COMPARATIVE ADVANTAGE IN

AGRICULTURAL SECTOR :
A case study between Malaysia
and
Thailand in palm oil and paddy
production

PARIMELA DEVI (EGA090056)

SA’DIAH (EGA090058)
SITI ROHAYA (EGA090047)
SANEMKHAN (EGA090042)
Introduction
Malaysia
Thailand
 Rice is regarded as
Rice production
the most important
contributes significant
crop in the food sub-
portion of Thai’s economy.
sector.
Rice
productio Thailand also recorded
 Mid 70s, the area
n 10 million tonnes of rice
under cultivation of
exports in 2008 which
paddy has persistently
remarkably far before
declined and 90% of
the rice consumed other exporting countries.
locally was produced
domestically. 2009, Thailand produced
(Athukorala et al., more than 27 million
tonnes rice and exported
2009)
an amount of 8.5 million
tonnes.
 1980 to 1989 the
production of paddy  Besides, the production
decreased until 1.7
of rice itself consumed
million tonnes
half of the farmable area
(Department of
and labor force in
Statistics Malaysia,
Thailand
2002).
 Malaysia
Introduction
Malaysian
Thailand
experience in
producing, trading
and financing palm Thailand’s recorded
oil is now being as third world
Palm oil
exported to other producer after
production
countries with Indonesia and
favorable conditions Malaysia.
for growing the oil
palm.  Plantation area of
this commodity is
Production of palm 512 000 hectares
oil increased from which successfully
only 1.3 million enable Thailand to
tonnes in 1975, double annual
through 4.1 million production to around
tonnes in 1985 and 6 million tonnes,
7.8 million tonnes in representing an
1995 to 17.7 million annual growth rate of
tonnes in 2008-2009. 9.5 percent
Malaysia Paddy and Rice production
(‘000 tons)
 Palm Oil Production in
Thailand and Malaysia (000
metric tons)
20,000
18,000
16,000
14,000
12,000
10,000 MALAYSIA
8,000 THAILAND
6,000
4,000
2,000
0
2006/07 2007/08 2008/09 2009/2010
 Palm Oil Export in Thailand
and Malaysia (000 metric tons)
Research Statement
The 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?
TSCs of total agricultural products in Malaysia and
Thailand
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.
Literature Review
 Th
M’ Suph
ai:
sia a
: B hna

(iv
ein ch

)R
te art
ma e

&D
(
i)ii

et t al.
xE

al. (2
op

(2 009
02
tr 0

00 )
,2

8)
NU
OAF Paddy
M )
i ’
s
D(: a (ii)
ap
e P rod
tr
m uct
ne
ahT M’s io n
S:i i a :
) Plet
mi
a Th99a
aw D P
( 19 i:Am cher
all G l. ma (19
dn
a (i) t a 7) r ( 1 90,
S F e
2 00 9 96) Athu
e ,
d off ( , an ko r
h
a
m ud d Cox ala et
a :A reh hea a l.
i
Ms ai:Pe
d et a (2009
l. (1 )
Th 998
)
 (iii) Disadvantages of palm oil production
Thai

Choy (2004)
Bandita Yangdee (2003)

(ii) R &D (iv) Contribution to economy

M’sia Thai
(Kajisa et al., 1997) Mbabaali (2000),
Tengku Mohd Ariff (1999) Khun Krisada Chavananand (2009)
Palm Oil

(i) Export (v) Tax and Subsidies

M’sia: Thai
(Pletcher, 1990), (World Bank, 2008)
Gopal (2001)
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.
Conceptual Framework
Tra
d
Exp e:
o
Agr rt and
Comparative
icul Imp advantage in
tur o
al s rt
har agricultural
eo
f GD
P sector
(A case study
between
Malaysia and
Thailand,
production of
paddy and palm
oil)
ol og y: :
Tec
hn u ction
d
pro
R&D ors of
t or es:
Fac and lab polici
t
Land rnmen tax
e d
Gov idies an
s
Sub