Determinants of Fisheries Trade Competitiveness: The Case of Malaysia

Abstract

Fisheries constitute one of the most globalised food industries and significantly contribute to a nation’s socioeconomic development and international food security. Malaysia is a small open economy endowed with fisheries resources; however, the rapid growth of international trade has changed the patterns of fish trade dependence. It has now become a fish importer and experienced a critical fish trade deficit since 2009, implicating eroding trade competitiveness of Malaysian fisheries in the global market. The existing empirical studies on competitiveness conclude that Malaysia loses the competitive status in the international fish market, but the Trade Competitiveness Index (TCI) and its determinants have not been thoroughly explored. Hence, this present study aims to examine the short and long run effects of trade openness, the exchange rate and fishery employment on the TCI of Malaysian fisheries during 1976– 2018, using an Autoregressive Distributed Lag (ARDL) approach. The findings conclude that Malaysia has lost its trade competitiveness in terms of TCI in the global fishery market. The ARDL results show that an appreciation of the exchange rate as well as more trade openness and fishery employment enhance the TCI in the short run (i.e., a few years), but have negative effects in the long run. To ameliorate trade competitiveness, higher restrictions on fish imports are recommended, as well as more adoption of science and technology in fisheries in the long run, given the nature of the exchange rate, appreciation policies are proposed in the short run.