Factors Affecting Export Demand for Malaysian Palm-Based Finished Products
Main Article Content
Abstract
The encouraging growth in volume and exports of palm-based finished products (PBFP) was directly related to an increase in their demand. It is thus important to investigate the factors influencing such demand. Our study attempts to elucidate this for the Malaysian PBFP in 10 major foreign markets, namely, Turkey, China, Iraq, Iran, Singapore, Romania, Australia, Pakistan, Russia, and Saudi Arabia. This study constitutes a panel data analysis for the 10 countries using data from 2007 to 2021 using the fully modified ordinary least squares (FMOLS) method. Pedroni and Westerlund cointegration test indicates the presence of a long-term relationship between the variables under study. The empirical results show that gross domestic product (GDP) has a long-term positive influence on the demand for PBFP, with every 1% increase in GDP will increase the demand for palm oil by 0.9%. In addition, population size (POP) also shows a positive sign and is statistically significant at the 1% level, indicating that a 1% increase in POP will lead to a 0.3% increase in PBFP demand. Substitute oil price also has a long-run positive influence where for every 1% increase in the price of both commodities will increase the demand for PBFP by 0.1%. Meanwhile the price of PBFP has a long-term positive influence on its demand. Thus, information regarding the factors influencing the demand for PBFP from our findings may help industry player and policymakers in formulating strategies to improve the markets, and academicians may also benefit from sharing the knowledge gained from the study.
Article Details
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
Alias, M. H., Arshad, F. M., & Rahman, A. A. (1992). Market share analysis of Malaysia’s palm oil exports: Implications on its competitiveness. Jurnal Ekonomi Malaysia, 26, 3–20.
Ambiyah, A. (2011). Determinants of Indonesian palm oil export: Price and income elasticity estimation. Trends in Agricultural Economics, 4, 50–57. https://doi.org/10.3923/tae.2011.50.57
Applanaidu, S. D., Arshad, F. M., Shamsudin, M. N., & Yusop, Z. (2011). The relationship among petroleum prices, biodiesel demand, and Malaysian palm oil prices: Evidence from simultaneous equation approach. BANWA, 8(1&2), 64–83.
Aryana, K. J., Resurreccion, A.V.A., Chinnan, M. S., & Beuchat, L. R. (2003). Functionality of palm oil as a stabilizer in peanut butter. Journal of Food Science, 68(4), 1301–1307. https://doi.org/10.1111/j.1365-2621.2003.tb09643.x
Aziz, M. I. A., & Applanaidu, S. D. (2017). Effects of palm oil price on exchange rate: A case study of Malaysia and Indonesia. Institutions and Economies, 71–87.
Bahri, E. N. A., Nor, A. H. S. M., & Nor, N. H. M. (2018). The role of financial development on foreign direct investment in ASEAN-5 countries: Panel co-integration with cross- sectional dependency. Asian Academy of Management Journal of Accounting and Finance, 14(1), 1–23. https://doi.org/10.21315/aamjaf2018.14.1.1
Bahmani-Oskooee, M. & Ratha, A. (2004). The J-curve: A literature review. Applied Economics, 36(13), 1377–1398. https://doi.org/10.1080/0003684042000201794
Basiron, Y. (2002). Palm oil and its global supply and demand prospects. Oil Palm Industry Economic Journal, 2(1), 1–10.
Bashier, A. (2014). Immigration and economic growth in Jordan: FMOLS approach. International Journal of Humanities Social Sciences and Education, 1(9), 85–92.
Biswas, N., Cheow, Y. L., Tan, C. P., Kanagaratnam, S., & Siow, L. F. (2017). Cocoa butter substitute (CBS) produced from palm mid-fraction/palm kernel oil/palm stearin for confectionery fillings. Journal of the American Oil Chemists’ Society, 94(2), 235–245. https://doi.org/10.1007/s11746-016-2940-4
Czine, P., Szakály, Z., & Balogh, P. (2020). A review of purchasing preferences for margarine among Hungarian and international students. Studies in Agricultural Economics, 122(1), 29–36. https://doi.org/10.7896/j.2008
Dian, N. L. H. M., Hamid, R. A., Kanagaratnam, S., Isa, W. A., Hassim, N A.M., Ismail, N. H., & Sahri, M. M. (2017). Palm oil and palm kernel oil: Versatile ingredients for food applications. Journal of Oil Palm Research, 29(4), 487–511. https://doi.org/10.21894/jopr.2017.00014
Egwuma, H., Shamsudin, M. N., Mohamed, Z., Kamarulzaman, N. H., & Wong, K. K. S. (2016). An econometric analysis of the determinants of demand for palm oil in Nigeria. International Journal Agriculture Sciences and Veterinary Medicine, 4(2), 1–12.
Elam, T. E., & Uko, E. (1977). Palm oil and the world fats and oils economy. Illinois Agricultural Economics, 17(2), 17–21. https://doi.org/10.2307/1348956
Gautam, T. K., & Paudel, K. P. (2018). Estimating sectoral demands for electricity using the pooled mean group method. Applied Energy, 231, 54–67. https://doi.org/10.1016/j.apenergy.2018.09.023
Ghazali, R., Yusof, M., & Ahmad, S. (2007). Non-food applications of palm-based products: Market opportunities and environmental benefits. Palm Oil Development, 44, 8–14.
Gould, B. W. (1997). Consumer demand for butter, margarine and blends: The role of purchase and household characteristics. Canadian Journal of Agricultural Economics/Revue canadienne d’agroeconomie, 45(3), 251–266. https://doi.org/10.1111/j.1744-7976.1997.tb00207.x
Hameed, A. A. A., Arshad, F. M., Shamsudin, M. N., & Yusof, Z. (2007). The palm oil import demand in middle east and north african (MENA) countries. Journal of International Food & Agribusiness Marketing, 19(2–3), 143–169. https://doi.org/10.1300/J047v19n02_08
Hameed, A. A. A., & Arshad, F. M. (2012). An empirical analysis of the import demand for palm oil in the five leading importing countries. International Review of Business Research Papers, 8(7), 94–103.
Hameed, A. A. A., Arshad, F. M., & Alias, E. F. (2016). Assessing dynamics of palm oil import demand: The case of six Asian countries. Journal of Food Products Marketing, 22(8), 949–966. https://doi.org/10.1080/10454446.2015.1121424
Hariri, N. M., Ismail, N. W., & Kamal, S. N. M. (2020). The effect of exchange rate on palm oil exports between Malaysia and its trading partners. Oil Palm Industry Economic Journal, 20(2), 1–8.
Hassan, N. A. M., Mazlan, N. S., Kamil, N. N., Salleh, K. M., & Chioma, O. Q. (2018). Import demand for Malaysian palm-based oleochemical in the Netherland. International Journal of Supply Chain Management, 7(4), 216–222.
Hassan, N. A. M., Zakaria, K., Salleh, K. M., & Ahmed, S. M. (2023). An empirical analysis of Malaysian palm oil export to world major palm oil importing countries. Operations Research and Decisions, 33(1), 61–73. https://doi.org/10.37190/ord230105
Hassim, N. A. M., & Dian, L. N. H. M. (2017). Usage of palm oil, palm kernel oil and their fractions as confectionery fats. Journal of Oil Palm Research, 29(3), 301–310. https://doi.org/10.21894/jopr.2017.2903.01
Hinds, M. J., Chinnan, M. S., & Beuchat, L. R. (1994). Unhydrogenated palm oil as a stabilizer for peanut butter. Journal of Food Science, 59(4), 816–820. https://doi.org/10.1111/j.1365-2621.1994.tb08135.x
Huffman, S. K., Jensen, H. H., & Tegene, A. (2010). Consumer demand for cholesterol- lowering enhanced margarine products. Acta Agriculturae Scandinavica, Section C — Food Economics, 7(1), 1–10. https://doi.org/10.1080/16507541.2010.531189
Idris, N. A., & Sahri, M. M. (2007). Utilization of palm oil and palm products in shortenings and margarines. European Journal of Lipid Science and Technology, 109(4), 422–432. https://doi.org/10.1002/ejlt.200600232
Jamilah, J., Zahara, H., Kembaren, E. T., Budi, S., & Nurmala, N. (2022). Market share analysis and export performance of Indonesian crude palm oil in the EU market. International Journal of Energy Economics and Policy, 12(2), 218–225. https://doi.org/10.32479/ijeep.12690
Jazuli, N. A., & Kamu, A. (2019). Factors affecting the export demand of Malaysian palm oil. Transactions on Science and Technology , 6(2–2), 89–99.
Jensen, K. L., & Bevins, S. (1991). The demand for butter, margarine, and oils: A nonparametric test for evidence of structural change. Journal of Agricultural and Applied Economics, 23(2), 59–64. https://doi.org/10.1017/S0081305200018173
Kamil, N., Balu, N., & Ismail, A. (2018). Managing exchange rate risk: Practices of Malaysian exporters of palm products. Oil Palm Industry Economic Journal, 18(1), 16–24.
Kushairi, A., & Parveez, G. K. A. (2017). Chapter 8. Decade: 1980–1989. In A. K. Din & A. P. G. Kadir (Eds.), The palm oil saga (pp. 84–117). Malaysian Palm Oil Board.
Lestari, D., & Oktavilia, S. (2020). Analysis of palm oil price in Southeast Asia. AFEBI Economic and Finance Review, 5(2), 63–78. https://doi.org/10.47312/aefr.v5i02.494
Lugo Arias, E. R., de la Puente Pacheco, M. A., & Lugo Arias, J. (2020). An examination of palm oil export competitiveness through price-nominal exchange rate. The International Trade Journal, 34(5), 495–509. https://doi.org/10.1080/08853908.2020.1766604
Maddala, G. S., & Wu, S. (1999). A comparative study of unit root tests with panel data and a new simple test. Oxford Bulletin of Economics and Statistics, 61(S1), 631–652. https://doi.org/10.1111/1468-0084.0610s1631
Mitic, P., Ivanovik, O. M., & Zdravkovic, A. (2017). A cointegration analysis of real GDP and CO2 emissions in transitional countries. Sustainability, 9(4), 568. https://doi.org/10.3390/su9040568
MPOB. (2008). Malaysian oil palm statistics 2007 (27th ed.)
Malaysian Palm Oil Board. MPOB. (2009). Malaysian oil palm statistics 2008. (28th ed.)
Malaysian Palm Oil Board. MPOB. (2011). Malaysian oil palm statistics 2010. (30th ed.)
Malaysian Palm Oil Board. MPOB. (2013). Malaysian oil palm statistics 2012. (32th ed.)
Malaysian Palm Oil Board. MPOB. (2015). Malaysian oil palm statistics 2014. (34th ed.)
Malaysian Palm Oil Board. MPOB. (2017). Malaysian oil palm statistics 2016. (36th ed.)
Malaysian Palm Oil Board. MPOB. (2019). Malaysian oil palm statistics 2018. (38th ed.)
Malaysian Palm Oil Board. MPOB. (2020). Malaysian oil palm statistics 2019. (39th ed.)
Malaysian Palm Oil Board. MPOB. (2021). Malaysian oil palm statistics 2020. (40th ed.)
Malaysian Palm Oil Board. Morris, D. H., Vaisey-Genser, M. (2003). MARGARINE | Dietary Importance. In B. Caballero, P. Finglas, & F. Toldra (Eds.), Encyclopedia of food sciences and nutrition (2nd ed., pp. 3719–3725). Elsevier.
Naik, B., & Kumar, V. (2014). Cocoa butter and its alternatives a review. Journal of Bioresource Engineering and Technology, 2, 1–11.
Nordin, A. B. A., Shariff, F. M., Balu, N. & Idris, N. A. N. (2012). Supply and demand performance for the oils and fats industry in Malaysia. Oil Palm Industry Economic Journal, 12(2), 14–21.
Oil World. (2021). Oil World Annual 2021, oilseed. ISTA Mielke GmbH, Germany.
Omosehin, O., & Osabuohien, E. (2022). Exchange rate variability and palm oil export in West Africa: Evidence from Nigeria. In Socioeconomic Shocks and Africa’s Development Agenda (pp. 41–53). Routledge. https://doi.org/10.4324/9781003208358-5
Othman, J., & Alias, M. H. (2000). Examining price responsiveness in US and EU import demand for Malaysian palm oil. Journal of International Food & Agribusiness Marketing, 11(2), 83–96. https://doi.org/10.1300/J047v11n02_05
Parveez, G. K. A., Tarmizi, A. H. A., Sundram, S., Loh, S. K., Ong-Abdullah, M., Palam, K. D. P., Salleh, Km. M., Ishak, S. M., & Idris, Z. (2021). Oil palm economic performance in Malaysia and R&D progress in 2020. Journal of Oil Palm Research, 33(2), 181–124. https://doi.org/10.21894/jopr.2021.0026
Pedroni, P. (1996). Fully modified OLS for heterogenous cointegrated panels. In B. H. Baltagi, T. B. Fomby, & R. Carter Hill (Eds.), Nonstationary panels, panel cointegration, and dynamic panelsand (vol. 15, pp. 93–130). Emerald Group Publishing.
Pedroni, P. (1999). Critical values for cointegration test in heterogenous panels with multiple regression. Oxford Bulletin Economic Statistic, 61(1), 653–670. https://doi.org/10.1111/1468-0084.0610s1653
Pedroni, P. (2000). Fully modified OLS for heterogenous cointegrated panels. Advances in Econometrics, 15, 93–130. https://doi.org/10.1016/S0731-9053(00)15004-2
Pedroni, P. (2001). Purchasing power parity tests in cointagrated panels. The Review of Economics and Statistics, 83(4), 727–731. https://doi.org/10.1162/003465301753237803
Pedroni, P. (2004). Panel cointegration: Asymptotic and finite sample properties of pooled time series tests with and application to the PPP hypothesis. Economic Theory, 20(3), 597–625. https://doi.org/10.1017/S0266466604203073
Peng, B., Song, H., Crouch, G. I., & Witt, S. F. (2015). A meta-analysis of international tourism demand elasticities. Journal of Travel Research, 54(5), 611–633. https://doi.org/10.1177/0047287514528283
Persyn, D., & Westerlund, J. (2008). Error correction model based cointegration test for panel data. The Stata Journal, 8(2), 232–241. https://doi.org/10.1177/1536867X0800800205
Pesaran M. H. (2007). A simple panel unit root test in the presence of cross-section dependence. Journal of Applied Econometrics, 22(2), 265–312. https://doi.org/10.1002/jae.951
Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289–326. https://doi.org/10.1002/jae.616
Sánchez-Muniz, F. J., & Cuesta, C. (2003). Sunflower oil. In B. Caballero & C. Cuesta Encyclopedia of Food Sciences and Nutrition (2nd ed., pp. 5672–5680). Elsevier. https://doi.org/10.1016/B0-12-227055-X/01351-1
Seng, K. W. K., & Ahmad, M. Y. (2017). Factors influencing malaysian palm oil export demand in long-run and short run. International Journal of Business and Management, 1(2), 204–210.
Shariff, F., Rahman, A. K. A. & Amiruddin, N. (2006). The elasticity of foreign demand for Malaysian palm oil. Oil Palm Industry Economic Journal, 6(2), 1–6.
Shamsudin, M. N., Mohamed, Z., & Arshad, F. M. (1994). Selected factors affecting palm oil price. Malaysian Journal of Agriculture Economics, 5, 20–29.
Soleymani, A., & Chua, S. (2013). Effect of exchange rate volatility on industry trade flows between Malaysia and China. The Journal International Trade and Economic Development, 23(5), 626–655. https://doi.org/10.1080/09638199.2013.803146
Talib, B. A., & Darawi, Z. (2002). An economic analysis of the Malaysian palm oil market. Oil Palm Industry Economic Journal, 2(1), 19–27.
Talib, B. A., Jani, M. F. M., Mamat, M. N., & Zakaria, R. (2007). Impact assessment of liberalizing trade on Malaysian crude palm oil. Oil Palm Industry Economic Journal, 7(1), 9–17.
Tandra, H., Suroso, A. I., Syaukat, Y., & Najib, M. (2022a). Palm oil import demand in North America countries. Jurnal Manajemen & Agribisnis, 19(3), 379–379. https://doi.org/10.17358/jma.19.3.379
Tandra, H., Suroso, A. I., Syaukat, Y., & Najib, M. (2022b). The determinants of competitiveness in global palm oil trade. Economies, 10(6), 132. https://doi.org/10.3390/economies10060132
Tety, E., Hutabarat, S., & Nofionna, A. (2009). The factors influencing on consumption of palm cooking oil in Indonesia. Economic Journal of Emerging Markets, 137–146.
Warsito, T. (2020). The economic determinant factors of Indonesia crude palm oil exports to India. Jurnal Ekuivalensi, 6(2), 148–164.
Westerlund, J. (2007). Testing for error correction in panel data. Oxford Bulletin of Economic and Statistic, 69(6), 709–748. https://doi.org/10.1111/j.1468-0084.2007.00477.x
Yanikkaya, H. Kaya, H., & Kocturk, O. M. (2013). The effect of real exchange rates and their volatilities on the selected agricultural commodity exports: A case study on Turkey, 1971–2010. Agricultural Economics-Czech, 59(5), 235–245. https://doi.org/10.17221/122/2012-AGRICECON
Zakaria, K., Kunchu, J. A. B., Salleh, K. M., Nambiappan, B., Hassan, A. H., & Azam, A. H. M. (2019). Demand for palm oil in the Balkans using autoregressive distributed lag (ARDL). Jurnal Ekonomi Malaysia, 53(1), 145–152. https://doi.org/10.17576/JEM-2019-5301-12
Zakaria, K., Balu, N., Baharim, N. M., & Rapiee, N. M. (2018). Demand for palm oil in Turkey. Oil Palm Industry Economic Journal, 18(1), 9–15.
Zakaria, K., Salleh, K. M. & Balu, N. (2017). The effect of soyabean oil price changes on palm oil demand in China. Oil Palm Industry Economic Journal, 17(1), 1–6.
Zuikarnain, S.Z. (2008). Factors affecting the demand of Malaysian palm oil. [Unpublished Student Project]. Universiti Teknologi Mara.