Malaysian Prime Minister Najib Razak, right, holds a F1 car model during a press conference in Putrajaya, Malaysia, Tuesday, Sept. 15, 2009. Malaysia will form its own Malaysia F1 team with the Formula One Federation (FIA) having accepted Malaysia's bid to enter the 2010 and future FIA F1 championships, Prime Minister Najib Tun Razak said.(AP Photo/Vincent Thian)
One Malaysia F1 team
After Honda and BMW have quit Formula One, and when the country is facing an economic recession, the government makes an announcement of forming the “One Malaysia F1 team”. It shows the spirit of “Malaysia Boleh” but from the commercial point of view, could such a huge investment bring the country any remuneration?
There are pros and cons to own a F1 team. The pros include enhancing the popularity of the country, Proton, Air Asia, Sepang International Circuit (SIC) and other sponsors, particularly Proton, in the international arena.
In fact, Lotus used to own a remarkable F1 team. It had won the annual championship for seven times since its first entry into the F1 race in 1958. By entering the race, Proton may master the latest technology and overcome the weaknesses of the engine, so as to open up more oversea markets.
"Is it a wise decision to join as even some famous automobile companies are unable to sustain?"
Once Proton gains a good reputation, it can sell a large number of licensed products. At the same time, the Malaysian team's entry can stimulate F1 ticket sales, reversing SIC's gloomy operation. Also, the team may share the total prize of US$500 million, as well as the TV rights revenue.
However, the formation of a team costs a lot. First of all, the new team must pay the The International Automobile Federation, commonly known as FIA, an entry bond of US$48 million. Also, Malaysia has to raise funds to build a production, design and technology development centre near the SIC.
Although Prime Minister Datuk Seri Najib Tun Razak did not disclose the cost of setting up the team, it is estimated to cost at least US$100 million, including the salaries and business entertainment expenses of the drivers and the captain. For example, after Honda took over the whole racing team in 2006, it had to allocate up to US$500 million for its annual budged.
We are worrying about the Malaysian team's ranking as the higher the points a team can accumulate, the higher the prize they get. If the Malaysian team is ranked at the bottom, it does not only have failed to gain popularity, but it may harm the brand. With Honda's technology, it had been suffering a bleak record for eight years and in 2007, the team was ranked number nine with only 14 accumulated points. Meanwhile, BMW decided to quit F1 because of its poor performance this year.
F1 is a “money-burning” sport. Even it does bring certain economic benefits, its return has been reduced under the shadow of the global financial turmoil and the automobile industry downturn. Is it a wise decision to join as even some famous automobile companies are unable to sustain?
Compared to other racing teams, the Malaysian team possesses the advantage of the government's support. But under the circumstances of deteriorating national budget deficit, would it be a wise investment?
What benefit has the country actually gained after spending US$130 million to build the circuit, hosting F1 races since 1999 and allowing Petronas to sponsor the BMW team for four years? It is better to show the people a clear account. The government should learn a lesson from previous failed investments in order to become a pragmatic investor. (By LIM SUE GOAN/Translated by SOONG PHUI JEE/Sin Chew Daily)