An Econometric Study of Palm Oil Import Demand in the Middle East and North African Countries
With vegetable oils supplies at record levels, increased emphasis is being placed on finding new and growing markets for different oils. The Middle East and North Africa region (MENA) is one of such emerging markets for palm oil and its products. Strong consumption growth for vegetable oils in ge...
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| Format: | Thesis |
| Language: | English |
| Published: |
2005
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| Subjects: | |
| Online Access: | http://psasir.upm.edu.my/id/eprint/6073/1/FEP_2005_9.pdf |
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| Summary: | With vegetable oils supplies at record levels, increased emphasis is being placed on
finding new and growing markets for different oils. The Middle East and North
Africa region (MENA) is one of such emerging markets for palm oil and its products.
Strong consumption growth for vegetable oils in general, and palm oil products in
particular, coupled with limited vegetable oils production capabilities in the region,
have been behind the increase in trade. Further growth is anticipated in large part due
to a strong regional GDP forecast. Palm oil has the opportunity to be a prime
beneficiary of this growth in trade, due to its export competitiveness in the global
market of fats and oils. The objectives of this study are; firstly to analyse the palm oil
import demand in representative MENA countries, namely Algeria, Egypt, Iran,
Jordan, Libya, Morocco, Saudi Arabia, Sudan, Syria, and Turkey, over a period of
time; and secondly, to identify the prospects of expanding its market in the MENA
regon. Ten single equation models are specified, following a general to specific
approach. to represent palm oil import demand functions in these countries. The
models have been estimated using multivariate cointegration and ECM methods for
the analysis through utilizing the ARDL technique.
The findings of the study show that the palm oil price variable emerged to be a
significant determinant of palm oil demand across the ten models. Soybean oil
proved to be an important substitute for palm oil in Algeria, Egypt, Iran, Jordan,
Morocco and Turkey. The major substitute oil for palm oil in Saudi Arabia and Libya
is corn oil, while rapeseed oil and sunflower seed oil came out to be important
substitutes for it in Sudan and Syria respectively. The prices of substitute oils in
almost all countries have been found to play an important role in shaping the palm oil
demand. Palm oil demand in all countries turned to be significantly dependent on
income. The remarkably high palm oil discount was an important factor in raising the
Turkish demand for palm oil. The results suggest that the sharp increase in world
petroleum prices in 1970s contributed significantly to the palm oil import demand in
Saudi Arabia.The anti-palm oil campaign came out to be an important factor that
negatively affected the palm oil import demand in Algeria and Iran. The Malaysian
market promotion effort proved to have a great influence in expanding the demand
for palm oil in Egypt. The Gulf war crisis and trade sanctions on Iraq expanded the
market of palm oil in Jordan, whereas the trade embargo on Libya suppressed the
demand. Exchange rate also proved to be an important determining factor for shaping
Libyan import demand for palm oil. Demand elasticities with respect to own price,
substitute price and income came out to be very high indicating its high
responsiveness to changes in these variables and implying the importance of
considering them in the process of formulating the marketing policies.
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Finally, projections for palm oil import demand revealed that import demand is
expected to increase in all the countries under consideration, with variations in the
magnitude of expansion among them, indicating the good potentiality of this market
for absorbing more palm oil. |
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