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Malaysia won't sell entire Proton stake to VW-report

From Reuters| June 21,2007

Malaysia's state investment arm will not sell its entire 43 percent stake in national car maker Proton (PROT.KL: Quote, Profile, Research) to Germany's Volkswagen (VOWG.DE: Quote, Profile, Research), the country's deputy prime minister said this week.

"It's the national car," Najib Razak was quoted as telling Bloomberg in an interview on Tuesday. "It can't be all of the stake."

Volkswagen wanted a "substantial" stake in Proton, Najib said, adding that the German firm possibly wanted a stake in the manufacturing division.

"If we want a foreign strategic partner then we have to accept the fact that it has to be run on a commercial basis," he said.

Volkswagen and loss-making Proton have been in extended talks for a tie-up aimed at helping the Malaysian company boost its sales and turn itself around.

Najib also said the government would keep petrol prices unchanged for the rest of the year and that the economy was expected to expand six percent in 2008.

"It's good macroeconomic management to cut back fuel subsidies. But it will come at a political cost," he said.

"I think in the long term we should try to reduce the subsidy, but it has to be a gradual process. We'd like to maintain petrol prices at the present level, at least for the rest of this year."

Malaysia last raised fuel prices by about a fifth in February 2006, setting off a round of price increases which drove inflation to a seven-year high of 4.8 percent in March last year, prompting the central bank to raise interest rates. 

Inflation has since eased to 1.5 percent in April.

Najib said there should be enough momentum in the economy to repeat this year's projected growth of 6 percent in 2008.

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