Global Crisis: Malaysian Automobile

The impact of global crisis towards Malaysian automobile industry is one of the good researches that we should to investigate. Malaysian automobile industry is one of industry that contributes to Malaysian GDP, Malaysian development and push industrialization. Malaysian automobile industry starting since year 1984 when Proton Saga was launching by perusahaan automobil nasional (PROTON) in the market and this make Malaysian are recognize and respectfully by Islamic country because able to produce its own car. Proton was joint- venture project with Mitsubishi which a corporation of Japan. Malaysian government already inject a huge capital to start this industry and they are always keep doing research and development how to improve this industry so that will be compete with the country whom comparative advantage in this industry. The existence of our own automobile industry also will decrease our dependent to imported cars and can attract foreign investor to make an investment in this industry because they trust with Malaysian capable. The major importers of Malaysian cars are United Kingdom, Taiwan, Thailand, Japan, Singapore, Indonesia and etc.

1.2 Problem Statement

First problem that I found is there is no scientific calculation involves in previous research for example calculation using econometric and forecasting method. The past research only collects the data and makes their own judgment based on the current situation or economic crisis. This will make people not reliable and inconsistent on that judgment. Second problem is there any correlation between economic crisis with sales, production, unemployment rate and government intervention.

1.3 Research Objective

There is several research objectives which is first we want to identify whether the sales and the production of automobile, the unemployment rate and government intervention will be directed effected by economic downturn. Second objective is to determine whether there has potential of Malaysia to maintain their automobile production when economic crisis occurs. Third is to examine what will happen to automobile industry before and after the economic downturn.

1.4 Scope and limitation of study

The scope of this study is only covered Malaysian country which refers to Malaysian automobile industry. Malaysia total population is 29.96 million and agriculture, service and industry was the higher contribution to Malaysian GDP. This study will gathered data from 1979 until 2010. The limitation of this study is first, hard to find the data that related to this study, second its lack literature review that related with this study and third is time consuming that required accomplishing this proposal.

1.5 The significant of problem

These papers are important for economy development in Malaysian. To know whether the dependent variable that are selected are significance or not with the independent variable. These papers also significant to the researcher, student and government to improve their performance and gain knowledge while managing this production of automobiles.

1.6 Chapter Outlines

Chapter 1 will discuss about the introduction of overall the impact of economic crisis towards automobile industry in Malaysian. In addition, in this chapter we also will know more detail about automobile and we can understand the contribution of this industry to Malaysian. After read the previous research, we can identify the problem that exists in this industry then we can develop a several objective. Lastly, the scope and the limitation while conducting this research.

Chapter 2 will discuss the literature review. In the literature review each of the variable are explain where the independent variable is production, sales, unemployment rate, and government intervention. The conceptual also include in this chapter where to show the relationship between dependent and independent variable.

Chapter 3 will discuss about the data and methodology. What data and method will be used is explained in this chapter. Population and sampling method will also be identifying. From data, we can analysis the data and make an hypothesis development for relationship between each variable and then test the data.

CHAPTER 2

LITERATURE REVIEW AND CONCEPTUAL FRAMEWORK

2.1 Introduction

The automobile industry was starting in Malaysian since 1960 when the government encourages local company to set up of automobile assembly plants in Malaysia. The main aims were to decreased our dependent on other country cars and to develop our industrial sector .This industry will help to maintain our economic, to create employment opportunity to local people and to provide the base for transfer of technology from developing country. This industry was starting to develop when our first national car, proton saga was launch in 1985 by Proton Company at the local market. And our second car was made in 1994 which is perodua kancil launch by Perodua Company. The implementation of the national car projects was a step towards the development of an integrated motor vehicle industry. The projects have contributed to the growth of the local component industry, as attested by the presence of 350 component manufacturers in Malaysia, of which 234 are Proton vendors and 135 are Perodua vendors. So far, the automobile industry has succeeded to fulfilling the government industrialization effort to improve Malaysian economy.

2.3 Literature review

2.3.1 Vehicle Sales.

(Mohd. Uzir Mahidin and R. Kanageswary, 2004) In the year of 1996 onwards, Malaysian automobile industry gives a large contribution to the manufacturing sector. However because of the economic crisis the amount was decline in 1998. The production volume of vehicles will be slow down depends on the economic situation. In 1999 onwards the amount was back to normal. ( Ragayah Haji Mat Zin and Faridah Shahadan, 2009) the sales performance was large in 2008 when the total amount of new cars reached 548115 units compared t0 487176 unit in the road in 2007 during the global crisis. It was rise almost 12.5%. The Malaysian automotive association forecast that in 2008 the volume of new car was 51000.( Wad, 2005) the sales of vehicles in Malaysian decline during the global crisis whereas proton sales fell by 52%, perodua fell by 35% and non-national assemblers fell by 78%. This is will bring a bad effect to the automobile industry because no contribution to the (Wad, 2010) in Japanese and us, the global economic decline started already in 2007 and Vehicle sales fell from 2006 to 2007.

2.3.2 Production of the vehicles.

(Dr mohd Rosli, 2006, the producer of automobile in Malaysian which is perodua and proton have recent y produce more than 200,000 and 100,000 respectively. This is exceeding the capacity amount that the government expects while the rest company, they only can produce below 50,000 annually. (Elizabeth Tinoco, 2010, the impact of global crisis on 1997 much larger than the others global crisis. The production of passenger and commercial vehicles in 1985 and during the financial crisis production shows the largest amount and continuously increased after 1998. (Wad, 2005) The production of proton is reducing in a large amount which is 57% during the global crisis, perodua reduce by 43% and non- national assemblers reduce by 85%. This will affect the performance of automotive industry in the worldwide.

2.3.3 Employment and industrial relations during the global financial crisis

(Wad, 2010) in 1998 the unemployment rate is rise because the automobile company will retrench their employees to reduce the cost of production. (Tinoco, 2010) the Malaysian government instruct the automobile company to retrench their employees during the global crisis but the company must remove the foreign workers first than the local workers. (Wad, 2005) in Malaysian the major company in automobile industry consist of proton and perodua has to remove their employees during the global crisis which is 14% and 11% respectively.

2.3.4 Government counter-cyclical intervention

(Wad, 2005) The Malaysian government rescued the national auto companies and then proceeded to do the same for the non-national auto companies in 1998. The Malaysian auto industry bottomed out in 1998 and recovered as of from 1999. ()The government announced the capital that contribute to automobile industry during the global crisis which is RM 60 billion that include the automotive development fund, support for the auto-scrapping schemes of Proton and Perodua. (Jean Teh, 2003) the Malaysian government also will protect their automotive industry with import duty, Mandatory Deleted Item Programmed, Approval Permit policy and Local Material Content Policy (LMCP). (Challie, Omar, 2010). According to this research Malaysian government implement a various policy to protect our local automobile industry so that the demand for cars will continuously increased. In addition the demand for cars in not depends on consumer income per capita, oil price and the price of the cars itself.

2.4 Conceptual framework

Vehicle Sales. independent variable

Production of the vehicles.

Dependent variable

Impact of global crisis on Malaysian automobile parts industry

Employment and industrial relations during the global financial crisis

Government counter-cyclical intervention

CHAPTER 3

DATA AND METHODOLOGY

3.1 Introduction

The data and methodology used in this study is ordinary least square (OLS). OLS is method for estimating the unknown parameters in a linear regression model. This method minimizes the sum of squared vertical distances between the observed responses in the dataset, and the responses predicted by the linear approximation.

3.2 Data, Population, and sampling methods

In these papers data was covering in times series data from year 1979 until year 2010 that is 32 years. In term of population, this study focuses on Malaysian automobile industry.

3.3 Hypothesis Development

: There is relationship between production of automobile and economic crisis

: There is relationship between sales of automobile and economic crisis

: There is relationship between unemployment rate and economic crisis

: There is relationship between government intervention and economic crisis

: There is no relationship between production, sales, unemployment rate, and government

Intervention with economic crisis.