The Construction of Market Potential Indicator and Trade Restrictiveness Index For Malaysian Palm Oil Export To The BRI (Belt And Road Initiative) Countries

Research Grant, 2018

Abstract

The Belt and Road Initiative (BRI) is an effort to improve regional cooperation and connectivity on a trans-continental scale. It involves 66 countries including China that account collectively for over 30 percent of global GDP, 62 percent of world population. The initiative aims to strengthen infrastructure, trade, and investment links between countries involved. These initiatives are important for small open economy countries like Malaysia that depend on international trade as one of the tools to drive the country economics growth. However, the impact of BRI on Malaysia is still unclear, especially on palm oil industry. Thus, the purpose of this study is to investigate the impact of BRI on Malaysia palm oil sectors, which is one of the important sectors for Malaysia. We first construct new palm oil market potential indicators for Malaysia palm oil and then construct a trade restrictiveness index to measure the overall external regulations (both tariff and non-tariff barriers) enacted by all BRI countries. Then we will estimate the effect of potential market and trade restrictiveness index on export demand of palm oil using gravity model by controlling the BRI variable proxied by China outward direct investment. This study will also recommend suitable trade policies to enhance competitiveness and productivity of palm oil production and exports. This study generates new framework for evaluating trade restrictiveness of the palm oil sector by taking into account the belt and road initiative’s regional connectivity.

Project Leader

Norlin Khalid (Faculty of Economics and Management, Universiti Kebangsaan Malaysia (UKM), nrlin@ukm.edu.my)