A Probe into the Status of the Oil Palm Sector in the Malaysian Value Chain

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.