cash!” said Pua in a statement.

Pua also highlighted that there has been no mention, to date, of any commitment or additional investment by Geely in Proton to turn around the beleaguered national carmaker, “other than the meagre cost of acquiring DRB-Hicom’s 49.9% stake in Proton for RM170 million”. DRB-Hicom bought over Proton in 2012.

As such, Pua posited that the government is “effectively bailing out DRB-Hicom, a company owned by [tycoon Tan Sri] Syed Mokhtar al-Bukhary, by indirectly ‘paying’ Geely to make it worthwhile for the latter to acquire 49% of Proton”.

He went on to describe the ministry of finance’s action as “completely inexplicable, [and] making absolutely no financial sense”.

“What is the point of privatising Proton by selling its entire stake to DRB-Hicom when at the end of the day, the government continues to ‘finance’ the company’s sustenance? This further raises the question — if Geely fails to resuscitate Proton and gives up on the company, will the government step in again to keep Proton on life support?” he asked.

Last Wednesday, DRB-Hicom inked an agreement to sell 49.9% of its stake in Proton to Geely, sparking discussions of what this would mean for the future of the national carmaker. As part of the deal, Proton would sell Lotus, which it acquired in 1996, for £100 million (RM542 million) to Geely, which is acquiring a 51% stake, and Syed Mokhtar’s Etika Automotive Sdn Bhd (the remainder 49%).