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The Estimated Total Revenue Generated The Estimated Total Revenue Generated For the Country Due to Crude Palm Oil For the Country Due to Crude Palm Oil

Price: An InputPrice: An Input--output Analysis output Analysis

Ahmad Fauzi, P1, Razali, A-K.2, and Rohana, A.R.31Senior Research Officer

3EconomistForest Research Institute Malaysia,

52109 Kepong, Selangor.Tel: +603-62797542

E-mail: fauzi@frim.gov.myAnd

2Senior LecturerUniversiti Teknology Mara (UiTM)

Shah Alam, Selangor

Outline of this paper• Introduction• Objective of the study• Methodology of the study• Results• Conclusions

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Introduction• Palm oil is the most versatile oil. • It can be used in a wide variety of

foodstuffs as well as in non-food products such as oleochemicals (e.g. soap, cosmetics and paint).

• Currently, about 90% of Malaysian palm oil is used for these traditional applications, with less than 1% destined for biodiesel production

• There are 5.65 million hectares of oil palm plantation in Malaysia.

• Expansion of oil palm area mainly through converted from tree crops area for about 1.02 million ha.

• This relatively small area representing about 1.84% of world’s total oilseed area.

• However, Malaysia is the largest vegetable oil and fats producer in the world constitute 25% of world production.

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Source:MPOB, 20007

Area

Source:MPOB, 20007

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Source:MPOB, 20007

Production

Malaysian Crude Palm Oil Price (CPO)

0

500

1000

1500

2000

2500

3000

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

RM

/TO

NN

E

Source:MPOB, 2007

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Malaysian Palm Oil Production (Tonne)

0

2

4

6

8

10

12

14

16

18

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

Mill

ions

Objective of the StudyThe objective of this paper is to study the

economic impact of palm oil production on the Malaysian economy. i) through the total revenue generated to the Malaysian economyii) through the total income created to the Malaysian economyiii) through to the employment created in the context of Malaysian economy

This study used input-output technique in computing the economic impact

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A Brief Overview of Input-output

• An input-output table is the form of a matrix

• There are 4 quadrants in the matrix:- Intermediate- Final Demand- Primary inputs- Primary input to final Demand

Figure 1: Schematic Diagram IO Table

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Descriptions of 92 Commodities in Malaysian Economy 2000

The model to calculate the total economic impact for palm oil production is:

X = (I – A)-1 Y

Where,Y = the palm oil production at various price level

(I – A)-1 = Leontief inverse matrixX = total revenue/income & employment effect

This study used Malaysian IO Table 2000 which is the latest available in Malaysia. There are 92 sectors or industries available for Malaysia.

Methodology of the study

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Backward LinkagesForward Linkages

Backward Linkages

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Forward Linkages

Output multiplierIncome multiplierEmployment multiplier

IO - Multiplier

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Output Multiplier

Income Multiplier

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Employment Multiplier

Senario of the studyThe palm oil price is the main issue which

we are facing at the moment. On this back ground this study will relate palm oil price with total value of production of palm oil. This study used average total production of palm oil for 2007 at various levels of prices.

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The Value of Crude Palm Oil Production at Various Price Level

Result of Analysis

Total Revenue generatedTotal Income generatedTotal Employment created

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i) The total Revenue Generated due to Crude Palm Oil Production at Various Price Level

Total Revenue Generated due to Crude Palm Oil Production at Various Price Level (RM’000)

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ii) The Total Income Created due to Crude Palm Oil Production at Various Price Level

The Total Income Created due to Crude Palm Oil Production at Various Price Level (RM’000)

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ii) The Total Employment Created due to Crude Palm Oil Production at Various Price Level

The Total Employment Created due to Palm Oil Production at Various Price Level

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RESEARCH FINDINGS

ConclusionPalm oil industry has a substantial economic

impact to the Malaysian economy especially in term of total revenue, total income as well as total employment.

The study found that if the average palm oil production of 15.8 million tonne with average price RM1,500 per tonnne, it could generated a total revenue of RM20.1 billion, created total income RM 2.5 billion and employment for 775,861 people.

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THANK YOU(TERIMA KASIH)