On the duration of trade competitiveness: the case of the Malaysian palm-based oleochemical industry

The Covid-19 pandemic has led to a surge in demand for oleochemicals, due to the increased demand for cleaning and disinfectants products. Since Malaysia is one of the world's largest palm oil producers, the demand for oleochemicals will be a key driver supporting the Malaysian palm oil industry. Palm oil is used in millions of products, from foods to soaps, personal care products cosmetics, and biodiesel feedstock. Currently, palm oil related exports are still highly dependent on the upstream segments such as crude palm oil (CPO), with a total contribution to the overall industry of 81.4%. In comparison, that downstream contribution is still low at about 18.6%. It is thus important to expand the production and export of high-value-added palm oil downstream products, including oleochemicals products. Therefore, this study aims to assess Malaysia's relative competi-tiveness in oleochemical products as compared to the main oil and fat producing countries -namely Indonesia, China, the European Union (EU) member states, the United States and Argentina. We examine the trade competitiveness by using the Revealed Trade Advantage (RTA) developed by Vollrath (1991) and utilizing yearly data spanning from 1999 until 2019. We also analyze the duration of comparative advantage using Kaplan-Meier Analysis. The results indicate that Malaysia has higher and more stable trade advantages relative to other main producers of oleochemical products.

Automated summary

The surge in demand for oleochemicals during the Covid-19 pandemic presents an opportunity for the Malaysian palm oil industry, as Malaysia is one of the largest producers of palm oil. However, the current export structure is heavily reliant on crude palm oil, and there is a need to expand the production and export of high-value-added downstream palm oil products, including oleochemicals. This study assesses Malaysia's competitiveness in oleochemical products compared to other major oil and fat producing countries, and the results show that Malaysia has a higher and more stable trade advantage in this sector.