Assumption! This is a hypothetical Board Meeting scenario that could take place in any big OEM car manufacturing division overseas this month.
(This article was contributed by a senior manager in a foreign car brand based in Malaysia)
1.0) *Agenda* – investments of RM200 million into any of the ASEAN country for the manufacture of car parts.
2.0) In attendance – All Board Members (production, finance, corporate, HR, technology and secretariat).
Finance Director – The latest National Automotive Policy (NAP) for our target country Malaysia is finally out. Can someone in Corporate update us on numbers, details of NAP etc?
Corporate Director – Yes its out…a lot of general stuff on future tech, AI, connected cars etc. Most probably done by one of those big auto consulting companies. A lot of subject matter and short on facts that we need to evaluate our future investment. 68 pages in all but only one on essential numbers.
Finance Director – Yes, but we need best estimates, quantitative figures, volume sales/ production, tax structure & breaks, special government incentives, etc to crunch our 5/10-year feasibility study. Without this we will not approve a single US dollar in this country anymore.
Corporate Director – We have data from other target ASEAN countries. Malaysia’s data is just out. We have some data but we doubt its accuracy?
Finance Director – What do you mean? We are talking about a RM200 million investment.!!
Corporate Director – their target Total Industry Volume (TIV) figures from the last NAP was 1.0 million units but they only achieved around 600K units. A shortfall of over 50%.
New NAP – in 2030 they target to sell 1.4 million units. That is very ambitious. If they have not achieved previous targets, we are not sure if they can achieve the 2030 numbers from today’s low 600K units.
Finance Director – Who or which consulting company did these projections? We need accurate or reasonably good estimates.!!
Corporate Director – Not stated anywhere in NAP who gave them the projections.? We guess its their own projections.
Finance Director – mmmm…… But we do not invest without good or reasonably reliable data. Moreover, they did not achieve their last NAP targets by 50%. Where is the magic in the new NAP to achieve these new projections.? We are a PLC company. We do not take such risks…..!! From 600K units to 1.4 million in 2030…that is a huge percentage jump. We need authentication.!! Not pie-in-sky figures. What is your team in Malaysia doing?
Corporate Director – Give us a month to go back and clarify with Government officials. They are busy with a lots of enquiries because its short on facts and abundant on form.
Secretariat – Our next Board meeting is 3 months away. If we do not get proper verifiable crunched numbers by then, bye bye Malaysia.!! That means your job and the jobs of your team in Malaysia.
Finance Director – what about tax structure, tax breaks , incentives, land grants, Electric Vehicle (EV), plug-in hybrid subsidy for consumers, etc. What does the NAP have for us? Our Thailand and Indonesian counterparts have given us comprehensive data. We can already see the viability of the project if we put our investment in these two countries.
Corporate Director – The new NAP does not have any quantative figures for tax incentives/ government grants etc. They have ‘Customized Incentives’. Please explain in detail to us what is ‘Customized Incentives’? We discuss with them and they give us based on what we decide to invest?
Finance Director – Strange rule but tell us more. Do our competitors get more or same or less? What is our competitive advantage.? Who decides if my investment is up to par or not?
Corporate Director – No idea, from what we hear, its personal-to-holder and private and confidential. From what I hear so far, its one agency that decides. Criteria for decision is not quantified.
Finance Director – So it is not transparent! Do they have a framework of investment levels vs incentives granted so we can compare with the other countries if its better or worse.? We have a matrix right so we just input the numbers.
Corporate Director – No, we don’t have a clue. But we will revert after contacting their Trade Minister.
He visited our plant here and excitedly invited us to invest in their country. He said they can be flexible. We told him a year ago and we wait for your NAP.
Finance Director – Yes, we invest not on flexibility and because you like the Trade Minister. We need reliable and concrete data, transparent investment policies etc. We invest for long term. Ministers come and ministers go.!!
Corporate Director – Please give us some time to revert…we ourselves are not clear on the so called ‘Customized Incentives’.
Two weeks later.
Finance Director – So where is the information from Malaysia on our investment proposal?
Corporate Director – Sir sorry, we just googled Malaysia and their top story is Minister of Trade and other key Ministers have vacated their post. We are not sure if this is fake news or real news. There is also a change of government in the offing. Sir we can’t confirm anything at the moment.
Finance Director – WHAT??…Poor and unreliable data, customized incentive, flexibility, Trade Minister removed, NO….we do not invest in such countries.
Finance Director – lets move fast and invest in other countries in the region who have a clear defined policy. We the Board need to decide quickly, and please keep Malaysia as a last option.
And that in a nutshell is the behind the scenes discussion in a typical Board Investment Meeting made up of Directors of a big auto manufacturer before they invest their shareholder’s money in any project.
