(AFP) National carmaker Proton is reviving plans to develop a three-billion-ringgit automotive township shelved four years ago, reports said today.

The Proton City project in central Perak state's Tanjong Malim, comprising a manufacturing plant and a township, was put on the backburner after a financial crisis swept Asia in 1997.

Perusahaan Otomobil Nasional Bhd (Proton) chief executive officer Mahaleel Ariff said Proton would use the new plant - conceived as the largest in the region - to produce new car models ahead of the launch of the Asean Free Trade Area (Afta).

"We are in the process of appointing a management team to oversee the revival of the project. The project will be revived very soon," The Star quoted him as saying.

No Formula One ambitions

Mahaleel also dismissed talk Proton would collaborate with the Minardi Formula One racing team to develop a Formula One engine.

"People can say all they want but there is no such thing. We have said very clearly from the beginning that Proton has no interest in Formula One at this moment," he said.

"We want to concentrate on building new cars and new engines for the Asean Free Trade Area. That means every engineer and every dollar that we have will be used for this.

"Formula One is, therefore, far away from us," he added.

The New Straits Times said Proton City, based on Detroit in the United States, was conceived for Proton to compete more effectively with bigger, more established carmakers under Afta.

Proton now has more than 65 percent of the Malaysian market due to high tariffs on imported cars.

But this protection will largely disappear by 2005 under Afta, under which most tariffs will fall to between zero and five percent at the start of 2003. Malaysia has obtained a reprieve for its auto industry until 2005.

Apart from the manufacturing plant, Proton City will also house a test drive circuit, an automotive technology centre and housing estates.

Capacity constraints

The newspaper said the project, scheduled for completion by 2020, would allow Proton to raise its annual production to 500,000 units by 2005 and to one million by 2010. Proton now sells less than 200,000 cars a year.

Proton's current plant in Shah Alam in central Selangor state is facing capacity constraints which had led to a recent production backlog.

"The wider line-up will garner greater brand recognition and also the possibility of reduced overall costs, which will enable Proton to compete effectively when the market is liberalised," an auto analyst said.

However the Business Times newspaper said many analysts cautioned the global economic slowdown may hamper any plans to revive the project.

Proton currently has some RM800 million in borrowings against a total capital base of RM3.86 billion, it added.

Prime Minister Mahathir Mohamad has told Proton to cut its production costs to stay competitive ahead of Afta and said the government was prepared to authorise the sale of up to 30 percent of Proton.