Revealed Comparative Advantage of Malaysian Exports: The Case for Changing Export Composition

Mahani Zainal Abidin and Wai Heng Loke
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Mahani Zainal Abidin: Institute of Strategic and International Studies, Malaysia, No. 1, Pesiaran Sultan, Salahuddin, 50778, Kuala Lumpur, Malaysia.
Wai Heng Loke: Faculty of Economics and Administration, University of Malaya, Malaysia.

Asian Economic Papers, 2008, vol. 7, issue 3, pages 130-147

Abstract: Since 2000, Malaysian-manufactured exports performance has been declining. The downturn of the global electronic industry and the rise of China's economy are the two major causes of this decline. To improve export performance, Malaysia participates in multilateral, regional, and bilateral trade liberalization. The competitiveness of Malaysian manufactured exports can be improved by examining the pattern of revealed comparative advantage (RCA). Within the non-resource-based manufactured exports, Malaysia still has comparative advantage for electrical and electronic goods and machinery (its largest export item), even though it has been on a decline. Malaysia's export strength has also gradually shifted from non-resource-based to resource-based manufactured exports. The RCA estimates also suggest that trade liberalization must not only lower or eliminate tariffs on final products, but also reduce import duties if exports were to increase their competitiveness. (c) 2008 The Earth Institute at Columbia University and the Massachusetts Institute of Technology.

Date: 2008

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