Abstract
A ban on palm oil imports by the European Union has become a problematic issue, especially for palm oil producers’ countries. Oil palm has been widely used in many sub-sectors, and any changes in the production side may affect many sectors that use oil palm as an input factor in their productions. This study explores the chain of the oil palm sector on the other sub-sectors in Malaysia by using a value-added multiplier method and network modeling. The study focuses on the specific oil palm sub-sector and oils and fats sub-sector in the Malaysian economic structure based on the Malaysian Input-Output 2015 Table. Network visualization and all the analyses involving network methods were developed and performed using UCINET and GEPHI software. The value-added multiplier results explained that the net value between output multiplier and import multiplier is vital to depict the real impact of net resources used as an input factor in the oils and fats and oil palm sub-sectors. The high-density value level shows that the Malaysian oil palm sector has high connectivity in the economic system. From the network visualization analysis, the oils and fats sub-sector has a high level of integration with other sectors within the network. Meanwhile, the oil palm sub-sector categorized in the periphery structure group has a low level of integration in the input-output network. This is due to the high value-added demand for oil palm in the oils and fats sub-sector in the manufacturing sector. Overall, most of the sub-sectors in Malaysia are highly interconnected due to the high clustering ratio. Therefore, ensuring sufficient oil palm production is vital for sustainable production of other sub-sectors.
Highlights
World palm oil production is growing rapidly, especially in Southeast Asia whereIndonesia and Malaysia are the primary producers
The value-added multiplier method is used for the input factor’s net value in the oils and fats and oil palm sub-sectors analyzed in this paper
The advantage of using a value-added multiplier is to avoid double counting of both domestic and import factors. It is vital for using the value-added multiplier method to explain the net impact of the flow of input factor of the oil palm industry
Summary
World palm oil production is growing rapidly, especially in Southeast Asia whereIndonesia and Malaysia are the primary producers. World palm oil production is growing rapidly, especially in Southeast Asia where. The oil palm sector is one of the significant contributors to the income of exporting countries. Many would think that the ban would affect mainly the smallholders as they totally depend on the production of oil palm. There are significant other parties which would be greatly affected as the oil palm products are widely used in other economic sectors. The oil palm sector is one of the 124 sectors listed in the Malaysian Input-Output Table in Malaysia. In 2018, the oil palm sector contributed around 2.8% (RM37.71 billion) to the composition of Malaysia’s GDP (Department of Statistic Malaysia 2019). The oil palm sector opened job opportunities up to 400 thousand in 2019, and this number is estimated to increase every year (Bernama 2019)
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