BILATERAL TRADE SUSTAINABILITY OF SARAWAK

1'IEW THIAN HF. h:

This project is submitted in partial fulfillment of' the requirements for the degree of Bachelor of Economics with Ilonours

(Industrial Economics)

Faculty of' Economics and Ii*utiincINti UNIVE'IZSI'I'I MALAYSIA SARAWAK

2010

ABSTRACT

BILATERAL TRADE SUSTAINABILITY OF SARAWAK

BY

VIEW THIAN HEE

This study investigates the bilateral trade sustainability of Sarawak towards Japan,

Singapore and Peninsular Malaysia. Using annual data of exports and imports, this

study found that absence of cointegration between exports and imports for all the

cases in the full sampling period. This imply that Sarawak violate its intertemporal

budget constraint in full sampling period. Besides that, this study found that there

existed one to one relationship for all the cases in pre-crisis data. On the other hand,

the results of bilateral trade indicated that Sarawak with Japan and Singapore support

to strong forms of sustainability condition while Sarawak with Peninsular Malaysia

was weak on the path of sustainability condition. Therefore, Sarawak does not

violate its intertemporal budget constraint in the pre-crisis.

ABSTRAK

KESEIMBANGAN DUA HALA PERDAGANGAN DI SARAWAK

OLEH

VIEW THIAN HEE

Kajian im rnenyiasat keseimbangan perdagangan dua hala di antara Sarawak dengan

Jepun, Singapura dan Semenanjung Malaysia. Dengan menggunakan data tahunan

eksport dan import, kajian ini mendapati bahawa tidak terdapat kointegrasi antara

eksport dan import untuk semua kes pada tempoh sampel penuh. Ini membayangkan

bahawa Sarawak melanggar sekatan anggaran antarwaktu pada tempoh sampel

penuh. Selain itu, kajian ini mendapati bahawa terdapat satu kointegrasi untuk semua

kes dalam data pra-krisis. Di samping itu, keputusan perdagangan dua hala

menunjukkan Sarawak dengan Jepun dan Singapura menyokong kuat keseimbangan

manakala Sarawak dengan Semenanjung Malaysia mendapati bahawa berlaku

kelemahan dalam keseimbangan. Oleh itu, Sarawak tidak melanggar sekatan

anggaran antar,, vaktu pada tempoh pra-krisis.

ACKNOWLEDGEMENT

I would like to express my special thanks to my family members for their

unflagging love, cares and moral support. In addition, I am indebted to my mother,

Wong Man Mooi, for her care and love. I have no suitable word that can fully

describe her everlasting love to me. I remember my mother constant support when I

faced difficulties. Mother, I love you. I feel proud of my father, Yiew Kiyu, for his

advised "nothing is impossible in life and try your best". Father, I love you. Besides

that, I would like to thank for my wife, Lai Chee King, for her support and love. I

love you. Last, I would like to show my gratitude to my sisters, Yiew Sok Fci, Yicw

Yin Fei and Yiew Fei Xin to support me. Thanks for being there for me though out

the way.

I am heartily thankful to my supervisor, Dr Evan Lau, whose encouragement,

guidance and support. His perpetual energy and enthusiasm in research had

motivated me. I am grateful for your patient explanation about the F-view and

Microtit software in competing my final year project. Sir, I feel proud of you.

Lastly, I otter my regard and blessings to all those who supported me in any

respect during the completion of tinal year project. I would like to extend my thanks

to all the lecturers especially Mr. Jerome and Dr. Puah, tier their care and opinion.

Apart from that, I would like to say thanks for all the staffs of the Faculty of

Economics and Business (FEB), UNIMAS, in the contribution to the success

towards this study.

TABLES OF CONTENTS

LIST OF TABLES x

LIST OF FIGURES xi

CHAPTER ONE: INTRODUCTION

1.0 Background of Sarawak .................................................... I

1.0.1 Development in Sarawak ..........................................

3

1.0.2 Bilateral Trade between Sarawak with Japan .................. 6

1.0.3 Bilateral Trade between Sarawak with Singapore ............. K

1.0.4 Bilateral Trade between Sarawak with Peninsular Malaysia. I

1.1 Definition

1.1.1 Bilateral Trade ......................................................

12

1.2 Problem Statement ..........................................................

13

1.3 Research Objective ..........................................................

15

1.3.1 Specific Objectives .................................................

15

1.4 Research Significance ......................................................

16

1.5 Scope of the Study ..........................................................

17

1.6 Conclusion ....................................................................

17

1'11

CHAPTER TWO: LITERATURE REVIEW

2.0 Introduction .................................................................. 18

2.1 Related Studies on Developed Countries ................................. 18

2.2 Related Studies on Developing Countries ................................

29

2.3 Conclusion ....................................................................

56

CHAPTER THREE: RESEARCH METHODOLOGY

3.0 Introduction .................................................................. 57

3.1 Theoretical Framework ..................................................... 58

3.2 Research Design ............................................................. 59

3.2.1 Model of Research ................................................. 60

3.3 Methodology

3.3.1 Unit Root Test

3.3.1.1 Augmented Dickey-Fuller .............................. 64

3.3.1.2 Kwiatkowski, Philips, Schmidt, and Shin............ 66

3.3.2 Cointegration Test .................................................. 67

3.3.3 Estimation of Long-Run Equilibria .............................. 70

3.3.4 Granger Causality Tests ........................................... 72

3.3.5 Generalized Variance Decomposition ........................... 73

3.3.6 Generalized Impulse Response Function ........................ 75

3.3.7 Persistence Profile .................................................. 77

3.5 Conclusion .................................................................... 78

Viii

CHAPTER FOUR: EMPIRICAL RESULTS AND DISCUSSION

4.0 Introduction ..................................................................

79

4.1 Unit Root Test ...............................................................

80

4.2 Cointegration Test ...........................................................

82

4.3 Estimation of Long Run Equilibria .......................................

86

4.3.1 Sarawak with Japan ................................................. 86

4.3.2 Sarawak with Singapore ........................................... 89

4.3.3 Sarawak with Peninsular Malaysia .............................. 91

4.4 Granger Causality Tests ....................................................

93

4.5 Generalized Variance Decomposition, Generalized Impulse Response Function and Persistence Profile ..............................

96

4.5.1 Sarawak with Japan ................................................ 97

4.5.2 Sarawak with Singapore ........................................... 100

4.5.3 Sarawak with Peninsular Malaysia .............................. 103

4.6 Conclusion .................................................................... 106

CHAPTER FIVE: CONCLUSION

5.0 Introduction .................................................................. 1 07

5.1 Summary and Conclusion ..................................................

107

5.2 Policy Implications and Recommendations ............................. III

5.3 Limitations and Suggestions ............................................... 114

Reference 115

Ix

LIST OF TABLES

Table 1: Sarawak's total import, total export and trade balance (RM million) ...................................................................

5

Table 2: Summaries of Literature Review on Developed Countries........ 23

Table 3: Summaries of Literature Review on Developing Countries....... 40

Table 4: Unit Root and Stationary Tests ........................................ 8

Table 5: Cointegration Test and Hypothesis Testing (Full sample)......... 83

Table 6: Cointegration Test and Hypothesis Testing (pre-crisis)............ 84

Table 7: Dynamic Ordinary Least Squares (DOLS) Estimation for Sarawak-Japan

.............................................................................. 87

Table 8: Dynamic Ordinary Least Squares (DOLS) Estimation lo r Sarawak-Singapore

...................................................... 89

Table 9: Dynamic Ordinary Least Squares (DOLS) Estimation for Sarawak-Peninsular Malaysia .........................................

91

Table 10: Granger Causality Results based on Vector Error Correction Model (VECM) (Pre-crisis) ............................................

93

Table 11: Generalized Variance Decomposition tier Sarawak with Japan... 97

Table 12: Generalized Variance Decomposition tier Sarawak with Singapore ..................................................................

100

Table 13: Generalized Variance Decomposition tier Sarawak with Peninsular Malaysia

..................................................... 103

x

LIST OF FIGURES

Figure 1: Export and Import for Sarawak with Japan from 1962 to 2008.7

Figure 2: Export and Import for Sarawak with Singapore from 1962 to 2008 ...................................................................... 9

Figure 3: Export and Import for Sarawak with Peninsular Malaysia from 1962 to 2008

...................................................... II

Figure 4: The Relationship between the Exports and Imports from Sarawak with Japan, Singapore and Peninsular Malaysia....... 58

Figure 5: CUSUM test for Sarawak-Japan ..................................... HK

Figure 6: CUSUM of Squares test for Sarawak-Japan ....................... KK

Figure 7: CUSUM test for Sarawak-Singapore ............................... 90

Figure 8: CUSUM of Squares test for Sarawak-Singapore .................. 90

Figure 9: CUSUM test for Sarawak-Peninsular Malaysia ................... 92

Figure 10: CUSUM of Squares test for Sarawak-Peninsular Malaysia...... 92

Figure 11: Generalized Impulse Response(s) to one S. E. shock in the equation fir EX (Sarawak-Japan) ...................................

99

Figure 12: Generalized Impulse Response(s) to one S. E. shock in the equation tiºr MM (Sarawak-Japan) .................................

99

Figure 13: Persistence Profile of the effect of a system-wide shock to CV(s) (Sarawak-Japan) ..............................................

99

Figure 14: Generalized Impulse Response(s) to one S. E. shock in the equation ti)r EX (Sarawak-Singapore) ..............................

102

Figurc 15: Generalized Impulse Reslumsc(s) to one S. F. shock in the equation for MM (Saraw ak-Sinbapore) ........ ...... ......... .....

102

Figure 16: Persistence Protile of the eftcct of a system-wide shock to CV(s) (Sarawak-Singapore) .........................................

102

Figure 17: Generalized Impulse Response(s) to one S. E. shock in the equation for EX (Sarawak-Peninsula- Malaysia)

.................. 105

xi

Figure 18: Generalized Impulse Response(s) to one S. E. shock in the equation for MM (Sarawak-Peninsular Malaysia) ................ 105

Figure 19: Persistence Profile of the effect of a system-wide shock to CV'(s) (Sarawak-Peninsular Malaysia)

............................ 105

X11

CHAPTER ONE

INTRODUCTION

1.0 Background of Sarawak'

The history of Sarawak began 40,000 years ago and Stone Age people lived in

Miri which in the Niah caves. In the 6"' century, China and Siam started the Barter trade

in Borneo and they reached Santubong village in the 11°i century while Santubong

became the first capital of Sarawak. Sarawak became an autonomous region under the

Brunei Sultanate in the 15`x' century.

In 1820, the Sultanate found antimony in the upper Sarawak River. I knee, the

Bruncians sent a Governor Pengiran Mahkota to establish his capital in Kuching.

However, the problems increased because people were victimized and faced unfairly

taxed. Thus, Sultan Omar All Saifuddin 11 forced to send his prime minister namely Raja

Muda Hashim to solve the problems. In the same time, James Brooke as an Fnglish

adventurer arrived in Kuching during a local uprising and assisted to suppress the

rebellion. Consequently. Raja Muda Hashim appointed Brooke as rajah of Sarawak as a

reward.

(his discussion is adopted from Saram ak go%crnmrnt otuicial portal. 2008.

I

James Brooke was succeeded by his nephew who was Charles Brooke after he

ruled Sarawak from 1841 until 1861. In 1917, Charles demise to his son Charles Vyner

until the Japan Invasion of December 1941. The Australia Military Administration

controlled for several months after Japanese surrendered on September II, 1954.

Furthermore, Sarawak was ceded by Vyner Brooke to Great Britain in May 1946

because Sarawak was under-developed country and bankrupt. Thus, Sarawak remained a

Crown colony for 17 years until September 16`1' 1963 when the federation of Malaysia

was formed.

Nowadays, Sarawak is one of the largest states fir Malaysia and on the north-

west coast of' the island of Borneo. A state of 124,485 square kilometers is facing the

South China Sea and it has tropical, monsoonal climate with humidity (Ooi, I997).

Besides that, Sarawak has 27 ethnic groups comprise the Than, Chinese, Malay,

Bidayuh, Melanau. Kayan, Kenyah, Lun Bawang, Penan, Kelahit, Kedayan, Bisaya,

Berawan, Lahanan. Sekapan, Kejaman, Punan, Bakctan, Ukit, Sihan, Tagal, Tabun,

Saban, Lisum, Longkiput and others while each of' them have their own distinct

language, culture and lifestyle. In addition, there are II administrative divisions include

Kuching, Kota Samarahan, Sri Aman, Bctong, Sarikei, Sihu, Kapit, E3intulu, Mukah,

Miri and Limhang in Sarawak.

1.0.1 Development in Sarawak 2

Looking into the appearance of the trade of'Sarawak, it existed first cross border

migration in Lundu before Sir James Brooke who was to become first white Rajah of

Sarawak in 1830'. In 1879, pepper was first and premier export during the period of'

Brooke rule. However, pepper cannot maintain the premier export. In nineteenth

century, Sarawak's main exports were jungle products and sago. After the first decade

of the nineteenth century, rising of pepper, gold, rubber and mineral oil caused jungle

products and sago declined. Hence, rubber was first listed as an export item in 19 10 and

petroleum became premier exports in 1920 and as the main foreign earner. During 1929

until 1931, Sarawak faced the depression and declined demand of' Sarawak's products

but gold increased dramatically reaching a peak and expansion of the timber in the nmid-

1930s caused Sarawak's recovery from the depression. Nevertheless, production of

crude oil had declined from over 5.5 million US barrels (873000 tonnes) in 1929 to less

than 700 000 US barrels (I I1 000 tonnes) in the year 1940 due to depletion of the Miri

oilfield reserves. Consequently. the British promoted new industries with the enactment

of' the Pioneer Industries (Encouragement) Ordinance and Development Finance

Corporation Ordinance in 1957 to enhance the economic growth in Sarawak. "Thus, these

supplied new industries with relief' from customs duty and income tax, and promoted

economic development through financial credits. Therefore, Sarawak Development

2 This discussion is adopted from Ooi (I997) and Purist (I997).

Population of Dayak Sclakau ch%indling. Saramak Iihunc, 19 November. 2002.

3

Finance Corporation (SDFC) was established and provided finance for private economic

development in agriculture sectors in 1958. In the same year, the Colonial Development

Corporation (CDC) registered the Borneo Development Corporation (BDC) to finance

private economic development in the industries sectors. Moreover, government was in

developing the country's infrastructure and establishing free trade with North Borneo

from 1 January 1962. Fourteen industries and products had been declared pioneer

industries and seven companies had been granted pioneer status in the end of 1962.

Sarawak became a state in the Federation of Malaysia on 16 September 1963,

constitutional reform had provided universal suffrage, an elected executive, an elected

legislature, and a ministerial form of government. Thus, Sarawak was established local

government structure, making extensive amendments to the 1941 Constitution to

provide the legal framework li)r the changing mode of government, and developing the

people's political awareness.

Gross domestic product of Sarawak was RM 501 million increased extremely to

RM 65722 million in the year 1962 and 2006 respectively. This showed that Sarawak's

gross domestic product increased around 131 times within this period. There were

positive upward of gross domestic product during 1962 until 2006. During 1970s, gross

domestic product decreased from RM 3082 million in 1977 to RM 2974 million in 1978.

Besides that, gross domestic product indicated positive trend. In 1985, gross domestic

product achieved RM 9469 million decreased to RM 8967 million in 1986 while it was

the first time decreased during 1980s. In 1990s, gross domestic product decreased one

4

time only to RM 19330 million in 1996 from RM 19769 million in 1995. During 2000s,

gross domestic product dropped from RM 32006 million in 2000 to RM 28005 million

in 2001. Moreover, gross domestic product indicated increased trend over the time.

During 1962 until 2006, Sarawak's gross domestic product grew steadily (Malaysia

Statistic Department, Annual Statistical Bulletin Sarawak from Department of' Statistic

Sarawak, various issues).

Table 1: Sarawak's Total Imports, Total Exports and Trade Balance j .M million) Imports Exports Trade balance

Year (RM million) (RM million) (RM million)

1960 444.9 488.3 43.4

1970 660.42 671.28 10.86

1980 2298.85 4041.42 1742.57

1990 6531.6 11283.5 4751.9

2000 13887.4 31 152 17264.6

2008 27609.4 91147.5 63538.1

Source: Malaysia Statistic Department. Annual Statistical Bulletin Sarawak from Uepailntent of' Stati%tic Sarawak, various issues.

According to the Table 1, Sarawak's trade balance from RM 43.4 million in

1960s dropped to RM 10.86 million in 1970s and increased massively to RM I742.59

million in 1980s. During 1990s, trade balance jumped to RM 4751.9 million while

increased extremely to RM 17264.6 million in 2000s. In 2008, trade balance increased

to RM 63538.1 million (Malaysia Statistic Department, Annual Statistical Bulletin

5

Sarawak from Department of' Statistic Sarawak, various issues). These indicated that

trade balance of Sarawak was in positive growth and this surplus of' trade balance can

enhance economic growth of Sarawak.

1.0.2 Bilateral trade between Sarawak with Japan

The total top five exports from Sarawak to Japan reached RM 21,659 million

which were about 99 percent of total exports of RM 21,782 million in 2007. Among the

top five exports items by value were Gas, Natural and Manufactured was RM 16,861

million as the top position. Following the second export, Cork and Wood Manufactures

achieved RM 2,564 million while Petroleum and Petroleum Products as the third export

which achieved RM 1,520 million. Moreover, the fourth export among the top live to

Japan was Crude of' Cork and Wood was RM 406 million. Electricity Machinery

Appliances was RM 257 million as the fifth export.

Sarawak's total top five imports from Japan achieved RM 1,531 million of total

imports of' RM 2,089 million in 2007. These top five imports indicated that 73 percent

of' total imports. The top import commodity from Japan was Chemical Mechanical

Aptitude Test which achieved RM 555 million. The second notable import among the

top five to Japan was Machinery for Particular Industries which achieved RM 402

million. The third and fourth imports were Iron and Steel, and the General Industrial

6

Machinery and Equipment which achieved value of' RM 22 1.7 million and RM 22 1.1

million respectively. The fifth import was Power (venerating Machinery and ICluipment

of RM 130 million.

Figure 1: Exports and Imports for Sarawak with Japan from 1962 to 2008

35000-

30000,

25000,

I 20000 -I E 2 15000 W

10000 ý

5000 ý / \`.

! 111111T 11T

65 70 75 80 85 90 95 00 05 Year

° Exports Imports

Source: Malaysia Statistic Department, Annual Statistical Bulletin Sarawak from I)cpaiimcnt of Statistic Sarawak, various issues.

During 1962 until 1983, the gap between Sarawak's exports to . Japan with

Sarawak's imports from Japan was close. After 1983, the gap was gradually widened

while trade balance from RM 305.7 million in the year 1982 increased to RM 1233.7

million in 1981. I fence, annual growth rate of'trade balance increased to 303.57 percent

in the year 1983 from 126.18 percent in the year 1982. Saramak's trade balance was

7

deficit in 1992 which reached RM -6299.5 million as first time deficit during 1962 until

2008 (Malaysia Statistic Department, Annual Statistical Bulletin Sarawak from

Department of Statistic Sarawak, various issues). The trade balance achieved surplus

from RM 19693.1 million in 2007 to RM 31534.2 million in 2008. This indicated that

the gap between exports and imports were widened over the time.

1.0.3 Bilateral trade between Sarawak with Singapore

The value of total top five exports from Sarawak to Singapore was RM 1,283

million or 88 percent of total exports RM 1,452 million in 2007. Petroleum and

Petroleum Products as the top export to Singapore achieved RM 537 million and

following Manufacturers of Metals reached RM 447 million. The value of Electricity

Machinery Appliances as the third export item was RM 115 million. Other Transport

Equipment achieved RM 100 million as the Iburth export while Cork and Wood reached

RM 82 million as the fifth export.

Total top five Sarawak's imports by value from Singapore achieved RM 103

million or 80 percent of total import RM 1,286 million in 2007. The top import from

Singapore was Petroleum and Petroleum Products reached RM 827 million. The second

import form Singapore achieved RM 72 million namely General Industries Machinery

and Equipment. The third import was Scientific Instruments and Application reached

8

RM 64 million. The fourth import was Iron and Steel achieved RM 36.5 million and

Essential Oils Ferfuniery etc achieved RM 36.2 million as the filth import.

Figure 2: Exports and Imports for Sarawak with Singapore from 1962 to 2008

2800

2400

2000 . -. c 0 1600-

1200-

800-

400 -

0

Exports -.. Imports

Source: Malaysia Statistic Department, Annual Statistical Bulletin Sarawak from I)cpartmcnt of Statistic

Sarawak, various issues.

The gap between exports and imports of Sarawak with Singapore increased from

RM 110.8 million in 1962 to RM 184.4 million in 1999. After 1999, trade balance

achieved deficit RM -220.3 million in 2000 while decreased to RM -I50.6 million in

2004. Furthermore, exports were greater than imports in the year 2005. Hence, trade

balance became surplus which reached RM 226.4 million in 2005 but dropped to RM

16.7 million 2006. Trade balance increased from RM 165.9 million in 2007 to RM

Iýý� -, --,

ý . - /^\... �

r

65 70 75 80 85 90 95 00 05 Year

9

393.2 million in 2008 (Malaysia Statistic Department, Annual Statistical Bulletin

Sarawak from Department of Statistic Sarawak, various issues). In 2008, trade balance

reached deficit indicated that Sarawak imports from Singapore were more than the

exports.

1.0.4 Bilateral trade between Sarawak with Peninsular Malaysia

The value of total top five exports from Sarawak to Peninsular Malaysia were

RM 11,934 million or 89 percent of total exports RM 13,287 million in 2007. Among

the top five exports, Petroleum and Petroleum Products as the main export which

achieved RM 10,550 million and following the Road Vehicles of RM 609 million as the

second export. Another notable item was Fixed Vegetables Oils and Fats as the third

export achieved RM 333 million while the fourth export was Crude Rubber of RM 245

million. The fifth export achieved RM 195 million namely Manufactures of Metals.

Petroleum and Petroleum Products, Iron and Steel, Manul: ºctures of Metals,

General Industries Machinery and Equipment, and Road Vehicles which were among

the top five of Sarawak's import from Peninsular Malaysia and achieved RM 6,794

million or 50 percent of' total imports of' RM 13,450 million in 2007. Petroleum and

Petroleum Products as the top import among the top five items of RM 2,779 million and

Following the Road Vehicle reached RM 2,004 million. The third import item which was

Iron and Steel of RM 948 million. Of'the top live items, Manufacturers and Metals as

I0

the fourth import achieved RM 604 million. The fifth import item achieved RM 457

million namely General Industries Machinery and Equipment.

Figure 3: Exports and Imports for Sarawak with Peninsular Malaysia from 1962 to 2008

Source: Malaysia Statistic Department, Annual Statistical Bulletin Sarawak from Department of Statistic Sarawak, various issues.

Sarawak's import from Peninsular Malaysia was greater than export to

Peninsular Malaysia. During 1962 until 2008, there were six years surplus which were

1963,1964,1965,1980,1981 and 2008. This indicated that Sarawak needed resources

from Peninsular Malaysia more that Peninsular Malaysia needed resources from

Sarawak. On the other hand, the gap between exports and imports were closely which

reached deficit RM -70.2 million in 2006. In addition, the trade balance decreased to

II

RM -162.9 million in 2007 but increased to RM 2307.2 million in 2008 (Malaysia

Statistic Department, Annual Statistical Bulletin Sarawak from Department of Statistic

Sarawak, various issues).

1.1 Definition

1.1.1 Bilateral Trade

Bilateral trade is defined as the trade between any two countries has to balance

or any imbalance has to be financed by credits arranged directly between the two

countries (Black, 2002). Bilateral trade will increase the welfare of countries and induce

the product efficiency to enhance the development and economic growth (Brown et al.

2002).

12

1.2 Problem Statements

Bilateral trade between Sarawak with Japan, Singapore and Peninsular Malaysia

had grown enormously during the 1962 until 2008. Sarawak's imports from Japan grew

around 115 times increased vastly from RM 14.2 million in 1962 to RM 1639.6 million

in 2008. The rate of growth of Sarawak's imports from Singapore jumped to RM 2706.1

million in 2008 from RM 27.6 million in 1962 and grew around 98 times. In 1962,

Sarawak's imports from Peninsular Malaysia increased tremendously from RM 3.9

million until RM 14360.2 million in 2008 and grew around 3682 times. As fir Sarawak,

the rate of' imports from Japan, Singapore and Peninsular Malaysia increased

dramatically during 1962 until 2008. Besides that, Sarawak's export to Japan increased

dramatically around 639 times from RM 51.9 million in 1962 to RM 33173.8 million in

2008. In 1962, Sarawak's exports to Singapore grew around 16 times from RM 138.4

million to reach RM 2312.9 million in 2008. While Sarawak's exports to Peninsular

Malaysia picked up and grew enormously around 210,978 times to RM 16667.4 million

in 2008 From RM 0.079 million in 1962. Trade balance of' Sarawak with Japan,

Singapore and Peninsular Malaysia are fluctuating over the years. however, the cilcct of

trade balance fluctuation towards the bilateral trade sustainability of Sarawak with her

partners is still vague.

On the other hand. Sarawak's imports from Peninsular Malaysia were greater

than exports to Peninsular Malaysia. Broadly speaking, the amount of trade balance

deficit achieved to RM -102.9 million in 2007 from RM -3.82 million in 1962 liar

13

Sarawak with Peninsular Malaysia. Besides that, the value of trade balance was surplus

from 1962 until 1999 but it became deficit in 2000,2001,2002,2(X)3,2004 and 2008

for Sarawak with Singapore. Moreover, trade balance deficit achieved RM -220.3

million in 2000, RM -393.1 million in 2001, RM 316.3 million in 2002, RM -424.5

million in 2003, RM -150.6 million in 2004 and RM -393.2 million in 2008. For

Sarawak with Japan, trade balance was surplus from 1962 until 2008 but it became

deficit in 1992 which was RM -6299.5 million. Clearly, trade balance become deficit

indicated that Sarawak purchased more than sold to abroad. In this manner, trade

balance deficit will lead current account becomes deficit. Hence, balance of payment

will be depleted tend to generate deficit in foreign trade. 't'herefore, bilateral trade

sustainability between Sarawak with Japan, Singapore and Peninsular Malaysia are

crucial.

14