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LIST OF ARTICLES

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Article Info

Vol 16 No.2 (2016) p19-27
Total Factor Productivity: How Productive is the Palm Oil Milling Sector in Malaysia?
Norhidayu, A*; Azman, H**; Balu, N* and Azman, I*

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Abstract


Total Factor Productivity: How Productive is the Palm Oil Milling Sector in Malaysia?

This study investigates the total factor productivity (TFP) growth for Malaysian palm oil mills over the period 2010 – 2014, using the stochastic frontier analysis (SFA) model. TFP focuses on three components, namely, technical efficiency (TE), technical progress (TP), and scale components (SC). The first step in estimating TFP comprises specification and estimation of SFA, followed by tests for specification of the stochastic production functions. Secondly, it involves the selected specification of a regression model used to predict the TE effects. The empirical results show that productivity growth was driven mainly by TE, followed by TP. However, the change in SC had a small effect on productivity growth. Overall, results of the study suggest that there is an opportunity to improve productivity growth in the palm oil milling sector in Malaysia, for instance, by improving working conditions, upgrading the capacity of the mills, and providing incentives and rewards to the workers

Keyword(s): total factor productivity, Malaysian palm oil mills, technical progress, technical efficiency, scale components

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Article Info

Vol 16 No.2 (2016) p9-18
The Push and Pull Factors in Business: A Study on Independent Oil Palm Smallholders in Selected States in Malaysia
Azhar Ahmad*; Ahmad Raflis Che Omar*; Lokhman Hakim Osman*; Norazlan Alias*; Mara Ridhuan Che Abdul Rahman*; Suraiya Ishak** and Mohd Abdullah Jusoh‡

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Abstract


The Push and Pull Factors in Business: A Study on Independent Oil Palm Smallholders in Selected States in Malaysia

The oil palm industry faces market volatility and economic oppression. This has seriously affected the income of oil palm smallholders. One way to increase their income is to get them involved in business. However, the involvement of oil palm smallholders in business is not influenced by economic factors alone, but also by push and pull factors. Therefore, a study was conducted on 178 independent smallholders who are currently doing business in Johor, Selangor, Perak and Sarawak, Malaysia. Analyses of the data were done by using the Method Structural Equation Model (SEM) with the SmartPLS software. The study found that overall the respondents engaged in the business because of several push and pull factors. The respondents expressed that ‘risk/challenges management’ was the most important push factor in business. This was followed by ‘leadership skills’, ‘business opportunity’, ‘family encouragement’, ‘knowledge and skills’ and ‘income level’. An important pull factor for the respondents was the ‘opportunity to attend training’, followed by ‘infrastructure facilities’ and ‘finance’.

Keyword(s): independent oil palm smallholders, business involvement, push and pull factors in business, entrepreneurship

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Article Info

Vol 16 No.2 (2016) p1-8
Consumer Perceptions on the Implementation of Biodiesel in the Transport Sector: A Case in the Central Region of Peninsular Malaysia
Kamalrudin Mohammed Salleh*; Ayatollah Khomeini Ab Rahman*; Yung Chee Liang* and Balu, N*

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Abstract


Consumer Perceptions on the Implementation of Biodiesel in the Transport Sector: A Case in the Central Region of Peninsular Malaysia

This study analysed the level of awareness of diesel and petrol vehicle users in the central region of Peninsular Malaysia on biodiesel and the currently running biodiesel programme for the transport sector, i.e. B7. In addition, the study also examines consumer perception on the implementation of biodiesel use in the transport sector. The results suggest that the level of awareness on biodiesel and the biodiesel programne was very low. Consequently, many of the respondents were neutral in expecting any advantage from B10 on vehicle performance.

Keyword(s): central region, B7, B10, transport sector, biodiesel.

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Article Info

Vol 16 No.1 (2016) p31-37
Examining the Long-term Relationships between the Prices of Palm Oil and Soyabean Oil, Palm Oil Production and Export: Cointegration and Causality
Ain Hassan and N Balu

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Abstract


Examining the Long-term Relationships between the Prices of Palm Oil and Soyabean Oil, Palm Oil Production and Export: Cointegration and Causality

The main objective of the article is to investigate whether there are long-run and short-run relationships among natural log of the prices of palm oil price (LPOP) and soyabean oil (LSOP), oil palm production (LPROD) and total export (LEXP). These time series data are annual data from 1988 to 2015. Augmented-Dickey Fuller (ADF) stationary test results show that the time series for LPOP, LSOP, LEXP, and LPROD are stationary at first difference. According to the Engle and Granger method, there is a cointegration relationship between the time series data. Further, the Johansen method shows at least two cointegration vectors between the variables. The Vector Error Correction Model (VECM) was used to test these two cointegration vectors for long-run cointegration relationships. The empirical evidence obtained from the study shows there is no longrun equilibrium between the variables. This is proven by the nonsignificant and positive values of the Error Correction Term (ECT) parameter. In other words, a change in oil palm price in the long-term is not influenced entirely by soyabean oil price. It may be affected by other important factors such as palm oil supply and extreme weather phenomena. However, the Granger short-run relationship test found that there is a one-way Granger causality relationship from LPROD to LPOP, and from LEXP to LPOP. Thus, it is shown that total export and production of palm oil are expected to influence palm oil price in the short-run.

Keyword(s): natural log of palm oil price, soyabean oil price, oil palm total export, oil palm total production

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Article Info

Vol 16 No.1 (2016) p18-30
Climate Variability and its Impact on the Palm Oil Industry
Nur Nadia Kamil and Syuhadatul Fatimah Omar

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Abstract


Climate Variability and its Impact on the Palm Oil Industry

Located between the Indian and Pacific Oceans, Malaysia is exposed to changes in climate variability, namely, the El Niño and La Niña phenomena. These two complex weather patterns result from variations in the ocean temperatures of the equatorial Pacific. The occurrence of the so-called El Niño-Southern Oscillation (ENSO) event has a notable impact on the amount of rainfall in Malaysia. However, the magnitude of the impact depends on the intensity of the event. Additionally, the occurrence of the ENSO event also influences the production of crude palm oil (CPO) as rainfall is one of the key requirements for oil palm cultivation. This article describes the development of the ENSO event and analyses its impact on the palm oil industry in Malaysia.

Keyword(s): El Niño, La Niña, ENSO, FFB yield, crude palm oil

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Article Info

Vol 16 No.1 (2016) p8-17
Sustainability as a Success Factor for Palm Oil Producers Supplying the European Vegetable Oil Markets
Emanuele Novelli

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Abstract


Sustainability as a Success Factor for Palm Oil Producers Supplying the European Vegetable Oil Markets

In Europe, due to their voluntary commitments, the leading businesses which are active in the food, feed, detergent and chemical sectors are moving towards procurement of sustainable and deforestation-free vegetable oils for their supply chains. The amended European Union (EU) biofuel legislation also requires them to comply with specific sustainability criteria for vegetable oils in the biofuels market. Both growing requirements of private businesses and EU biofuel legislation highlight the importance of sustainability certification for palm oil suppliers. Moreover, for those markets where a substitution of palm oil is unlikely due to technological and cost reasons, the implementation of the EU Regulation 1169/11 on the Provision of Food Information to Consumers, further prompts the procurement of sustainable certified palm oil. Suppliers of sustainable palm oil could profit from these favourable circumstances only if their sustainability certification were granted through reliable and credible sustainability standards. Through the use of advanced tools granting deforestation-free supply chains, such as the Global Risk Assessment Services (GRAS), and the adoption of requirements even more stringent than the ones demanded by the European biofuel policy, the International Sustainability and Carbon Certification scheme (ISCC) emerges, among others, as a highly reputable scheme. The objectives of this article are to describe the current European regulatory framework, the impacts deriving from it and the reasons why sustainability certification, if supported by advanced tools and released by highly credible standards such as ISCC, will be the key to access the European energy, food, feed, detergent and chemical markets.

Keyword(s): sustainability, palm oil, ISCC, GRAS, deforestation-free supply chain, European Union.

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Article Info

Vol 16 No.1 (2016) p1-7
Revealed Comparative Advantage and Competitiveness of Malaysian Palm Oil Exports against Indonesia in Five Major Markets
Kamalrudin Mohamed Salleh; Ramli Abdullah; M Ayatollah Khomeini Ab Rahman; N Balu and Ali Zulhusni Ali Nordin

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Abstract


Revealed Comparative Advantage and Competitiveness of Malaysian Palm Oil Exports against Indonesia in Five Major Markets

This study analysed the extent to which Malaysia had a comparative advantage over Indonesia in crude palm oil (CPO) and processed palm oil (PPO) exports to five major markets, namely, China, India, the European Union (EU), Pakistan and the USA. In addition, this study examined how Malaysia’s competitiveness and comparative advantage changed over the period 1999-2014 in major markets by adopting a widely used Revealed Comparative Advantage (RCA) index. The results suggest that Malaysia retained its comparative advantage in exporting CPO to Pakistan from 2009 to 2014 and started to gain comparative advantage in exporting CPO to India in 2014. Meanwhile, for PPO market, Malaysia sustained its comparative advantage in the USA along the study period, but gradually reduced comparative advantage onset 2012. In Pakistan, the study found that Malaysia started to lose comparative advantage for PPO to Indonesia in 2012 and 2014.

Keyword(s): trade, revealed comparative advantage, export competitiveness, palm oil, CPO, PPO, Malaysia, Indonesia, China, India, EU, Pakistan, USA.

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Article Info

Vol 15 No.2 (2015) p21-27
Bulking Installations in Malaysia: Their Issues and Challenges Relating to the Palm Oil Industry
Ali Zulhusni Ali Nordin* and Aimi Shahirah Mohd Fadzil*

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Abstract


Bulking Installations in Malaysia: Their Issues and Challenges Relating to the Palm Oil Industry

Bulking installations are facilities for the storage of crude and refined palm oils in port tanks until they are ready to be piped directly into the tankers which berth at nearby jetties in the port. This study covers six regions, namely, the southern region, central region, northern region, east coast region as well as Sabah and Sarawak. The purpose of the article is to provide information regarding the export trends of bulking installation facilities in Malaysia. The method used in the study is faceto-face interviews and a survey to determine the issues and challenges faced by the various bulking installation facilities. The major issues and challenges faced during the handling of transshipment cargo were determined from all the interviews and field visits undertaken, especially in the northern region. It was found that different issues and challenges were faced by the operators of bulking installation facilities in the different regions.

Keyword(s): bulking installation facilities, palm oil logistics, palm oil

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Article Info

Vol 15 No.2 (2015) p11-20
Impact of Tax Imposition on Cost Competitiveness of the Malaysian Palm Oil Industry
Honey Irmawati Hamzah*; Azman Ismail*; Ramli Abdullah*; Kamaruddin Idris*; Kamalrudin Mohd Saleh*; Embong Abd Ghani**; Zaiton Muhammad**; Hartini Mohamed**; Francis Dungkit‡ and Mohd Hazlan Hamzah‡

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Abstract


Impact of Tax Imposition on Cost Competitiveness of the Malaysian Palm Oil Industry

The study aims at examining the impact of tax imposition on the cost competitiveness of the Malaysian palm oil industry, using gross profit margin analysis. Secondary data were used in this study and gross margin analysis was undertaken to identify the relationship between cost and revenue for each commodity, namely, oil palm, rubber and cocoa. Gross profit (GP) is the difference between total revenue (TR) and total operating cost (total cost of production). To calculate gross profit margin (GPM), GP is multiplied by 100 and divided by TR (GP/
TR x 100). GPM with and without tax were calculated and compared for each commodity. In the calculation of GPM, the average price in 2013 and the average price over seven years (2007-2013) for the three commodities were used. Based on the average price in 2013, it was found that GPM with tax for rubber was the highest at 48.93% compared with oil palm (45.91%) and cocoa (7.79%). For oil palm, if the crude palm oil (CPO) price were less than or equal to RM 2500/t, an increase in CPO price will increase GPM, and the difference between GPM with and without tax becomes lower. However, if CPO price were greater than RM 2500/t (when the windfall profit levy will be imposed on oil palm plantations), an increase in CPO price will increase GPM, but the difference between GPM with and without tax becomes higher. This means that the windfall profit levy gives a higher impact to the oil palm plantation than cess and sales tax.

Keyword(s): cost competitiveness, gross profit margin analysis, oil palm plantation, tax

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Article Info

Vol 15 No.2 (2015) p1-10
Labour Productivity in the Malaysian Oil Palm Plantation Sector
Azman Ismail*; Siti Mashani Ahmad* and Zuraihan Sharudin*

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Abstract


Labour Productivity in the Malaysian Oil Palm Plantation Sector

This study attempts to measure oil palm labour productivity based on land-labour ratio by job category, region and estate size; and based on output-labour ratio by job category and region. It culminates by suggesting action plans for improving labour productivity and reducing labour requirement. Primary data collected through an online survey were used in the study, while the calculation of labour productivity was done using Microsoft Office Excel and SPSS. From the study, it was found that the ideal land-labour ratio for oil palm plantations in Malaysia is 10:1. Currently, the ratio set by the government for oil palm estates hiring foreign workers is 8:1 (i.e. 8 ha to one worker). To reduce the number of foreign workers in oil palm plantations, the current ratio needs to be increased from 8:1 to 10:1. To increase labour productivity, it is suggested that estate owners practise mechanisation, especially for harvesting (when palm height is less than 8 m) and in-field collection of fresh fruit bunches (FFB). By using a motorised cutter for harvesting, productivity per worker can be increased from 0.99 t per day to 2.24 t per day. For in-field collection, a mechanised FFB transport system (MFTS) can reduce the required number of workers and lower the cost of transportation as well as cost of production.

Keyword(s): labour, productivity, land-labour ratio, output-labour ratio, mechanisation.

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No part of this publication may be reproduced, stored in a retrieval system,
in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of the publisher.

This online publication is electronically compiled by Palm Information Centre, Malaysian Palm Oil Board (MPOB)
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