[This story was updated at 11:30 p.m. on Monday, Feb. 9, 2015, to add background and comments]

Manila/Jakarta. President Joko Widodo has denied that a joint venture between Malaysian car manufacturer Proton and a little-known Indonesian company will produce an Indonesian “national car.”

The comments, made to reporters in Manila on Monday during a state visit by the president to the Philippines, directly contradicts a statement posted on the official website of the Cabinet Secretary last week.

Joko told reporters that his attendance at the signing of a memorandum of understanding on Friday between Proton and the Indonesian company Adiperkasa Citra Lestari (ACL) in Malaysia did not mean that the Indonesian government was supporting the partnership as a “national car” project.

He said his visit to the Proton factory was at the invitation of Malaysian Prime Minister Najib Razak and his predecessor, Mahathir Mohamad, who serves as the Proton chairman.

Joko said “of course it is too early” to declare future products of the joint venture as national car, and that what he had witnessed was simply a business-to-business matter between Proton and ACL.

Joko drew a torrent of criticism for witnessing the signing, which activists and political opponents have pounced on and labeled as yet another concession being made by the president to his party chief.

ACL president director Abdullah Mahmud Hendropriyono, a former State Intelligence Agency (BIN) chief and retired Army general dogged by allegations of gross human rights abuses, is known to be close to Megawati Soekarnoputri, Joko’s political patron and the chairwoman of the Indonesian Democratic Party of Struggle (PDI-P).

That the president seemingly endorsed Hendropriyono’s company — which is not registered with Indonesia’s Industry Ministry and whose history and line of business remain unknown — in the joint venture left many Indonesians flabbergasted.

Joko emphasized he had not decided to make the Proton Indonesia’s national car.

“They haven’t even conducted a feasibility study [for the project] yet,” the president said. “I have to see the results of the study and what targets should be achieved.”

Business-to-business

Hendropriyono himself has asserted that his company’s joint venture with Proton was “business-to-business,” and that the Indonesian media’s constant use of the expression “national car” to describe future products of the partnership was misleading because the Indonesian government in fact had no stake at all in the project.

“It is incorrect to call what we will build ‘national cars’; why don’t you first properly learn academic terms [before commenting],” Hendropriyono told reporters. “This a business-to-business partnership. We’re a private company and so is Proton.”

He added that he had secured foreign loans to finance the project, though stopped short of mentioning the amount of money involved. He also declined to say whether the deal involved tax breaks or other concessions from the Indonesian government.

Hendropriyono said it had long been his dream to produce Indonesian-made cars, recalling the “national car” project helmed by late strongman Suharto’s son, Hutomo Mandala Putra, better known as Tommy Suharto, which essentially rebadged Kia cars from South Korea as Indonesian-assembled Timor vehicles.

The Timor project ran from 1996 to 1999, before the combination of the Asian financial crisis of 1997-1998 and Suharto’s fall from power in 1998 forced its closure.

Hendropriyono appeared to have been involved in the project, serving as the president commissioner of Kia Mobil Indonesia from 1999 to 2001.

He blamed the Timor fiasco on the acquisition of Kia by fellow South Korean carmaker Hyundai.

Industry Minister Saleh Husin also clarified on Monday that the government had made no financial contribution to the ACL-Proton joint venture.

“There is no government involvement at all, be it through the use of state funds or through state-owned enterprises. This is purely business-to-business,” Saleh said.

He added that developing a national car was not included in Indonesia’s automotive industry development targets.

“We still continue to coordinate [with foreign carmakers in Indonesia] so that the automotive industry will keep increasing the portion of local components they use,” Saleh told the Jawa Pos News Network.

Proton who?

While some observers have questioned the need for the president to witness a business-to-business deal, others have blasted the choice of Proton as a partner to ostensibly help boost Indonesia’s domestic car industry.

“If the agreement is considered a business-to-business [agreement], then why did the president have to be there?” Lana Soelistianingsih, a University of Indonesia economist, said on Monday.

She said the president’s presence was symbolically important — and also unnecessary in this case.

Lana also said Indonesia would benefit more if it partnered with carmakers from countries with more advanced know-how in the industry.

“Many have said we should learn from Germany or Japan when it comes to car technology,” said Lana, who is also the chief economist and head of research at Samuel Aset Manajemen, a local fund manager.

Didik J. Rachbini, an economist and lecturer at the University of Indonesia, also cited “the unimportance” of Joko having to witness the signing ceremony.

He said that in the course of an official state visit, everything on the agenda, including the signing of MOUs, must be considered of high national interest.

“All must be carefully planned,” he said.

Didik also questioned Proton’s standing as a carmaker with knowledge of the Indonesian market, where it has a market share of less than 1 percent.

“Its market share in Malaysia is less than 20 percent. And I haven’t seen that many Proton cars in Indonesia,” he said.

Proton had a 17.8 percent share of the Malaysian car market as of November 2014, according to the Malaysian Automotive Association, making it the second most popular brand after Perodua, with 29.3 percent.

Proton itself has lost its mantle as Malaysia’s national car. It has struggled to improve its fortunes in recent years after years of lavish government subsidies evaporated, amid a decline in market share and stiff competition eroding at its profits.

After failing to get German auto giant Volkswagen to invest in Proton, the Malaysian government’s quest to get a buyer for the company ended in 2012 when it was taken over by a local vehicle distributor called DRB-Hicom.

In Indonesia, Proton’s business is handled by Proton Edar Indonesia, the sole distributor of the Malaysian cars here.

The company offers 10 models with 27 variants that have been marketed in Indonesia since 2007. All the cars sold to Indonesian buyers are completely built up from Malaysia, meaning the company does not even have an assembly plant in Indonesia.

Indonesian car sales last year totaled 1.2 million units — double the 2014 sales in Malaysia — with Proton selling all of 523 cars here, the most popular model being the Exora Star MPV.

Officials from the local automotive manufacturers’ association, known as Gaikindo, declined to comment on the ACL-Proton issue.

Semi-national car

Unlike in Malaysia, no commercially available car sold in Indonesia today is fully manufactured in the country, with the best-selling Toyota Kijang Innova MPV, 80 percent of whose components are made locally, coming the closest.

“I think it’s the only one we can call a semi-national car,” Didik said.

The Kijang Innova is manufactured by Toyota Motor Manufacturing Indonesia and exclusively distributed by Toyota Astra Motor.

Joko previously championed the Esemka, a car made from components imported from China by students at a vocational school in Solo, Central Java, back when he was mayor of the town in early 2012.

Critics later said his endorsement of the venture was simply a publicity stunt to pave the way for his candidacy in the Jakarta gubernatorial election later that year, which he went on to win.

Critics of the ACL-Proton tie-up have questioned why Joko has not continued to support the Esemka project and its producers.

“If I was Jokowi, I would have brought Esemka into the cooperation with Proton Malaysia to produce a national car,” Fahri Hamzah, a deputy speaker of the House of Representatives, wrote on Twitter.

Agus Windharto, a transportation expert from the Department of Industrial Design at the Sepuluh Nopember Institute of Technology (ITS) in Surabaya, said he was upbeat about the prospects of the ACL-Proton partnership helping develop Indonesia’s car industry.

He said Indonesia needed to follow Malaysia’s step in assisting a local company to produce national car.

“Malaysia, which has a smaller car market, has its own national car. It’s good to have a national car, but we need to prepare out manpower,” Agus said. “We need to spend trillions of rupiah gathering the experts. If we fail to do so, it will only be a joke.”

Setya Novanto, the speaker of the House of Representatives, agreed that the public should not dismiss out of hand the possibility of Indonesia developing its own, saying that Hendropriyono’s involvement in the scheme did not destine it to failure.

“As long as it will truly benefit the people and the nation, surely we must appreciate it. We must support all things that will push development and improve the nation’s prosperity,” Setya said. “Don’t instantly react negatively. Let’s see first what the deal can bring us. Let’s take a look.”

Additional reporting from Investor Daily