This Study was intended to examine the coming of AFTA (Asian Free Trade Agreement) and its impact upon the Malaysian automobile industry. This study covers a period of four years, from 2000 – 2004. The rational for choosing this topic is based upon the fact that AFTA is growing into a global issue affecting not just the ASEAN (Agreement of South East Asian Nations) market but sucking in global manufacturers. With regards to the automobile industry, many have taken to AFTA as a stepping stone for car manufacturers to become more competitive in a market protected by tariffs and barriers especially in Malaysia, where local car manufacturers such as Perusahaan Otomotif Nasional (Proton) and Perusahaan Otomotif Kedua (Perodua) are protected against foreign manufacturers through high taxes and duties. As AFTA draws closer, many are showing concern as to how the government will respond to AFTA and whether it would equate to lower prices.
The study aims to answer several questions that are in the mindset not only of Malaysians but also that of the automotive players. The study thus will try to provide the background on AFTA and the need for a study on it. In carrying out a study on AFTA, the research aims to provide answers on the cost-benefit of the introducing such a system. The study also aims to achieve a certain level of predictability to both the consumers and the manufacturers on what to expect and on the possible outcome of the implementation of AFTA.
Some of the issues to be explored in this Study include an overview of AFTA in terms of its background, what it comprises, its’ members, as well as it’s aims and objectives. We will also look into the Malaysian automobile industry, the effect of the Asian financial crisis in 1997/1998 on car sales, the coming of Proton and Perodua, the recent entry of NAZA KIA, and the current state of the car industry. Another issue to be discussed is the various challenges posed by AFTA towards local manufacturers such as Proton and Perodua. We will explore both the positive as well as the negative impact of AFTA on the Malaysian automotive industry. The background for the subject to be studied is seen as a rationalization effort to appease the flagging automobile sales market. The mass especially the Malaysian public is aware that with the coming of AFTA, price of local automobile will indeed decrease. As mentioned before, this study would try to highlight the implication of AFTA implementation. Hence, it could be said that this worthy study would benefit not only the automotive industry but also the policy makers and the general public. Finally, we will look into the pre-AFTA as well as the post-AFTA impact on the Malaysian car industry. The Study of the pre-AFTA impact covers the period from 2000 – 2003 while the post-AFTA impact covers the period from late 2003 – early 2004.
The study intends to search the answer that lingers on every individual whom anticipates the coming of AFTA to witness the change it will bring with it particularly on the local automobile industry. The study will provide the necessary data which would in turn assist policy makers in formulating essential and appropriate policies to overcome any form of shortcomings which would adversely affect the automobile industry.
At the end of the Study, one will be able to evaluate the impact of AFTA on the Malaysian automobile industry as well as critically point the loop holes of the current policies and laws in order to protect the nation’s automobile industry. As this would be a virgin area of study, this study would be clear of outcomes of precious studies. The general parameters set by previous study does not apply in toto. However this is not to say that there are no redeeming factors from studies which covered area of regional mechanism such as AFTA. It is vital to point out that any such extraction or derivation would be for the purpose of answering the fundamental question; which is the impact of AFTA in Malaysia.
In defining the scope of the study, the research would first cover all the previous research which was published or which are publicly accessible. Upon obtaining a possible parameter of previous studies and the outcomes/ analysis of such studies –this study would focus on the cost-analysis of the implementation of AFTA and its impact of AFTA. It must be noted however that the study is limited only to the period of 2003. The study does not cover such new observable facts such as the unstinted growth of companies like KIA, Alado, Cherry and of course specific built cars like Innova, city and Vios from traditional manufacturers such as Honda and Toyota. These new phenomenon has transformed the way automotive sectors in Malaysia has reacted to these changes.
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