The impact of world crude oil price on the liberalisation of Malaysia’s paddy industry

Siti ‘Aisyah Baharudin

Abstract


Abstract

 

Malaysia has adopted an open economy policy to boost its economic growth and per capita income. As a small and open economy, the country is susceptible to external shocks such as the 2008 financial crisis. Moreover, the increase in the international food price and the shortage of food in early 2008 imposed a new challenge to the national paddy sector. Besides, the increase in average world crude oil prices from USD 69.08 per barrel in 2007 to USD 101.56 per barrel in 2009 saw accompanied escalation in world food commodity prices, resulting in increases in input costs and hence the cost for food production. This paper examines the impact of the world crude oil price on the liberalisation of Malaysia’s paddy industry using system dynamics analysis. The two types of inputs impacted by crude oil price are fuel and fertiliser price. The results showed that 120 litre per hectare of diesel and petrol is the rate of fuel used in paddy production. The fertiliser consumption is 388.53 kilogram per hectare. The removal of fuel subsidies accompanied by the increase in the world crude oil prices significantly impacts farmers’ income and productivity levels as it triggers higher production expenses. The simulation results of the policy suggest that the subsidy rationalisation programme will free up more funds for product development such as precision farming technology as well as increased farm practices by farmers.

 

Keywords: crude oil price, farmers’ income, machinery cost, paddy industry, productivity, system dynamics


Full Text:

PDF

References


References

Abdul Rahim, A.S., & Zariyawati, M.A., (2011). Causal effects of world crude oil prices on the prices of rice and soybean oil: An ardl approach. Pertanika Journal Social Science and Humanities, 19(1), 123-130.

Amin Mahir Abdullah. (1989). Subsidi dan kesannya ke atas petani padi. Jurnal Ekonomi Malaysia, 19, 17-30.

Bernama. (2018). MOF: Harga RON95, diesel ditetapkan pada RM2.20, RM2.18 seliter, Bernama, 1-3. June 7.

Bundschuh, J., & Guangnan Chen, E. (2014). Sustainable energy solutions in agriculture. (1st ed.). CRC Press, London.

ECM. (2011). National energy balance, Putrajaya, Suruhanjaya Tenaga (Energy Commission of Malaysia).

FAO. (2018). Agricultural outlook 2018-2027, Rome, OECD-FAO.

Forrester, J.W., (1992). Policies, decisions and information sources for modeling. European Journal of Operational Research, 59(1), 42-63.

Gusev, M. (2018). Crude oil price forecast: 2018, 2019 and long term to 2030. Retrieved from http://comstat.comesa.int/infographics/.

Hashim, S.M., (1998). Income inequality and poverty in Malaysia.(1st ed.) Rowman & Littlefield, London.

Idris, N.D.M., & Siwar, C. (2017). From poverty reduction to poverty relief: Impact of non-farm income in Integrated Agriculture Development Area (IADA) Samarahan, Sarawak, Malaysia. Geografia Malaysian Journal of Society and Space, 11(2), 32-41.

Jafni, J.M., C.H., Abu Hassan, D., & Mohd Shahrul Shah, M. (2010). Strengthening food security through sustainable rice production. Serdang, In Proceeding of national rice conference 2010, 434-437.

MADA. (2013). Statistics of MADA 2013. Kedah: Lembaga Kemajuan Pertanian Muda Retrieved from http://www.mada.gov.my/en

Man, N., & Sadiya, S.I. (2009). Off-farm employment participation among paddy farmers. In the MUDA Agricultural Development Authority and Kemasin Semerak Granary areas of Malaysia. Asia-Pacific Development Journal, 16(2), 3-18.

Mat, B., & Othman, Z. (2014). Regional cooperation in addressing food security issues in Southeast Asia: Malaysian perspectives. Geografia Malaysian Journal of Society and Space, 10(6), 37-47.

MoA. (2013). Agrofood statistics 2013, Putrajaya, Ministry of Agriculture and Agro-based Industries.

Rabu, M.R., & Shah, M.D.M. (2013). Food and livelihood security of the Malaysian paddy farmers. Economic and Technology Management Review, 8(1), 59-69.

Ramli, N.N., Mad Nasir Shamsudin, Zainalabidin Mohamed, & Radam, A. (2012). The impact of fertilizer subsidy on Malaysia paddy/rice industry using a system dynamics approach. International Journal of Social Science and Humanity, 2(3), 2013-2015.

Saari, Y., Alias Radam, & Abdullah., A.M. (2008). The impacts of increase in the domestic petroleum prices on cost production in the agricultural and agro-based sectors. International Journal of Business and Society, 9(1), 37-39.

Sanyal, P.L.A.M., & Kaplan, P. (2015). Impact of energy price variability on global fertilizer price: application of alternative volatility models. Sustainable Agriculture Research, 4(4), 132-144.

Siti 'Aisyah Baharudin, Fatimah Mohamed Arshad, Muhammad Tasrif, & Ibragimov, A. (2016). Impact of fuel prices on paddy farmer’s expenditure allocation in Malaysia. British Journal of Applied Research, 1(1), 5-9.

Sterman, J.D. (2004). Business dynamics: Systems thinking and modeling for a complex World. (1st ed.). New York, Irwin/McGraw-Hill.


Refbacks

  • There are currently no refbacks.