No part of this document may be reproduced, stored in an automated retrieval system, or transmitted in any form or by any means, graphic, electronic, mechanical, photocopying, recording, scanning, or otherwise, without the prior permission of the author. First of all, I would like to express my deepest gratitude to my supervisor, Dr. Tun, for his support and his suggestions for the completion of this senior year project. My parents helped me a lot in making this project at times in gathering various information.
Thank you again for your support and suggestion for completing my final year project. This dedication will be just a small part for me to thank those who have supported me until the completion of this final year project. This research will also develop the research objective, research questions and the significance of this research.
RESEARCH OVERVIEW
- Introduction
- Research Background
- Problem Statement
- Research Objective
- Research Questions
- Significance of Research
One of the projects Malaysia is negotiating with China is the East Coast Rail Link (ECRL) project. Each of the key features will affect how BRI projects proceed in Malaysia and Malaysia's trade performance. As the East Coast Rail Link (ECRL) project is one of the BRI projects signed with China, China will procure all materials and.
The RCEP agreements believe that it will be beneficial for China to deliver materials and equipment to Malaysia, as it is considered as one of the imports. The two charts shown below are Malaysia's foreign trade performance chart and trade balance chart from 2000. As seen in the charts, Malaysia's trade performance fluctuates from 2007 and starts to have a steady flow from 2015.
The threat of BRI increasing debt will affect the country's GDP and directly affect the country's trade performance. The purpose of this study is to provide an understanding and to investigate whether BRI will enhance trade performance in Malaysia. In this research, users are able to know whether BRI has an impact on the country's trade performance.
As there are still many research debates on the positive and negative impacts that BRI brings to a country's trade performance and this research is believed to provide a complete picture of the impact by providing users with the result based on the RCA calculation. Thus, users are able to know more about the impact of BRI on a country's trade performance that are useful for future research and future forecasting.
LITERATURE REVIEW
- Introduction
- Revealed Comparative Advantage
- Malaysia China Trade
- Hypothesis Development
According to Hossain et al. 2021), analyzed China-Bangladesh trade using RCA analysis. Their study shows that Bangladesh has high comparative advantage in 5 sectors, while China does not have any sector with high comparative advantage. According to Yean and Kam (2015), the bilateral relationship between Malaysia and China is not well researched and their study indicated that the bilateral trade relationship will be highly focused on electrical and electronic and palm oil as important exports from Malaysia to China.
However, their results for both products show a diminishing comparative advantage in exports. China has a higher contribution to GDP compared to Malaysia and this is due to differences in background, technology and other factors in both countries. Trade even took place, but due to some of the factors influencing, Malaysia does not have a high public comparative advantage compared to China.
Another study by Hing (2013) studied the economic relationship between Malaysia and China from year 2000 to 2010 and concluded that Malaysia will face stiff Chinese competition in the market as China has a large supply of low-cost and skilled labor has. China continuing to improve its production technology will greatly impact Malaysia's comparative advantage as Malaysia would lose its comparative advantage. According to Loke (2008), he concluded that the data showed that Malaysia has a comparative advantage in electrical and electronic manufacturers, but China also has an increase in RCA values in the electrical and electronic manufacturers.
According to Zam and Yakob (2017), Malaysia has a great comparative advantage in electrical and electronic products, but exports are decreasing over the years. H0: There is no potential industry between Malaysia and China. H1: There is a potential industry between Malaysia and China.
METHODOLOGY
- Methodology Introduction
- Research Design
- Data Collection Method
- Secondary Data
- Data Analysis
- RCA Formula
- Conclusion
The result will be used to test whether the hypothesis will be accepted or rejected. The data will be obtained from the official website that provides the data that this research needs. In this research, the sources will mainly come from Google Scholar and UN comtrade websites.
Some journals that have been published in the last 20 or 30 years will not be suitable for the search will be excluded and show the journals that published within the selected time interval. The years to be taken for analysis are 2019 to examine whether the BRI really has an impact on Malaysia. Data will only be obtained for the 3-digit commodity code as the 4-digit commodity code will be applicable to more advanced researchers.
The software that will be used in this research is Microsoft Excel to analyze the data we get from the UN comtrade website. The reason why the data will be analyzed using Microsoft Excel is that Microsoft Excel is easy to calculate formula and get the completed data we need in a short time. After getting the number for 2 countries, it will be divided with Malaysia as the numerator and China as the denominator.
When the index less than unity, the implication will be that Malaysia does not have a revealed comparative advantage over China. Finally, the collection of secondary data method will be carried out by getting all the data such as export and import for Malaysia and China from the UN trade.
DATA ANALYSIS
- Data Analysis Introduction
- Data Analysis
- Export Data Analysis
- Import Data Analysis
- Hypothesis Testing
- Conclusion
Natural rubber can be one of the main exports for Malaysia and RCA scores calculated for 3 years are more than 1 shows that Malaysia has comparative advantage in exporting natural rubber products. One of Malaysia's main exports is petroleum products and no doubt the analysis shows that the 4 selected commodity codes have a comparative advantage in exports. For oils and petroleum gases, there are still comparative advantages, and some of the commodities faced declines in the RCA index.
Commodity code 283 which is copper ores have a comparative advantage in export as mining is one of the major industries in Malaysia. According to the calculated result, all 3 commodity codes 246, 248 and 248 have a comparative advantage in export. The reason why Malaysia does not have a comparative advantage in exporting electronic products as China is a well developed country with advanced technology.
In conclusion, Malaysia's main export of electronic products has no comparative advantage when it comes to exports. According to the calculated result, all chosen commodity codes have no comparative advantage in export. Even though Malaysia has a comparative advantage in natural rubber exports, Malaysia still imports natural rubber as Malaysia has a comparative advantage in natural rubber imports.
According to the calculated result, all 3 commodity codes which are 246, 248 and 248 have no comparative advantage in importation. According to the table above, Malaysia has a comparative advantage in importing petroleum oils derived from other than crude oil and petroleum gases, while Malaysia has no comparative advantage in importing petroleum oils from crude oil and natural gas. Crude oil and natural gas have no comparative advantage and the RCA index is decreasing, indicating that Malaysia does not gain any advantage in importing these two products.
Electronic machine products are the main industries for Malaysia, but the RCA result shown for commodity code 752 and 764 does not have a comparative advantage for importing those goods.
DISCUSSION, IMPLICATION AND CONCLUSION
- Introduction
- Summary of Statistical Analysis
- Discussion on Major Findings
- Implications of the Study
- Limitations of the Study
- Recommendation for Future Research
- Conclusion
The calculated result showed that potential industry exists between Malaysia and China, even it does not reach the majority of the total commodity. According to the result, some of the potential industries that benefit in export would be natural rubber, timber and dairy products. Some of the state do require a valid harvesting license issued by the state forestry department before the company can start harvesting the timber.
So for some of the industry that has a high entry barrier but with potential will require the company to plan early before they can enter the industry to take advantage of BRI. In addition, the result also shows some of the potential industry or commodity to import to Malaysia to gain some of the import benefit. In summary, some of the industries are suggested to import their goods from other countries to take advantage of BRI.
BRI is believed to have an effect on Malaysia, but according to the above analysis, some of the commodities are affected by some other factors that cause the data to have a big difference compared to the other 2 years. The first recommendation will be to conduct the research again 10 or 15 years after the introduction of the BRI. For the result of the effect to be more obvious, more years will need to be included in future research to make a clearer comparison.
Another recommendation would be to include 4-digit and 5-digit commodity in the future research related to BRI and trade performance. 4-digit and 5-digit item code will be more detailed as a category of the products will be separated into different categories or more detailed categories that provide more detailed information for a particular product category. For example, non-alcoholic beverages is one of the category, but in the 4-digit and 5-digit commodity code, the category further narrows to beverages with sugar and without sugar.
This research will be provided as future reference for future research that relates to the effect of BRI on other countries' trade performance.
