Impact of biodiesel blend mandate on natural rubber market in Malaysia

• Main Author: Nur Hazirah, Md Ludin
• Format: Thesis
• Language: English; English
• Published: 2019
• Subjects: HB Economic Theory
• Online Access: https://etd.uum.edu.my/10334/1/depositpermission_s93813.pdf; https://etd.uum.edu.my/10334/2/s93813_01.pdf; https://etd.uum.edu.my/10334/
• Institution: Universiti Utara Malaysia

One of the important elements in Malaysia's natural rubber market is the implementation of biodiesel mandate. This mandate is affecting the supply and demand of natural rubber industry. The main objective of the study is to analyse the impact of biodiesel blend mandate on Malaysian natural rubber market. The specific objectives are to (i) develop a Malaysian natural rubber market model, (ii) examine the impact of biodiesel blend mandate on the natural rubber market supply; (iii) examine the impact of biodiesel blend mandate on the natural rubber market demand; and (iv) examine the impact of biodiesel blend mandate on the natural rubber market price. Two stage least squares (2SLS) estimation method has been applied by using data from year 1985-2016. The market model consists of production, import, domestic consumption, export, domestic and world price equations and closed by using domestic and world stock identities. Biodiesel mandate, interest rate, government expenditure on rural development and agriculture and crude oil price are the new important variables that had been included in natural rubber equations. Biodiesel mandate, interest rate and government expenditure on rural development and agriculture are found to be significant in production equation. While crude oil price is significant in world price equation. The ex-ante analysis results are consistent with the counter/actual analysis. Result shows that there are changes in all of these variables when there is an increase in the mandate. Domestic price shows the highest negative effect on all percentage biodiesel mandate among all endogenous variables in this study. It can be concluded that the entire mandate will give positive and negative impact to natural rubber market in Malaysia. Hence, an appropriate mandate has to be implemented to avoid the sudden decrease in the natural rubber production.