JAKARTA. Malaysian automaker Proton Holdings Berhard is standing firm behind its collaboration with Indonesian firm PT Adiperkasa Citra Lestari on their joint car manufacturing project, despite their questionable use of the term “national car” to describe the proposed product.

“Proton today announced the signing of a Memorandum of Understanding (MoU) with PT. Adiperkasa Citra Lestari to establish cooperation ties between Malaysia and Indonesia in relation to the development and manufacturing of Indonesia National Car,” the company said in a release published on its website on Monday following the signing on Friday last week.

Proton said that both companies would carry out a feasibility study in the whole area of their automotive operations and businesses, including the commercial and technical aspects of the project.

The company said that further cooperation would involve development plans for localization, purchasing, engineering and design activities, logistical services, market studies, as well as other relevant work.

“The collaboration will be good as both nations specifically work together to develop products for the larger market,” said Proton CEO Dato’ Abdul Harith Abdullah, who signed the memorandum of understanding on the project with its counterpart, Adiperkasa’s CEO AM Hendropriyono, the former State Intelligence Agency (BIN) chief.

Proton, which was established by former Malaysian prime minister Mahathir Muhammad in the early 1980s during his rule, has now lost ground in its domestic market with its share shrinking from around 50 percent a decade ago to only 21 percent in the past year as tighter competition from foreign rivals escalates.

Proton’s entry into Indonesia, a promising auto market with car sales expected to top 1.29 million this year, will help revive its struggling business at home and further open a new path to the regional market.

Developing a national car is not new to Indonesia as in the past it launched a similar project through a joint venture between PT Timor Putra Nasional, owned partly by Hutomo “Tommy” Mandala Putra, the son of former president Soeharto, and South Korean carmaker Kia Motors.

The joint venture, in which Hendropriyono was a president commissioner, enjoyed several government facilities, including exemption from import duties and luxury taxes on imports of “national cars” and components, but later struggled with huge debts after an economic crisis in 1997 and the fall of Soeharto a year after.

The World Trade Organization (WTO) then also decided that the national car program violated its rules following challenges from the European Community, Japan and the United States.

Hendropriyono, an advisor to President Joko “Jokowi” Widodo’s election campaign team, refuted concerns about the national car, saying that the made-in-Indonesia cars would be developed with the funds he would borrow through a syndicated loan from some foreign financial institutions.

“This project will be a labor-intensive industry employing up to 6,000 workers, which will generate profits in a longer period compared to my property business,” he said.

Jokowi, who witnessed the MoU signing on the sidelines of his visit to Malaysia on Friday, said in the Cabinet’s secretary website that the car project would be purely a “business-to-business arrangement” with no involvement from the government.

On his ride to a bigger political stage, Jokowi, during his tenure as Surakarta mayor back in 2012, once campaigned on the so-called national car project Esemka, which was assembled by a local vocational high school. The progress of the Esemka project remains unclear.

Separately, Industry Minister Saleh Husin also asserted that the government was not engaged in the agreement between Proton and Adiperkasa, neither directly nor through state-owned enterprises.

“There’s no participation from the government using the state budget or state-owned enterprises. Once again, it’s purely private-to-private,” he said Monday.

Indonesian Automotive Industry Association (Gaikindo) deputy chairman Jongkie Sugiarto said that the business group did not have any knowledge about the national car program. He added that Adiperkasa was not registered as a member of the association. (Linda Yulisman)

Editor: Barratut Taqiyyah Rafie