Comparative Advantage of Malaysian Wood Products in the European Market

Abstract

Malaysia is currently one of the world's top tropical timber producers. The Malaysian wood industry has grown tremendously since past decades. Besides producing wood products for the domestic markets, most of the wood products have been exported to other countries including Europe. We used the framework developed by Balassa (1965) to examine the comparative advantage of Malaysian timber products in the European market. The results implied that for the overall performance, Malaysian wood products have a noticeable advantage in the European market in comparison to other global producers. Among several Malaysian timber products, only five of them have a high comparative advantage. We discovered that the high comparative advantage products are the secondary processing products and ìmechanized mass market productsî. While the revealed comparative advantage is very dependents of the quantity traded, a high quantity does not imply a high comparative advantage. We found that the factors such as abundant resources, communication and technology, production cost, and indeed demand pattern are essential in influencing the comparative advantage of the products.wood products, Malaysia, Europe, comparative advantage, Balassa approach