An application of gravity models to freight data in Malaysia

Abstract

Background: Freight transport services and international trade are among important factors in pushing economies’ transition forward. Malaysia’s strategic location along key maritime routes positions it as a vital hub for international shipping and logistics, facilitating efficient trade between Asia, Europe and the Middle East.Objectives: Despite extensive global studies on freight and trade, little specific research exists from Malaysia’s perspective. Thus, this study aims to evaluate how factors such as economic size of trade partners and distance impact Malaysia’s freight transport in international trade, using the gravity model, a tool for analysing bilateral trade flows.Method: Three types of gravity models are employed to assess the impact of economic scale, infrastructure and demographic factors on freight transport. Then the validity of these relationships is further evaluated.Results: The random effect model (REM) is found to be the best fitted model. The study identifies infrastructure and economic scale as pivotal factors influencing both freight export and import. The result showed the volume of container handled in ports is the main determinant in both export and import of freight, whereas air freight has significant impact to boost the export of freight. Distance is statistically significant, however, with marginally small impact.Conclusion: Based on the analysis, we can conclude that the robust port infrastructure and efficient logistical facilities are important in reducing freight costs and enhancing Malaysia’s international trade competitiveness.Contribution: This study mainly contributes on providing empirical evidence and in-depth insight on Malaysia freight transport services through the application of gravity models.