FACULTY OF BUSINESS, ECONOMICS AND ACCOUNTANCY

UNIVERSITI MALAYSIA SABAH

APPLIED FINANCIAL ECONOMETRICS

(BF31403)
SEMESTER 1, 2021/2022

INDIVIDUAL ASSIGNMENT
Title: Factors Influence Trade
Performance in Malaysia from Year 2001
to Year 2020

PREPARED TO:
DR. MORI KOGID

PREPARED BY:

No. Name Matric No.

1. GEOFFREY KUEH CHEN SZE BB19110458

SUBMISSION DATE: 30TH JANUARY 2022

 Factors Influence Trade Performance in Malaysia from Year 2001 to Year 2020

Geoffrey Kueh Chen Sze

Faculty of Business, Economics and Accountancy Undergraduate, Universiti Malaysia Sabah

Abstract
This paper investigates factors influence the trade performance in Malaysia from year 2001 to
2020. Gross Domestic Product value, trade restrictions or barriers, export and import value,
Foreign Direct Investment value and logistic performance are the determinants factors
influence trade performance in Malaysia. In general, trade balance value in Malaysia on this
period shows inconsistent although export and import value shows increasing from year to
year. This study applies two estimation tests, which are Ordinary Least Squares regression
analysis and unit root test. Overall, unit root test seems more accurate and significant test on
this paper compared to OLS regression analysis which only export and import value. Compared
to OLS regression analysis, unit root test shows significant especially on first difference and
second difference. This study concludes all the five determinant factors able to influence trade
performance in the period of 20 years based on unit root test.
1.0 Introduction
Trade defined as a basic economic concept which involve the buying and selling of good and
services, with payment paid by a buyer to seller, or goods or services exchange between parties.
It can take place within an economy between producers and consumers. In the old times, the
trade activity was by using the barter system which involve in the goods such as shell, animals,
and fruits. But, for today world, it uses money and currency system to go on trade activity. In
the globalisation times, international trade is applied in today’s economy situation which
involve open economy. In other words, international trade includes import, export and entrepot.
This kind of trade allows countries expand the markets for both goods and services to entire
countries. The impact of the international trade is the market contains greater competition thus
proves more competitive prices which brings a cheaper product home to the customer. In this
paper, trade performance defined as the measurement of the performance on trade which
involves import, export, total trade and net export or known as trade balance.
This paper is focussing on the trade performance in Malaysia from year 2001 to 2020.
This paper will investigate on the import, export and the net export in the period on our country.
Before discuss on the study background, Malaysia is one of the open economy countries
involve in the international trade activity since independence. Until year 2020, Malaysia still
going on the trade activity with main economy nations which are United States, China, Japan,
Singapore, Thailand and United Kingdom despite the Covid-19 pandemic. Malaysia exports
fruits, glove and petroleum products while imports automobile equipment, processed foods,
and chemical products. These products which import and export shows the trade performance
in this country in a good path thus generates the income and productivity of the nation.
 1,200,000.00 200,000.00

180,000.00
1,000,000.00
160,000.00

140,000.00
800,000.00
120,000.00

600,000.00 100,000.00

80,000.00
400,000.00
60,000.00

40,000.00
200,000.00
20,000.00

0.00 0.00

Export (RM Million) Import (RM Million) Trade Balance (RM Million)

Graph 1.1: Trade Performance in Malaysia from Year 2001 to Year 2020
Source: Department of Statistics Malaysia, 2021

Based on graph 1.1, the trade value which consists of export, import and trade balance
shows increasing in overall although inconsistent in selected period. The most remarkable data
in this graph is year 2009 due to the global economic crisis which known as Great Recession.
In year 2019, the export value declined 16.67% which was from RM 663,013.50 million to RM
552,518.10 million which import value fell 16.37% compared to year 2008. The trade balance
was steadily dropped from RM 143,209.20 million in year 2008 to RM 117,848.30 million in
year 2009. Based on the data from year 2000 to 2020, export, import and trade balance value
shows significant increased. The export value increased 2.64 times in year 2020 compared to
year 2000 which only RM 373,270.30 million while import value increased 2.57 times in year
2020 compared to year 2000 which only RM 311,458.90 million. At the same time, trade
balance in year 2000 only RM 61,811.40 million but increased almost in triple in year 2020.
There are numbers of factors contribute to the increasing of trade performance during
the period, which are Gross Domestic Production or GDP, trade restriction, export and import
value, foreign direct investment or FDI and technology factor. But before that, there are some
past studies regarding this issue. Lemi (2017:47) stated that the aid for trade from OECD
countries has improved African countries’ trade performance thus AfT played a vital role
shows impact in Africa’s trade performance. Mazhikeyev et. al. (2015:945) mentioned
countries build more trade connections which raise income and welfare in this globalization
era. Globalization plays important role to improve the trade performance which increase the
connectivity on export and import activities without boundaries. At the same time, multilateral
relationship on international trade able to improve this performance.
Gross Domestic Production is one of the indicators to determine the trade performance
in Malaysia. However, a study shows there is no relationship between GDP and trade
performance which the paper only focussed on FDI, inflation and female labour force
participation (Raja Aziz & Azmi, 2017:62). Zahonogo (2016:42) proved that the relationship
between trade openness and economic growth shows theoretically controversial at first, but
after the analysis, it resulted trade openness shown growth favourably in the long run but the
effect was not linear.
Trade restriction is the limitation or embargo of the trade which is the barrier on the
trade openness wherein effects on the trade performance. Trade restriction which known are
tariff, quota and export restraints. Yeo and Deng (2019:11) proved there have evidence which
trade policy affects Pakistan’s trade with major partners, but depends on the geographical
location and trading partner organization. It proves the trade restriction shows significant
effects on trade performance.
Besides that, export and import value changes period by period also proves significant
effects to the trade balance value on a country. A study shows a firm use of specific Export
Promotion Programmes or EPPs impacts on its export competitiveness beside other
determinants (Monreal-Perez & Geldres-Welss, 2019:17).
Foreign Direct Investment or FDI also a determinant on the trade performance which
investment from other countries improves the trade performance. Usually, investors invest to
the interested business company to expand and improve the business networking on company.
Mensah and Mensah (2021:6) prove that FDI shows positive impact of trade openness on
volatility. It can be concluded that FDI enable improves trade performance.
Technology factor can also be assumed as logistic factor for the terms of trade
performance and it is vital to determine the trade activity. It makes import and export activities
easier and advance compared to before. Gani (2017:285) examined the logistic performance
effects international trade performance prove positive result in trade activities with the advance
technology on logistic sector.
Malaysia’s trade performance shows positive growth from year to year despite
economic crisis such as 2009 economic recession, and recent Covid-19 pandemic which spread
the world until today. Two studies show GDP has affecting the trade performance in Malaysia.
Idris (2016:676) explained the GDP per capita income also statistically significant to explain
national exports and imports with its trading partners in the ASEAN-Australasian region.
Sarmidi et. al. (2010:12) prove that GDP value was most significant to influence the trade
performance. It means that GDP plays important role in the trade activities in Malaysia which
brings positive impact on Malaysia’s trade performance.
There are a number of questions on this research paper. However, the main research
question on this paper is “What are the factors lead to trade performance in Malaysia from year
2001 to year 2020?”. Meanwhile, the specific research questions in this study are as follows:
a. Can GDP lead to trade performance in Malaysia from year 2001 to year 2020?
b. Can trade restriction affects trade performance in Malaysia from year 2001 to year 2020?
c. Can export and import value lead to trade performance in Malaysia from year 2001 to year
2020?
d. Can FDI lead to trade performance in Malaysia from year 2001 to year 2020?
e. Is the technology factor such as logistic really influence trade performance in Malaysia
from year 2001 to year 2020?
The main research objective in this paper is “To identify the factors lead to trade
performance in Malaysia from year 2001 to year 2020.”. Meanwhile, the specific research
objectives in this study are as follows:
a. To analyse whether GDP led to trade performance in Malaysia from year 2000 to year
2020.
b. To investigate whether trade restriction affects trade performance in Malaysia from year
2000 to year 2020.
c. To analyse whether export and import value lead to trade performance in Malaysia from
year 2000 to year 2020.
d. To examine whether FDI lead to trade performance in Malaysia from year 2000 to year
2020.
e. To determine whether the technology factor such as logistic enable influence trade
performance in Malaysia from year 2000 to year 2020.
In this study scope, the aim of study is to investigate whether factors can influence trade
performance in Malaysia from year 2001 to 2020. The time horizon for this empirical analysis
was ranged from 2001 to 2020 which covered 20 years due to the available annual data from
Department of Statistics, Malaysia.
The remainder of the paper is organized as follows. Section 2 reviews the theoretical
and empirical literature which linked between factors and trade performance. Section 3 presents
the methodology used in this paper which create a research design, determine the statistics
model specification and estimation method. Section 4 presents findings thus analyses and
summarise the findings of empirical results. Finally, Section 5 concludes the paper and outlines
its main economic policy implications.
2.0 Literature Review
This section is presenting the theoretical review which used identified underlying model
wherein investigate the model is suitable for this paper which will be explained. At the same
time, empirical review also discussed in this section to proof past evidence on this paper and
divided based on variables. As in the paper, trade performance is dependent variable which is
determined by trade balance of the country, while there are five independent variables to
determine the trade performance, which are GDP, trade restriction, export and import value
performance, FDI and technology factor.

2.1 Theoretical Review

The solution of this form is to concretely study the collected corpus of theories related
to issues, concepts, theories, phenomena. The theoretical literature analysis assistances to find
out current theories, the relationships between the data to solve a problem, the range to which
present theories have been explored, and to develop new theories to be tested. Often these
forms are used to help exact a lack of suitable theory or to reveal that current theories are
deficient to clarify new or developing research problems. The element of investigation can
focus on a hypothetical concept or an overall theory or context.

2.1.1 Gravity Model

For the definition related to international trade, it refers to the model set in its traditional
form which predicts bilateral trade flows based on the economic sizes and distance between
two units which estimates the interaction amount between two cities. For example, bilateral
trade between two countries is proportional to their respective sizes as mentioned wherein
usually measured by GDP of both nations. Dinh Thi et. al. (2013:3) highlighted this model had
been utilized intensively to explain bilateral trade flows between two countries which can’t be
solved by other economics theories. This theory came from physics which was from Newton’s
law on gravity, which gravitational attraction between two objects is proportional of their
masses and inversely related to square of their distance.
For the formula of this model, it shows at the below.
𝑀𝑖 , 𝑀𝑗
𝐹𝑖𝑗 = 𝐺
𝐷𝑖𝑗2
where, 𝐹𝑖𝑗 = gravitational attraction
𝑀𝑖 , 𝑀𝑗 = the mass of two objects
 𝐷𝑖𝑗 = distance
𝐺= gravitational constant
By relating trade, Krugman and Obstfeld (2015) also utilized this model for trade
activities and provided a common model as follows:
𝑌𝑖 , 𝑌𝑗
𝑇𝑖𝑗 = 𝐴
𝐷𝑖𝑗2
where, 𝑇𝑖𝑗 = total trade flow from country i to country j
𝑌𝑖 , 𝑌𝑗 = economic size of two countries which are i and j.
𝐷𝑖𝑗 = distance between country i and j.
𝐴= gravitational constant
At the same time, Ekanayake et. al. (2010:628) applied this model augmented with
several sets of dummy variables estimated the effect of various RTAs on trade flows within
and across membership groupings in Asia as well as RTAs effects on members’ trade with
other Asian countries. Bergstrand (1985:475) defined that a bilateral trade flow equation must
include exporter and importer incomes as exogenous variables to be gravity model. Another
one empirical evidence on this model is by Khayat (2019:6) examined the analysis on his paper
by using Gravity Model for trade flows which consists of regressed three independent variables
which are bilateral trade flows, exports, and imports on a set of standard explanatory variables.

2.1.2 Heckscher-Ohlin Model

According to Investopedia, this model is an economy theory which proposes that
countries export the product which produce most efficiently and plentifully. This model focus
on the goods export requiring production factors that a country has in abundance and also focus
on the goods import which the nation can’t produce as efficiently. Lam (2015:605) assumed
there were no differences in the aggregate preferences between countries but different countries
have different resources endowments was the only difference which exist. While, Zuleta and
Pogorelova (2014:489) mentioned the return to the scarce factor may increase after trade
liberalization wherein opposite to the original of this model.
2.2 Empirical Review
This is the empirical evidence part which dependent variable related to the independent
variable on the past studies. Zahonogo (2016:42) investigated the relationship between trade
openness and economic growth. The article mentioned recent developments suggests that trade
openness is not always beneficial to economic growth. Based on the empirical result, it proves
that GDP has positive relationship with trade performance despite this variable failed to accept
the hypothesis of a unit root presence for all variables at a 1% level. However, analysis shows
trade openness has a positive and significant effect on economic growth but only up to a
threshold which may impact growth favourably in the long run although the effect is not linear.
Semancikova (2016:408) examined the relationship between trade, trade openness, and
macroeconomic performance. This article highlighted that many economists and policymakers
started to examine a possible relationship between international trade and economic growth
since 60s. a large number of presented empirical studies shows positive contribution of
international trade components, trade openness and liberalization on macroeconomic
performance. Ali et. al. (2018:112) analysed the relationship between export and import from
abroad on real GDP. Based on the findings, it proves import and export shown negative
relationship towards GDP which was economic growth. It proves by ANOVA test of the F-
statistics which export coefficient was significant while import coefficient was insignificant
was measured at the 5% level of significance.
Idris (2016:676) explained the national trade policies reforms and other factors that led
to trade openness and increasing trade flows. Study shown GDP per capital income was
statistically significant in explaining national external trade with its trading partners in the
ASEAN-Australasian region which led to positive relationship between GDP and trade
performance in Malaysia. However, Yusoff (2005:12) proved from Granger-causality tests
result suggested that no direct causal links between Malaysia export and economic growth.
Next, the empirical review on trade restriction. Yeo and Deng (2019:11) studied the
effect of trade policy in international trade which based on Pakistan. The result shows trade
policy variables shown positive relationship to trade performance which was statistically
significant correlation on the data analysis. Amiti et. al. (2019:205) studied the new trade theory
on how increasing in trade barriers can reduce welfare by restricting the range of varieties that
consumers are able to purchase which the tariff affects the trade performance although the tariff
revenue value was high. This finding is supported by Fajgebaum et. al. (2020:3) which
explained the implementation of the tariff in US caused large declines in import and export
which import value fell 31.7% in average while 9.9% on export.
 Madsen (2001:849) estimated the income, tariff, and non-tariff barriers contribution on
world trade during the Depression from year 1920 to 1938. This study prove tariff
implementation shows negative relationship between trade which tariff adversely affected
income and collapse on trade performance in US. Bown and Kee (2011:1) presented a set of
stylized facts on the new protectionism that had emerged during the global economic crisis of
2008-2009. This paper provided evidence on how the stock of imposed exporter-specific trade
barriers affected a number of exporting economies over time included crisis era. This statement
prove it shows negative relationship between protectionism policy and trade performance. At
the same time, Mittal (2018:545) listed five impacts on trade barriers. The barriers create
positive impact on employment, encourage the positive features on domestic firms and
economy and able to correct the deficit in the payment balance. However, consumers pay more
with protectionism and affects the economic growth in developing countries.
The third empirical review on independent variable is export and import value. Ajija et.
al. (2021:6) investigated on whether International Trade Promotion Centre (ITPC) brought
positive impact on non-oil and gas exports in Indonesia or not. The resulted shown ITPC had
a positive and significant effect on non-oil and gas export in Indonesia which ITPC and the
export performance relationships are positive. Monreal-Perez and Geldres-Welss (2019:17)
found that the firm’s use of specific EPPs impacts on its export competitiveness which trade
fairs and trade missions provided experiential knowledge to support the firm in international
markets especially export.
Then, the empirical review on FDI. Mensah and Mensah (2021:6) investigated the
inward FDI impact on output growth volatility which involved on trade. The result proved the
inward FDI stocks and trade performance which was trade openness shown positive
relationship which the inward FDI proved positive impact of trade openness on volatility was
correctly identified. Idris and Idris (2013:196) proved there have positive relationship between
FDI and export which interpret from the result. Not only that, both of the authors mentioned
export and FDI contribute to Malaysian economy. The increasing of FDI shows the export
value also increasing.
Last but not least, technology factor mainly focusses on logistic sector on this paper.
Gani (2017:280) examined the logistics effect on international trade. The result proved logistics
performance was positive relationship with external trade performance in which the findings
revealed statistically significant positive correlation of overall logistics performance and
external trade performance. It proved the logistics sector played positive role to increase the
trade performance. Oesingmann (2022:17) argued the over depending of air cargo on air
passenger services caused air cargo service exploit the RTAs effects as trade was able to do
which shows the effect that air cargo services didn’t operate on the optimal set of routes which
shows caused by lower growth rates compared to total trade flows.
3.0 Methodology
This part is discussing about research methodology that were used in this study, namely
introduction, model formation, research hypothesis, data collection, data analysis, and
summary. The research methodology facilitated the researcher to achieve research objective.

3.1 Research Design

Kassu (2019:2) highlighted the research design intends to provide an appropriate
framework for a study. Making a choice regarding research approach wherein determines how
relevant information for a study will be obtained is a very important decision in research design
process as we know.
For the research design, this paper applies positivism research philosophy to investigate
the factors determine the trade performance in Malaysia from year 2011 to year 2020.
Positivism research philosophy sticks to the view that only fracture knowledge gained through
measurement is trustworthy. This is the most proper in this study due to several reasons. The
trustworthy and quantifiable data are collected to achieve the research objectives through
statistical analysis. These data obtained from Department of Statistics, Financial Report from
Ministry of Finance and statistics from Ministry of Transport which these data are from
Malaysia for the analyzation purpose. Wilson (2010) highlighted the positivism took an
objective view when conducted the research and was detached from those involved in the study.
This kind of research design need to have critical of the positivist approach and prefer to take
an active role when carrying out the research.
The second research design is the research approach. Research approach is explained
the step from developing the hypothesis to modifying the existing theory or assumption.
Generally, it can be divided into two are deductive and inductive where both approaches have
different research processes. Wilson (2010) highlighted this deductive approach involves
developing hypotheses based on existing theories, then designing research strategies to test
those hypotheses. The developed null and alternative hypotheses were proposing how the
independent variable influence the dependent variable.
In addition, the research strategy consists of how the researcher plans its action that
gives direction in conducting the research on schedule and systematically. The choice of this
research strategy, depends on the objectives of the study and the data required. This author
explores and expose properly acquired knowledge of factors of trade performance really
influence trade performance or not. All the required information such as past study and
statistical data has been collected and compiled to facilitate data analysis.
 Last but not least, this paper uses the longitudinal research on the time horizon research
to determine the factor influence trade performance in Malaysia from 2001 to 2020. Generally,
longitudinal is a type of correlational research which meant by the researcher observe and
collect the data on several variables without influence those variables. This paper decides to
use time series data analysis to investigate the factors or known as independent variables
influence the trade performance or dependent variable in Malaysia. Time series data analysis
is a specific way to analyse a sequence of data points collected over the time interval. This help
organizations understand the underlying causes of trends or systemic patterns over time. In this
study, this paper use secondary data from Department of Statistics Malaysia from year 2001 to
year 2020 that related to the factors influence the trade performance in Malaysia.
As mentioned, the secondary data was collected via Department of Statistics, Malaysia
over the year of 2001 to 2020 which is 20 years’ time series data analysis. The data include
export and import value, trade balance value, GDP value, FDI value, cargo transportation
freight weight which measured by tonnes which is a part of logistic performance and import
duties value as the measurement of trade restriction analysis. This study use time series data
analysis due to only a country involved which is Malaysia and it is based on timeframe analysis.
3.2 Conceptual Framework
Conceptual framework illustrates the framework between the independent variables
towards the dependent variable. The framework consists of five independent variables which
are GDP value, trade restriction which determined by import duties value, export and import
value, FDI value and logistic performance which measured by the cargo transportation mass.
The dependent variable is the trade performance which measure the performance and
progression of trade activity in Malaysia by using the trade balance. The independent variables
are explained in Table 3.1 and Figure 3.1 illustrates the relationship between the independent
and dependent variables.

No. Dependent Variable Description

1. Trade Performance represent trade performance, which used to measure
GDP value, trade restriction which is tariff, export and
import value, FDI value, and logistic performance which
is cargo transportation mass.
No. Independent Variables Description
1. GDP Value represent GDP value, which used to capture the GDP
value in trade performance;
2. Trade Restriction represent trade restriction which is import duties value,
which used to capture the trade restriction in trade
performance;
3. Export and Import Value represent export and import value, which used to capture
the export and import value in trade performance;
4. FDI Value represent FDI value, which used to capture the FDI value
in trade performance;
5. Logistic Performance represent logistic performance which is cargo
transportation freight weight, which used to capture the
logistic performance in trade performance;
Table 3.1: Independent and Dependent Variables Details
 Independent Variables

Gross Domestic Product (GDP)

Value
Zahonogo (2016:42), Semancikova
(2016:408), Ali et. al. (2018:112),
Idris (2016:676), Yusoff (2005:12),
Raja Aziz & Azmi (2017:62), Sarmidi
et. al. (2010:12)

Trade Restriction
Yeo & Deng (2019:11), Amiti et. al.
(2019:205), Fajgebaum et. al.
(2020:3), Madsen (2001:849), Bown Dependent Variables
& Kee (2011:1), Mittal (2018:545)

Trade Performance
Export and Import Value Lemi (2017:47), Mazhikeyev et.
Ajija et. al. (2021:6), Monreal-Perez & al. (2015:945)
Geldres-Welss (2019:17)

Foreign Direct Investment (FDI)

Value
Mensah & Mensah (2021:6), Idris &
Idris (2013:196)

Logistic Performance
Gani (2017:280), Oesingmann
(2022:17)

Figure 3.1: Research Conceptual Framework

3.3 Statistics Model Specification
For this statistics model specification, this paper applies multiple linear regression
analysis to analyse the result on this paper. Generally, regression analysis is qualitative research
technique is used when includes modelling and analysing numerous variables, wherein the
relationship contains a dependent variable and one or more independent variables. Regression
investigation is a quantitative method used to test the nature of relationships between a
dependent variable and one or more independent variables in modest terms. The basic method
of regression models contains unknown parameters (β), independent variables (X), and the
dependent variable (Y). Regression model, essentially, requires the relation of dependent
variable (Y) to a purpose combination of independent variables (X) and unknown parameters
(β).
Y= f (x, β)

3.3.1 Multiple Linear Regression

In this paper, multiple linear regression is applied due to more than one independent
variable found on this paper. Multiple linear regression refers to the fact that the model is linear
in the parameters, which are 𝛽0 , 𝛽1 , … 𝛽𝑝−1 , 𝛽0 , 𝛽1 , … 𝛽𝑝−1 . This simply means that each
parameter multiplies an x-variable, while the regression function is a sum of these parameter
times x-variable terms. Each x-variables are often a variable or a change of variables (such
because the square of a predictor variable or two predictor variables multiplied together).
𝑦𝑖 = 𝛽0 + 𝛽1 𝑥𝑖 , 1 + 𝛽2 𝑥𝑖 , 2 + ⋯ + 𝛽𝑝−1 𝑥𝑖 , 𝑝 − 1 + 𝜀𝑖
where, 𝑦𝑖 = Dependent variable
𝑥𝑖 = Independent variable
𝛽𝑖 = Parameter
𝜀𝑖 = Error
When interpretation the consequences of multiple regression, beta coefficients are valid
though holding all other variables constant. The output from a multiple regression can be
showed horizontally as an equation, or vertically in table form. For starters, it is more difficult
to see the relationship of independent variable and dependent variable that named as y and x.
The population model for the multiple linear regression model that associates the y-variable
with the p-1 x-variables is written subscript. (Uyanik & Guler, 2013:235).
 The below shows the empirical equation for this paper for the model specification. This
model specification used to investigate the factors influence trade performance from year 2001
to year 2020 which apply time series data analysis.
𝐿𝑇𝑅𝐴𝐷𝐸𝑡 = 𝛽0 + 𝛽1 𝐿𝐺𝐷𝑃𝑡 , 1 + 𝛽2 𝐿𝑅𝐸𝑆𝑡 , 2 + 𝛽3 𝐿𝐸𝑋𝑃01𝑡 , 3 + 𝛽4 𝐿𝐼𝑀𝑃𝑡 , 4 + 𝛽5 𝐿𝐹𝐷𝐼𝑡 , 5
+ 𝛽6 𝐿𝐿𝑂𝐺𝐼𝑆𝑡 , 6 + 𝛽𝑝−1 𝑥𝑖 , 𝑝 − 1 + 𝜀𝑖
where, 𝑇𝑅𝐴𝐷𝐸𝑡 = Trade Performance (Net Export Value)
𝐺𝐷𝑃𝑡 = Gross Domestic Product value
𝑅𝐸𝑆𝑡 = Trade restriction (measured by using import duties)
𝐸𝑋𝑃𝑡 = Export value
𝐼𝑀𝑃𝑡 = Import value
𝐹𝐷𝐼𝑡 = Foreign Direct Investment value
𝐿𝑂𝐺𝐼𝑆𝑡 = Logistic Performance (measured by using tonne of cargo freight weight)
𝛽𝑖 = Parameter
𝜀𝑖 = Error
t= Time period which is from year 2001 to 2020
L= Logarithm
3.4 Variable’s Definition
This part is explaining the definition of every single variable. A dependent variable which is
trade performance and five independent variables which are GDP value, trade restriction,
export and import value, FDI value and logistic performance will discussed in this part.
Trade performance is an indicator to measure the economic performance through
external trade which are export, import and entrepot. In this paper, I measure trade performance
by using the net export value which export subtract import to find the net export which
represent the potential on Malaysia’s external trade.
In this paper, GDP defined as the output amount in a country which produced by
national and foreign nation production factor in a year thus also measure the potential growth
in economy by using GDP growth. This economy indicator mainly growth in increase each
year unless it caused by war like Second World War and pandemic diseases like Covid-19
pandemic which caused the value contracted. GDP determines the national productivity growth
in a country to determine the national development.
Next, trade restriction. Trade restriction such as tariff, quota, and embargo cause the
external trade activity disturbed because of the obstacle. It is implied by the government by
some reasons which are reduce the monopoly of foreign products, support the local products
and to prevent the criminal issue on trade. For this variable, it measured by using amount of
import duties collected by government.
Export and import are the component in external trade. For export, the good or service
sell to another country while for import, the good or service buy from another country. It can
be an indicator on national economy measurement and determinant to the economy
development. This activity is important to increase the national income, improve the national
business and trade networking and shows variety on goods and services.
FDI is a type of investment which is the purchase of an interest in a company by a
company or an investor located outside its borders wherein describe the business decision to
acquire a substantial stake in a foreign business or buys it outright to expand its operations to
a new region. Usually, this frequently goes beyond capital investment which include the
management, technology and equipment provision. FDI enables to improve the national
productivity especially on manufacturing sector which contribute on national economy thus it
can improve the external trade in a country. Malaysia is one of the countries which enable to
attract FDI which improve the multinational company which is manufacture-based. It generates
more job opportunities besides increase the national productivity and income.
 Last but not least, logistic performance. This variable refers to the performance on the
field which related on the resources or products management when in storage and transit. It can
be said that shipping process management to other party or also can define the transportation
of inventory to a merchant. For this paper, it brings the meaning which the cargo service ships
the export item to another country or vice versa. This variable measured by using cargo freight
weight which represents tonnes unit.
3.5 Research Hypothesis
This part consists of five research hypotheses or known as independent variable which
are related to dependent variable which is trade performance. Jansen (2020) defined the
research hypothesis in this context is a tentative answer or statement to search problem or study
outcome. It contains of five research hypotheses as below.
Hypothesis 1
Null: GDP does not influence the trade performance in Malaysia from 2001 to 2020.
Alternative: GDP has influenced the trade performance in Malaysia from 2001 to 2020.
Hypothesis 2
Null: Trade restriction does not influence the trade performance in Malaysia from 2001 to 2020.
Alternative: Trade restriction has influenced the trade performance in Malaysia from 2001 to
2020.
Hypothesis 3
Null: Export and import value does not influence the trade performance in Malaysia from 2001
to 2020.
Alternative: Export and import value has influenced the trade performance in Malaysia from
2001 to 2020.
Hypothesis 4
Null: FDI does not influence the trade performance in Malaysia from 2001 to 2020.
Alternative: FDI has influenced the trade performance in Malaysia from 2001 to 2020.
Hypothesis 5
Null: Logistic performance does not influence the trade performance in Malaysia from 2001 to
2020.
Alternative: Logistic performance has influenced the trade performance in Malaysia from 2001
to 2020.
3.6 Data Obtained
This part consists of the data obtained from various source which are Department of Statistics
Malaysia, Economic Report, Ministry of Finance and Ministry of Transport. This part includes
the data of independent variables or known as the determinant factors on trade performance.
There are GDP value and GDP growth percentage, import duties collected, export and import
value, FDI value and cargo freight weight. The graph and explanation as below.

Gross Domestic Product in Malaysia from Year 2001 to 2020

1,600,000 20
1,400,000
15
1,200,000
10
1,000,000
800,000 5
600,000
0
400,000
-5
200,000
0 -10
20012002200320042005200620072008200920102011201220132014201520162017201820192020

GDP Value (RM Million) GDP Growth (%)

Graph 3.1: Gross Domestic Product value and growth in Malaysia from Year 2001 to
Year 2020
Source: Department of Statistics Malaysia, 2021

Graph 3.1 above shows the analysis of GDP value and GDP growth in Malaysia in a
period of 20 years. In general, the value of GDP in Malaysia increases from year 2001 to year
2020 except year 2009 and year 2020 which caused by economic recession and Covid-19
pandemic respectively. Both of the years shows reduction on GDP value and it affects the GDP
growth percentage which was contracted. In year 2001, the GDP value was RM 352,579
million. But in year 2008, there was shown significant increasing which increased 2.18 times
to RM 769,949 million. However, due to the economic recession in year 2009, GDP value was
dropped to RM 712,857 million and after year 2009 it was continuously increasing. The GDP
value increased 2.12 times to RM 1,513,157 million in year 2020 but decreased 0.06% to RM
1,416,605 million.
The GDP growth from year 2001 to year 2020 shows inconsistent which the percentage
of growth depends on GDP value. During year 2002, the GDP growth 8.69% and slightly grow
in year 2003 which was 9.28%. This value was grown 14.67% in year 2005 before the growth
percentage dipped slightly in the subsequent year which was 9.79%. However, it was bounced
back which GDP grown 15.72% in year 2008 but contraction of GDP seems visible which
contracted 7.41% in year 2009 due to global economic recession. In year 2010, massive
increased on GDP growth percentage which grown 15.23% and continuously dipped 3 years
later to 4.88% on GDP growth. The percentage of GDP growth shows increased in double in
year 2017 which was 9.81%. Since year 2018, GDP growth percentage shown dipping from
year to year which was grown 5.50% in year 2018, grown 4.52% in year 2019 and contracted
6.31% in year 2020. These dipping percentage of GDP growth shows political instability also
affects GDP growth thus Covid-19 pandemic came around the world also affected the growth.

Import Duties (RM Million)

4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Graph 3.2: Total of Import Duties collected in Malaysia from Year 2001 to Year 2020
Source: Economy Report, Ministry of Finance, Malaysia (several years)

The graph above represents total value of import duties collected by Malaysia
government in the period of 20 years. In year 2001, government via Ministry of Finance
collected RM 3,193 million and increased RM 726 million 2 years later. However, from year
2004 to year 2007, the import duties value continuously decreasing in four consecutive years
which in year 2007 shows the value collected was RM 2,424 million but slightly increased to
RM 2,635 million in year 2008. In year 2010, the import duties value collected which recorded
the lowest value in this period which was RM 1,966 million. Until year 2016, the value of
import duties continuously increasing which increased almost RM 1,000 million in year 2016.
However, year 2017 and year 2018 shown decreasing and increasing on this value which
respectively collected RM 2,784 million and RM 2,897 million. Year 2020 shows reduction of
the value collected which decreased to RM 2,346 million.

Export and Import value in Malaysia (RM million)

1,200,000.00

1,000,000.00

800,000.00

600,000.00

400,000.00

200,000.00

0.00
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Export (RM Million) Import (RM Million)

Graph 3.3: Export and Import Value in Malaysia from Year 2001 to Year 2020
Source: Department of Statistics Malaysia, 2021

The graph above shows the graph of export and import value in Malaysia in 20 years
period. Generally, the trend of export and import value on the graph is almost similar. In year
2001, export and import values were RM 334,283.80 million and RM 280,229.10 million
respectively. Both of the export and import value were increasing until year 2008 which
recorded RM 663,013.50 million and RM 519,804.30 million respectively. In year 2009 which
was shown the economic recession over the world which affected export and import value
significantly. For export, the value dropped 16.67% while the import value decreased 16.38%
in year 2009. After 9 years, export and import value increased, wherein export value increased
RM 451,068.80 million to RM 1,003,586.90 while import value increased RM 445,134.20
million to RM 879,804.00 million. Year 2020 shows Covid-19 pandemic caused export and
import value dropped, wherein export and import value respectively dropped to RM 983,827.00
million and RM 800,481.00 million.
 FDI Value (RM Million)
800,000

700,000

600,000

500,000

400,000

300,000

200,000

100,000

0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Graph 3.4: Foreign Direct Investment Value in Malaysia from Year 2001 to Year 2020
Source: Department of Statistics Malaysia, 2021

The graph above represents FDI value in Malaysia from 2001 to 2020. The FDI value
increased consecutively on this period. In year 2001, Malaysia FDI value was RM 129,093
million. in year 2020, FDI value was increased 5.41 times to RM 698,757 million compared to
year 2001.
 ('000) Freight Weight Tonne
700,000

600,000

500,000

400,000

300,000

200,000

100,000

0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Graph 3.5: Total of Cargo Freight Weight in Malaysia from Year 2001 to Year 2020
Source: Ministry of Transport, Malaysia

This graph shows the amount of cargo freight weight on trade activity which these data
obtained from Ministry of Transport via annual report. This graph pattern seems increasing in
overall. In year 2001, a total of 232,928 thousand tones was recorded which involves trade
activity. The increasing of 182,007 thousand tones to 414,935 thousand tones in year 2008
recorded but decreased 24,359 thousand tones in subsequent year. In year 2015, the cargo
freight weight was increased 48.04% from year 2009. The cargo freight weight was decreasing
to 544,711 thousand tones in year 2017 and increasing to 595,478 thousand tones in year 2019.
A slightly decreasing on cargo freight weight in year 2020 which was 564,329 thousand tones.
3.7 Estimation Methods
For the section of estimation methods, the time series data analysis estimation method is
organized to investigate the factors influence trade performance in Malaysia from year 2001 to
year 2020. This paper applies Ordinary Least Square regression analysis and unit root test to
analyse the factors influence Malaysia’s trade performance in the period of 20 years.

3.7.1 Ordinary Least Square Regression Analysis

For Ordinary Least Square or OLS analysis, this analysis defines a statistical regression
form used as a way predicts unknown values from an existing set of data. This analysis takes
an input, independent variables and produces an output which is the dependent variable. This
is a common technique to estimate the coefficients of linear regression equations which
describes one or more independent quantitative variables and a dependent variable which
involve simple and multiple linear regression. Least Squares stands for the minimum squares
error or SSE. The below is the sample model of OLS analysis.
The below is the equation of OLS regression model with multiple explanatory variables
which explained with multiple explanatory variables and interpret into single regression
equation by Hutcheson (2011:226). This equation of model formation as shown below which
consists of Y as dependent variable which is the trade performance and predicted by
independent variables which are from X1 to X6 which are the determination on trade
performance as mentioned before.
Y=α+β1X1+ β2X2+ β3X3+ β4X4+ β5X5+ β6X6… (1)
The parameters interpretation which are which are α and β from the model above is
similar to simple regression model. α indicates the value of trade performance when all values
of independent variables are zero while each β parameter indicates the average change in trade
performance which associated with a unit change of the factor determine the trade performance,
whilst controlling for the other independent variables in this model. At the same time, model-
fit can be assessed through comparing deviance measures of nested models. The change’s
significance in the deviance scores can be assessed via the calculation of the F-statistic using
the equation as provided above.
3.7.2 Unit Root Test
Unit root test defined as the test for stationarity in a time series data analysis which the
time series has a constant mean and constant variance over time. These features are essential
for the reliable test statistic calculation and able to have a significant impact on model selection
although not particularly important for the econometric models’ parameters estimation. Kogid
et. al. (2010:127) highlighted that many economic and financial time series exhibit non-
stationarity in the mean. Nelson and Plosser (1982:140) mentioned most time series
macroeconomic data contain unit root which are caused by a stochastic trend although the trend
which follows random walk process in certain situation. This estimation test is vital to
determine whether a data series is stationary or not because estimators which are not stationary
is most empirical research shows invalid result. This paper applies three types of tests on unit
root test, which are Augmented Dickey-Fuller (ADF) Test, Philips-Perron (PP) Test and
Kwiatkowski-Philips-Schmidt-Shin (KPSS) Test. First and foremost, ADF test which
conducted by Dickey and Fuller (1979:428) as below:
Δ𝑦𝑡 =𝛼0 +δ𝑦𝑡−1 +𝜀𝑡 … (2)
Δ𝑦𝑡 =𝛼0 +δ𝑦𝑡−1+∑𝑝𝑖=2 𝛽𝑖 Δ𝑦𝑡−𝑖+1 +𝜀𝑡 … (3)
where, Δ= first difference operation
𝜀𝑡 = stationary random error
𝑦𝑡 = variables such as 𝐿𝑇𝑅𝐴𝐷𝐸𝑡 , 𝐿𝐺𝐷𝑃𝑡 , 𝐿𝑅𝐸𝑆𝑡 , 𝐿𝐸𝑋𝑃𝑡 , 𝐿𝐼𝑀𝑃𝑡 , 𝐿𝐹𝐷𝐼𝑡 , or 𝐿𝐿𝑂𝐺𝐼𝑆𝑡
P= autoregressive level that is AR(p)
δ=0 is the null hypothesis for this test. The data set for 𝑦𝑡 contains unit root if null hypothesis
can’t reject. For the autoregressive level, this paper choose Schwarz Information Criterion
(SIC) value since the sample size is only consists of 20 sample sizes. For the equation of SIC,
it shown at as follows:
𝑙 log (𝑇)
SIC= -2(𝑇) + k … (4)
𝑇

where, 𝑙= value of the log of the likelihood function

k= parameters estimated
T=observations
If δ is significant or negative, it shows the hypothesis δ=0 will be rejected. The various
information criteria are all based on -2 times the average log likelihood function and adjusted
by a penalty function.
The second method on unit root test is Philips-Perron (PP) method. This method shows
a non-parametric correction to the t-test statistic is under-taken to account for autocorrelation
that will be present when the underlying data generating process or d.g.p. is not autoregressive
at first level AR (1) rather than taking account of the extra terms in d.g.p. by adding than to the
regression model as in ADF test. Philips and Perron (1988:336) proposed an alternative
controlling method for serial correlation to test the unit root test and this method estimates the
non-augmented Dickey-Fuller test as at equation (2) and modified the δ coefficient t-ratio so
that serial correlation doesn’t affect test statistics asymptotic distribution. This test procedure
is based on the following regression which is ADF test procedure generalization as below.
Δ𝑦𝑡 =𝛼0 +δ𝑦𝑡−1 +𝜀𝑡 … (5)
and the statistic equation as below:
𝛾 ̂
𝑇(𝑓 −𝛾 )(𝑠𝑒(𝛼))
𝑡̃𝛼 =𝑡𝛼 ( 0 )1/2 - 0 01/2 … (6)
𝑓0 2𝑓0 𝑠

where, 𝛼̂= estimate

𝑡𝛼 = t-ratio of α
𝑠𝑒(𝛼̂)= coefficient standard error
𝑠= test regression standard error
𝛾0= consistent estimate of the error variance in 𝑦𝑡 = 𝑓 (𝑥𝑖𝑡 ) which calculated as (T-k)𝑠 2 /T
𝑘= number of regressors
𝑓0 = residual spectrum estimator at frequency zero
The third unit root test is KPSS test. This test proposed in year 1992 by four
econometrics’ researchers which are Kwiatkowski, Philips, Schmidt, and Shin which differs
from ADF and PP tests in that the series 𝑦𝑡 is assumed to be stationary under the null hypothesis
but this test proves useful for confirmatory analysis means confirming the conclusion about
unit roots rather than its role as a sole unit root test. This test statistic is the Lagrange Multiplier
(LM) and based on the residuals from the OLS regression of 𝑦𝑡 on the exogenous variable 𝑥𝑡 .
𝑦𝑡 = 𝑥𝑡′ 𝛿 + 𝜀𝑡 … (7)
The LM statistic is defined as:
𝐿𝑀 = ∑𝑡 𝑆(𝑡)2 /(𝑇 2 𝑓0 )… (8)
where, 𝑓0 = estimator of the residual spectrum at frequency zero
S(t) = ∑𝑡𝑟=1 𝑢̂𝑟 = cumulative residual function
based on the residual, 𝑢̂𝑡 = 𝑦𝑡 − 𝑥𝑡 ′ 𝛿̂ (0)
In overall, Kogid et. al. (2010:129) mentioned ADF and PP tests were considered had
several problems especially in their low power and size distortions terms although both of the
tests were routine and widely used to test the unit roots in most time series macroeconomic
data. At the same time, Schwert (1989) found from the result that if Δ𝑦𝑡 had an ARMA
representation with a large and negative MA component, then ADF and PP tests were severely
size misrepresented and PP test were more size misrepresented compared to ADF test. KPSS
test also found similar problems which were found by Caner and Killian (2001). However,
Perron and Ng (1996) suggested useful modifications to the PP test to reduce this size
distortion.
4.0 Findings and Discussion
This part discusses the empirical results from the findings by applying two estimation methods,
which are Ordinary Least Square regression method and unit root test by using Eviews 12th
Version. In the same section, this part also discusses the discussion which contains of analysis
of data findings and the interpretation on this research paper.

4.1 Empirical Results and Findings

4.1.1 Ordinary Least Square Regression Method
Dependent Variable: LTRADE
Independent Variables Coefficient t-statistics
LGDP -0.354734 -1.293496
LRES -0.048328 -0.925946
LEXP01 6.573060 25.80624***
LIMP -5.331682 -20.78037***
LFDI 0.169869 1.327053
LLOGIS -0.082305 -0.568745
Diagnostics Tests
R2= 0.992722 Adjusted R2= 0.989362 Durbin-Watson statistics=
2.160113
Notes: *, **, and *** indicates the significance at 10%, 5% and 1% levels respectively.
Table 4.1: Analysis of Ordinary Least Square Regression Method
4.1.2 Unit Root Test
Test Type Variables Level First Difference Second Difference
ADF1 LTRADE -1.459052 -4.121456*** -6.703204***
LGDP -2.275957 -3.832374** -5.078688***
LRES -2.231937 -2.784405* -4.750436***
LEXP01 -1.872047 -4.328219*** -4.976928***
LIMP -1.797688 -4.219337*** -6.850560***
LFDI -1.110995 -3.942268*** -5.394187***
LLOGIS -3.510922** -1.661121 -5.011182***
PP2 LTRADE -1.459052 -4.121456*** -10.05616***
LGDP -4.300450*** -3.832374** -12.33327***
LRES -1.366895 -2.753412* -5.140756***
LEXP01 -2.204056 -4.328397*** -18.52394***
LIMP -2.478267 -4.214759*** -14.24528***
LFDI -1.929945 -3.739106** -8.877048***
LLOGIS -7.187223*** -3.251059** -10.32065***
KPSS3 LTRADE 0.330681* 0.159143* 0.215780*
LGDP 0.603651*** 0.422180** 0.500000***
LRES 0.234484* 0.106060* 0.180344*
LEXP01 0.600875*** 0.228161* 0.500000***
LIMP 0.600700*** 0.221180* 0.500000***
LFDI 0.605510*** 0.289520* 0.308677*
LLOGIS 0.586060*** 0.568958*** 0.317180*
Notes: *, **, and *** indicates the significance at 10%, 5% and 1% levels respectively.
Table 4.2: Analysis of Unit Root Test

4.2 Discussion
Based on part 4.1 which is results or findings on this paper, this paper uses two analysis
statistics which are ordinary least square regression method and unit root test. On unit root test,
this paper applies three types of tests which are ADF, PP and KPSS test statistics.
Based on the outcome on OLS regression method, only EXP and IMP independent
variable shows significant at 1% level towards TRADE dependent variable. It means that
export and import values only show significant relationship between trade balance which is the
net export of the country while the rest of independent variables prove insignificant
relationships towards TRADE at 1% level which means no significant relationship towards
trade performance in Malaysia. For R2 and adjusted R2, since both of the values are very large,
the regression model fits this observation on this paper. While, for Durbin-Watson statistics,
the value of this statistic above 2 shows negative correlation on this statistical model.

1
By using t-statistics
2
By using adjusted t-statistics
3
By using LM-statistics
 Next, the unit root test. Since the sample size is smaller, so I decide to use SIC for this
test. As mentioned before, three-unit root test used in this paper which are ADF, PP and KPSS
tests. Based on the table, all variables are stationary at first and second difference (based on
ADF and PP tests). However, on the level, LOGIS is significant based on ADF and PP tests
while GDP only significant based on PP test, not ADF test which resulted in not stationary at
level. On the KPSS test, all the variables on level, first difference and second difference are
stationary which the significant level are various depends on the results above.
In plus, the discussion section interprets the result from result section. Two statistical
analysis estimation are already did as shown above. First and foremost, only export and import
have significant relationship towards trade performance which measured by trade balance. It
means that export and import value show positive relationship to trade balance which export
and import only impacts on trade performance. Meanwhile, GDP value, trade restriction which
measured by import duties, FDI value and logistic performance which measured by using cargo
freight weight doesn’t show significant relationship towards trade performance.
However, for the second test, it shows different result. As mentioned before, all
variables in first difference prove significant on certain level. It means that the alternative
hypothesis is accepted and null hypothesis is rejected. In another meaning, this result shows all
the factors able to influence the trade performance in Malaysia. It can be said that every single
factor able to influence the value of trade balance in Malaysia in the period of 20 years. So, for
this paper, unit root test is the best analysis test to interpret the trade performance in Malaysia
and ordinary least square is not the suitable test to determine the factors influence the trade
performance.
5.0 Conclusion
In a nutshell, international trade enables to bring Malaysia become an open economy
which depends on export and import activities. In Malaysia, a number of products such as
handicraft, glove and fruits export to other countries which generate the income from the items
exported. Meanwhile, electronic equipment, automobile, and medicine are imported from other
countries which is rare in this country for the consumer purchasing purpose beside to make the
variations on these products enable to choose. In every year, Malaysia proved the trade activity
shows positive outcome which the import and export value seems increase from year to year.
Not only that, government via MITI has playing their role to improve this activity which able
to support the national macroeconomics activity thus able to strengthen national economy.
This study identified five factors determine the trade performance in Malaysia from
year 2001 to year 2020, which are GDP value, trade barriers which measured by using import
duties value, import and export activities, FDI value, and logistic performance which measured
by using cargo freight weight. Several empirical literature reviews applied in this paper and
most of the review are related to trade performance. This author applied two type of test
estimation method, there are Ordinary Least Square regression method and unit root test.
However, OLS method is unsuitable to analyse due to the insignificant on these determinants
(factors) which most of factors are more than 1% significant level except import and export
value shows 1% significant at the level. Unit root test is mostly accepted on this finding which
shows most of the variables are significant at first-difference which mostly at 1% significant at
the level (ADF and PP tests).
On this paper, this study still needs longer past period to able get the accurate result on
analysis and this paper only use 20 years as observation which shows this analysis still lack on
years period and these data shall be included more by enlarge the period to find more accurate
results. This is the one of the limitations on this study beside there is a challenge to find the
data which lack of details on specific data especially FDI value which only find year 2001 to
year 2020 and this contributes on the lack of data findings.
From the result, this study proves logistics performance contribute trade performance
in Malaysia at level (ADF and PP tests). Logistics factor especially cargo services enable to
increase the ability on trade activities nowadays. It can be improved the ability by improving
the cargo services on technology and modernization on cargo airplane. GDP value also plays
important role to determine trade performance. This is because trade activities also contribute
into Malaysia’s GDP which improve the national ability on production.
 In addition, export and import value shows big contribution on trade performance. This
can be proved by OLS regression analysis which both of the factors are significant at 1% level.
The increasing of export level shows positive result on trade performance which measured by
using trade balance. Not only that, import value also important to determine the performance
on trade activity. Both of the factors stress the ability on determine of trade performance.
Beside of all the factors determinant trade performance as on this paper, qualitative
factor also determines trade performance. One of it is government initiative. As a policymaker,
this study recommend that government shall implement some initiatives or programs to
improve trade performance in Malaysia. There is government subsidy on exported items, tax
exemption on exported items and improve the local items which will export. This kind of
initiative mainly focus on improving export value besides improve the local product ability to
export.
Another factor is the political stability. This factor is vital to ensure trade performance
enable improve the national trade balance due to the confidence on trade activity. It is almost
same on Foreign Direct Investment. Recently, national political situation seems instable
besides affected by Covid-19 pandemic. This caused the trade activity disturbed due to political
instability and the progression on trade is in unsafe level. To eliminate this crisis, government
shall have General Elections to stabilize the politic beside to make sure trade performance also
can be improved well.
Last but not least, this paper still discovers other factor determine trade performance
and need further investigation on this research. At the same time, the longer period of research
enables the findings on this research could be more accurate. These five factors determine trade
performance shows significant on this paper. Some questions asked to improve this study on
future: Shall this paper only mentioned export and import value influence trade performance
as the best determinant? Can other factors besides five factors as mentioned influence trade
performance in Malaysia? These questions need to do the further investigation in the future
which related with trade performance to improve this research.
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