Government investment arm Khazanah Nasional pledged to keep control of national carmaker Proton after it decided not to buy a 15.8 percent stake held by Mitsubishi of Japan, a report said today.

Khazanah managing director Anwar Aji told The Star that it was "not part of our equation to have more (of a) stake in Proton" but at the same time, it would not sell down its 32 percent holding in the carmaker.

"Our investment in Proton is a strategic stake. It is a national project and we have no intention to pass control to anyone or any other party," Anwar said.

The newspaper said Khazanah was not keen on buying the 15.8 percent Japanese holding as to do would trigger a mandatory offer for the rest of the company, which would prove to be a costly affair for the government investment agency.

Mitsubishi Motors and Mitsubishi Corp, which each hold a 7.9 percent stake in Proton, are likely to sell their shares to institutional investors rather than offer them in the open market, it added.

Proton was established in 1983 by Malaysian companies as well as Mitsubishi Motors and some Mitsubishi group companies.

Pullout a blow to Proton

Mitsubishi's pullout could deal a blow to Proton, which is grappling with poor sales due to intense foreign competition ahead of market liberalisation under the Association of Southeast Asian Nations (Asean) Free Trade Area (Afta).

Analysts said Mitsubishi's withdrawal, however, appears to be a commercial decision to reorganise operations in Asia due to financial troubles and did not reflect Proton's fundamentals.

Proton's market share tumbled to 49 percent last year from 60 percent in 2002, with its car sales falling 27.5 percent to 155,420 units last year.

Under Afta, import tariffs for most products in the region were cut to below five percent from last year.

Malaysia obtained a two-year reprieve for its auto industry until 2005 but it recently said it would further defer reducing duties to the required level until 2008. - AFP