Comparative Advantage in Agricultural Products in Malaysia

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INTRODUCTION

Malaysia and Thailand are both members of ASEAN and these countries are agricultural based economy since 1960s. Malaysia and Thailand have tropical climate which is suitable for the plantation of palm oil and paddy in the country. 1.1.1 Rice Production in Malaysia and Thailand In Malaysia, rice is regarded as the most important crop in the food sub-sector. However, the area under cultivation of paddy has persistently declined since the mid 1970s (Athukorala et al., 2009) and 90% of the rice consumed locally was produced domestically. Rice production rose from over 1 million tonnes in 1960 to 1.9 million tonnes in 1979, but starting from year 1980 to 1989 the production of paddy decreased until 1.7 million tonnes. The peak of paddy’s production was from 1995-1999, when production increased over 2 million tonnes (Department of Statistics Malaysia, 2002). Rice production contributes significant portion of Thailand’s economy. Statistically, in 2009, Thailand produced more than 27 million tonnes rice (UN FAO) and exported an amount of 8.5 million tonnes. Thailand also recorded 10 million tonnes of rice exports in 2008 which remarkably far before other exporting countries. Besides, the production of rice itself consumed half of the farmable area and labor force in Thailand 1.

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1.1.2 Palm Oil Production in Malaysia and Thailand Production of palm oil in 2008-2009 was almost 43 million tonnes coming mainly from Indonesia and Malaysia with smaller amounts from Thailand and other more than 20 countries. Production in Malaysia has increased from only 1.3 million tonnes in 1975, through 4.1 million tonnes in 1985 and 7.8 million tonnes in 1995 to 17.7 million tonnes in 2008-2009. Malaysian experience in producing, trading and financing palm oil is now being exported to other countries with favourable conditions for growing the oil palm 2. In palm oil industry, Thailand’s recorded as third world producer after Indonesia and Malaysia. Currently, the

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