DETERMINANTS OF EXPORT PERFORMANCE:MALAYSIAN CASE STUDY

SYEO FALIQ FAHMI BIN SYED FAROUK

Submitted in Partial FulfillmentOf the Requirements for the

Bachelor of Business Administration(Hons) International Business

FACULTV OF BUSINESS MANAGEMENTUNIVERSITI TEKNOLOGI MARA MELAKA

MAY 2007

ACKNOWLEDGEMENT

There are many people who have been enormously helpful in the preparation of this

thesis. First and foremost, my gratitude goes to Allah the Almighty for giving me the

strength and patience in completing this study.

My warmest gratitude goes to lecturers in UiTM Melaka, in particular: Madam Masturah

binti Ma'in (first advisor) and Mr. Mohamed Saladin Abdul Rasool (second advisor) for

giving me beneficial assistance, comments, critics and suggestions throughout the

development of this study. I would never be able to complete this study without their

guidance. I would also like to acknowledge DRB-HICOM Berhad for allowing me to

complete my practical training program

I also wish to thank all my friends especially Mohd Azlan Bin Ahmad, Mas Ayu bte

Othman, Nadiah Abu Bakar and Nadia Fuad for being there when I needed them the

most. I really treasure your honest opinions and encouragement that have put me

through the good and bad times. Your assistance is a major contribution to me in

completing this study. Besides that, my best regards and thanks to everyone who had

contributed in the making of this research whether directly or indirectly.

Last but not least, I would like to express my deepest gratitude to my beloved mother:

Madam Najebah Hj Yahaya, as well as my family members for their untiring support,

assistance, guidance and encouragement.

Thank you.

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TABLE OF CONTENT

CONTENT

ACKNOWLEDGEMENTLIST OF TABLESLIST OF FIGURESABSTRACT

CHAPTER 1: INTRODUCTION

1.1 Background of Study1.2 Overview of Malaysian Export Performance1.3 Problem Statement1.4 Research Questions1.5 Research Objectives1.6 Theoretical Framework1.7 Significance of study1.8 Scope of study1.9 Limitations of Study1.10 Definitions of Terms

CHAPTER 2: LITERATURE REVIEW

PAGE

ivviiiixx

247

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2.1 Studies on Determinants of Export Performance 232.2 Foreign Direct Investments as Determinants of Export Performance 252.3 REER as Determinants of Export Performance 272.4 Trading Partners' Income as Determinants of Export Performance 292.5 Inflation as Determinants of Export Performance 30

CHAPTER 3: RESEARCH METHODOLOGY

3.13.23.3

Research DesignData Collection MethodData Analysis and Interpretation

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CHAPTER 4: DATA ANALYSIS AND INTERPRETATION

4.14.24.34.44.54.6

IntroductionTrend Analysis of Foreign Direct Investment of MalaysiaTrend Analysis of Annual REER of MalaysiaTrend Analysis of Annual Trading Partners' Income of MalaysiaTrend Analysis of Annual Inflation Rates of Malaysia.Estimation of Determinants of Export Performance of Malaysia

v

363637394040

LIST OF FIGURESPAGE

Figure 1.1 - Malaysia Export Performance 6

Figure 1.2 - Theoretical Framework of Study 16

Figure 4.1 - Trend Analysis of Foreign Direct Investment of Malaysia 36

Figure 4.2 - Trend Analysis of Annual Real Effective Exchange Rates of Malaysia 37

Figure 4.3 - Relationship between Exports Performance and REER 38

Figure 4.4 - Trend Analysis of Annual Trading Partners' Income of Malaysia 39

Figure 4.5 - Relationship between Export Performance of Malaysia and Trading

Partners'lncome 39

Figure 4.6 - Annual Inflation Rates of Malaysia 40

Vlll

ABSTRACT

Year by year, total trade of our country have increased tremendously and being one of

the major revenues to boost up our economy and providing lines of employments

throughout the nations. As Malaysia implemented export-oriented development strategy

beginning in the 1980s, exporting has been the major vehicle that has transformed

Malaysia from a primary commodity based economy to a more industrial based on. Thus

it is important to have an idea what are the determinants of Malaysia export performance

so that we could focus on these determinants in order for us to stay afoot in today's

world of globalization. However, there were few studies have been made worldwide in

tackling the question of what are the factors that boost a country's export performance

as most of them focused only on firm-level instead of country-level as a whole.

Therefore the purpose of this study is to examine the factors that influence the export

performance in Malaysia. In addition, this paper also attempts to look at the trends of

those determinants and how they affect our country's export performance.

Based on some studies made by few international researchers, there are several factors

that influence the export performance of a country, which are the Foreign Direct

Investment, Real Effective Exchange Rates, trading partners' income and inflation rates

This study found out that all four variables mentioned above, have a significant impact

on determining what are the factors that boost Malaysia's export performance and it is

vital for government to take essential steps in securing this variables to ensure that

exports will still be one of Malaysia's most important revenue generators

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