A case study between Malaysia and Thailand in palm oil and paddy production
PARIMELA DEVI (EGA090056)SA’DIAH (EGA090058)SITI ROHAYA (EGA090047)SANEMKHAN (EGA090042)
COMPARATIVE ADVANTAGE IN AGRICULTURAL SECTOR :
Introduction
Rice productio
n
MalaysiaRice is regarded as the most important
crop in the food sub-sector.
Mid 70s, the area under cultivation of
paddy has persistently declined and 90% of the rice consumed
locally was produced domestically.
(Athukorala et al., 2009)
1980 to 1989 the production of paddy decreased until 1.7
million tonnes(Department of
Statistics Malaysia, 2002).
ThailandRice production
contributes significant portion of Thai’s economy.
Thailand also recorded 10 million tonnes of rice exports in 2008 which remarkably far before
other exporting countries.
2009, Thailand produced more than 27 million
tonnes rice and exported an amount of 8.5 million
tonnes.
Besides, the production of rice itself consumed
half of the farmable area and labor force in
Thailand
Palm oil production
MalaysiaMalaysian
experience in producing, trading and financing palm
oil is now being exported to other
countries with favorable conditions for growing the oil
palm.
Production of palm oil increased from
only 1.3 million tonnes in 1975,
through 4.1 million tonnes in 1985 and 7.8 million tonnes in 1995 to 17.7 million
tonnes in 2008-2009.
Thailand
Thailand’s recorded as third world producer after Indonesia and
Malaysia.
Plantation area of this commodity is 512 000 hectares which successfully enable Thailand to
double annual production to around
6 million tonnes, representing an
annual growth rate of 9.5 percent
Introduction
Palm Oil Production in Thailand and Malaysia (000
metric tons)
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
2006/07 2007/08 2008/09 2009/2010
MALAYSIA
THAILAND
Research StatementThe study aims to identify which country has comparative advantage in paddy and palm oil production and also to analyze the factors which contribute to it.
Does Malaysia has comparative advantage in producing palm oil?
Does Thailand have comparative advantage in paddy’s production?
What are the factors that made Malaysia become one of the leading palm oil exporters in the world and Thailand to lead in paddy’s world export market?
Objective of the Study To examine the pattern of Comparative
Advantage for Malaysia and Thailand in production of palm oil and paddy between 1961 and 2005 using Revealed Comparative Advantage (RCA).
It will reveal the factors that make the country enjoy comparative advantage over the production of paddy and palm oil and to discuss how a country with lower comparative advantage can adopt the strategies and policies of another country which has comparative advantage in those products.
Significance of the Study
To assist the government/policy makers of each country to specialize their production of certain agricultural product and also adopt the successful strategies and policies such as research and development, productive labor and land, government policies which are implemented by another country. By doing this, the contribution of agricultural sector to the GDP of the country will increase since agro-based industry is still playing a vital role in a country’s economy.
(iv) R&D
M’sia: Beintem
a et al. (2008)
Thai:Suphahnachart et al. (2009)
(iii)
Expo
rt
M’sia
:(Dep
artm
ent o
f Sta
tistic
s Malay
sia,
200
2, U
N FAO)
Thai
:Sia
mwal
la a
nd S
etbo
onsa
rng
(199
1,19
93)
(i) GDP
M
sia:Ahmad, F et a
l. (1999)
Thai:Perehudoff (2007)
(ii)Production M’sia:Pletcher (1990,Athukorala et al. (2009)
Thai:Ammar (1996), and Coxhead et al. (1998)
Paddy
(iii) Disadvantages of palm oil productionThai
Choy (2004) Bandita Yangdee (2003)
(iv) Contribution to economyThai
Mbabaali (2000),Khun Krisada Chavananand (2009)
(v) Tax and SubsidiesThai
(World Bank, 2008)
(i) ExportM’sia:
(Pletcher, 1990),Gopal (2001)
(ii) R &DM’sia
(Kajisa et al., 1997) Tengku Mohd Ariff (1999)
Palm Oil
Statement Of Hypothesis Malaysia has comparative advantage in palm oil while
Thailand has comparative advantage in paddy.
This will be proven by using Revealed Comparative Advantage (RCA) which is calculated using Trade Specialization Coefficient (TSC), (Balassa, 1986). TSC takes a value between 1 and -1.
The study assumes that the country mentioned above has comparative advantage over a certain agricultural product due to different government policies, research and development and factors of production.
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