Export Competitiveness of Malaysian Electrical and Electronic (E&E) Product



0 Comment

Abstract Malaysia is among the world’s top 20 trading nations. This is due to the structural change in the Malaysian economy that turned the country from an exporter of primary commodities into an exporter of high value-added manufactured products. In Malaysia, E&E forged a strong foundation over the last 3 decades, which provides new opportunities for such investments.

This study analyses the structural effect on export competitiveness of Malaysian E&E products focusing on semiconductor (SITC 776), Telecommunication product (SITC 764), Electrical machinery, Apparatus, Part and necessary (SITC 772), Printed Circuit Board (SITC 759) and Disk drives, printers and PCs (SITC 752). Further, the study uses the Constant Market Share (CMS) and Revealed Comparative Advantage (RCA) framework to analyses the extent of the export competition between Malaysia and other competitor economies.

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!


order now

Overall, CMS result shows that, in the first sub-period (1990-1994), Malaysia E&E export was competitive in the four markets studied, namely USA, Singapore, Japan and Hong Kong. However, in second and third period, CMS result shows that Malaysia E&E export was increased but not due to market competitiveness but due to the structural effect – that is due to an increased in the world import. In terms of export performance ratio, RCA results show that, Malaysia E&E product was only highly perform in the US market for almost all SITC.

Indonesia has concurred the Singapore market and Hong Kong was concurred by China. However, Malaysia E&E export to the world generally has comparative advantage over other competitors namely Indonesia, Thailand and China. The study also revealed that Malaysia has higher export capacity to other countries besides USA, Singapore, Japan and Hong Kong. Therefore the argument saying that China will intensify the competitiveness of Malaysian E&E market is questionable since the study cannot reveal the comparative advantage hold by China.

The study found that China was only dominated in the Hong Kong Market for almost all SITC studied. 1. 0 Introduction Issue on Malaysia’s competitiveness has been widely debated and researched. The crisis that started a few years ago in the Asian NICs (Hong Kong, Singapore, South Korea, Taiwan, Malaysia, Thailand, Philippines, Indonesia), with the implementation of ASEAN Free Trade Area (AFTA) and the opening policy of China has an important impact on the Malaysia’s economy.

The past two decades have seen substantially changing patterns of export share and export merchandise among Malaysia as exporters of primary commodities, labor-intensive goods as well as technology or capital-intensive manufacturers to the world market. As a response to previous studies, this paper 2 assessed the Malaysian export competitiveness of Electrical and Electronic (E&E) product vis-a vis the Indonesia, Thailand and China with major exporter (US, Singapore, Japan and Hong Kong) using CMS and RCA indices during a longer time period of 1990 to 2004 (15 years).

This study also aspires to link qualitative explanation to the quantitative results, and therefore suggests that competitiveness is also based on other factors. This study analyses the structural effect on export competitiveness of Malaysian E&E products focusing on semiconductor (SITC 776), Telecommunication product (SITC 764), Electronic Switch Relay and Circuit (SITC 772), Printed Circuit Board (SITC 759) and Disk drives, printers and PCs (SITC 752).

Further, the study uses the Constant Market Share (CMS) and Revealed Comparative Advantage (RCA) framework to analyses the extent of the export competition between Malaysia and other world economies. It was argued that the emergence of other low cost producers such as China and ASEAN Free Trade Area (AFTA) will intensify the competitiveness of Malaysian E&E market. Many studies have assessed the competitiveness of Malaysian commodity exports, namely Palm Oil (Fatimah and Roslan, 1988, Mohamad, Fatimah, Abdul Aziz, 1992), Cocoa and rubber (Md Nasir, Mohd Ghazali, Othman, 1993) and all Malaysian manufacturing product (Amir,2000).

Similar to the current study, Fatimah and Alias (1997) was also focus on the export performance of selected E&E products but the current study, extend the research area by comparing the performance of Malaysia E&E product and their competitiveness with three other countries namely Indonesia, Thailand and China from year 1990 to year 2004. In addition, these studies have focused on identifying measures and determinants of Malaysian competitiveness in specific E&E sector using CMS approach and RCA approach while Fatimah and Alias (1997) used Shift-share analysis approach.

China’s robust economic growth and strong gravitational pull of foreign direct investments was argued to have serious threats to ASEAN countries, particularly those which are highly dependent on the E&E sector for their export revenue. Does this then imply doom and gloom for Malaysia? To answer this question, the current study will investigate the performance of Malaysian E&E exports and their competitiveness as compared to other competitors. Therefore, the objective of the study is: 1. To analyze the market share of Malaysia E&E exports using constant Market Share (CMS) approach in order to assess its competitiveness in the world market. . To identify the Malaysian competitive position in E&E exports to the major importing countries from 1990-2004. 3. To examine whether the decline in Malaysia E&E export performance over 1990 –2004 is associated with the decline in Malaysian Competitiveness and the emergence of China. 3 2. 0 Analysis Method There are numerous methods to analyze the determinants of manufactured export growth and export competitiveness. This research used a decomposition method called Constant Market Share (CMS) analysis and Revealed Competitive Advantage (RCA).

The method used is similar to the previous studies of the export competitiveness either primary export commodities-palm oil, rubber, cocoa and pepper or manufactured products such as E&E in the global market. 2. 1 Constant Market Share (CMS) CMS analysis will be used in the present study in order to examine Malaysia’s E&E export growth and competitiveness attributable to ‘world trade effect’, ‘commodity composition effect’, ‘market distribution effect’ and ‘competitiveness effect’. ‘World trade effect’ indicates that part of Malaysia’s E&E export growth is attributable to the general increases in major importers in this study (i. . USA, Japan, Singapore and Hong Kong). The magnitude of this effect shows the potential increase of Malaysia’s exports if it were able to maintain its share of the major importers. Commodity composition effect shows whether Malaysia has concentrated on the export of E&E for which markets have been expanding rapidly, or on E&E for which markets have expanding less rapidly. This effect reflects the factor endowment of the export country (for instance, Malaysia endowed with technology and labor intensive) and the income and price elasticity of demand for the products in which that country specializes.

Market distribution effect indicates Malaysia ability to concentrate on relatively growing countries. The change in exports due to market distribution depends on trade policies and income growth in foreign countries. Competitive effect is defined by the residual term of the CMS model. As a residual it picks up everything not explained by the first three effects. However, this term is taken to indicate the improvement or the deterioration in the competitiveness of exports depending on whether the term has a positive or negative sign.

It is usually assumed that this effect is independent of other effects discussed above and it largely reflects the role of domestic factors of the exporting country. The method basically was built from the assumption that a country’s exports may succeed (fail) to grow as rapidly as the world average for three reasons: (1) exports may concentrate in commodities or manufactured product in which the demand is growing relatively fast (slowly); (2) exports may be going to relatively (stagnant) regions; (3) the country in question may have been able (unable) to compete effectively with other sources of supply.

Another assumption of the method is that a country’s export share in the world market should remain unchanged over time. The differences between the export growth, implied by the constant-share norm, and the actual export growth are assumed to be caused by competitiveness, commodity-composition and marketdistribution effect as mentioned earlier.

x

Hi!
I'm Adrienne!

Would you like to get a custom essay? How about receiving a customized one?

Check it out