Assessing the Competitiveness of the Malaysian Palm Oil Industry
Malaysia has been the world's largest producer and exporter of palm oil for the last fifteen years. The palm oil is facing stiff competition from other palm oil producers especially Indonesia. Indonesia's production of palm oil is increasing rapidly at more than 10% annually compared to...
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Format: | Thesis |
Language: | English English |
Published: |
1997
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Online Access: | http://psasir.upm.edu.my/id/eprint/8818/1/FEP_1997_2_A.pdf http://psasir.upm.edu.my/id/eprint/8818/ |
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Summary: | Malaysia has been the world's largest producer and exporter of palm oil for the
last fifteen years. The palm oil is facing stiff competition from other palm oil
producers especially Indonesia. Indonesia's production of palm oil is increasing
rapidly at more than 10% annually compared to Malaysia which showed an average
growth of only 8.2% from 1990 to 1995. In response the Malaysian government has
taken many efforts to improve the performance of the local palm oil industry.
Despite the efforts of the government as well as the private sector to develop the palm
oil industry in Malaysia, the performance of the industry, measured in terms of market
share and profitability, is declining relative to those of other countries especially
Indonesia. Therefore, the aim of this study is to assess the competitiveness of the
Malaysian palm oil industry and to identify the factors affecting it.This study analyzed the competi1iveness of the pahn oil industry at the country
and industay level The compcIitivmess at country level was detennincd by palm oil
export performance which was measured by 1he constant Market Share model (CMS).
The CMS model decomposes the export of palm oil into three effects ie. size of
market, distribution and competitive effects. The result of the CMS analysis for the
size of market effect shows that the country was unable to cope with world palm oil
demand in the later periods, compared to Indonesia. The distribution effect showed
that both Malaysia '8 and Indonesia '8 palm oil expolls were concentrated in markets
where demand was growing at slower rates during earlier periods fonowed by faster
rates in the later periods. Finally, the competitive effect showed a decline in Malaysia' 8
market share for the later periods, while Indonesia's market share was increasing
continuously. Thus, Malaysia is graduaJly losing its competiJiveness to Indonesia in
tenns of market share.
The analysis was carried out on crude palm oil (CPO) millers. The
perfonnance of the industry was found to be affected by productivity, technology,
market share, quality, balgaining power and cost of production. Performance was
measured by value added and return on assets. The coefficient of determination was
64.0% and 42.08% for ROA and value added rcspec1ively. The results showed that the
cost of production, market share, productivity of capital, quality (free fatty acid
content) and technology were significant at 5%. Bargaining power did not contribute
much to the performance of CPO millers. In conclusion, it was found that the
competitiveness of the industry can be improved if the firms increase their production,
productivity, technology, market share and reduce the cost of production. |
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