AN EMPIRICAI, STUDY O}. TIIE RUBBER PLANTING DEMAND AND NATURAI, RUI}I}I]]IISUPPLY BY SMALLIIOLDER'S IN SABAII

.Iim .lipun

AI}S'I'IIAC'I'

ctltrrtliorts. ,tl rcctrr.sittt ftutclictnctl /ottn is usecl Ltn estimuled using lhe Ortlinur-t, Leusl ,\tlLtttt'c.s i()1,,\l tttttl.l vo Sttr,qc [.t:rr,st ,\qtrcu'as (2SLS) in the Log linear fbrru.7'he motlel tt'trs trsctl trt c.tlirtttrlc itrflut'rttt'ttl

.\trhttlt tt,rr,t irtlluenc'ed b1, prit:c of' rtLhber (ot'n priccl, 7tt'ice rtf pcrlm rtil (c'rttrtpt:litrtr ttluttt.t i ,iittl

rtrhltc:t'prrtlttt'tiln in u.\,eur ugo. rtthbct'nruturad oreu size untl timc scrie.t Jtt'o.r.t'lrt lt't'lttrttlrt,l.t

S tt h u lt u n'.t r t cr I u r u I r u b h er i n tl u,s I r'.t:.

Kct,Worcls: (Planting. MatLrrccl arcii. ProclLlction. Pricc clasticit.y'Lind (lross pricc clasticitl')

I. INl'ROr) t.l(-'l',ION

llirlrlrcr (ilcrn:u) is llrc tlrircl importarrt corrnrcrcial conllrodity in Sabah alicr oil palnr and cocolt. iir v*rt.

l0().1. thc rr-rbbcr corrmoclitv rvas cotrtributcd I{MIti8.6q3.l9i to statc cxllorl . 'l hc rLLbbe:r cttttttttt,tiit-r

lrlocluction arc Starrclarcl Malavsia I{ubber (SMlf) ancl speciality'rtrbbcr (Sabah lnclLtstrv I{rr[r'ncr

Iloarcl. 2004). l'hcsc prodLrcl tvill sencl to Peninsr-rlar Malal'sia lbr advancc proccssing activitic.. Ilrc

aclvancc proccssingj rvill bc producc a high value proclr-rct or goocls. Ilor,r,ct'cr. ttt,,wariat's titc lirbltcrcxpansiolt onlv or lnol'c lo smallholdcr's. I{cccntly. thc govcrntnclrt wtls cttcoLtragctl to pt'odrrcc litc t'Lrbbcr

u,oocis. l'ltc govcrnn-ront iilso was to ptollotcd thc rLrbbcr rvoocls lirrttiturc procltrction thal ttrorc attcl ttrot.c

iprlrorlant in tl.rc r,r,orlci marl<ct (Suhuh lnstitule l)evelopmenr rl St u.clies (ll)'\).1999).Sincc in thc bcginning o1'rubbcr cxpausiou spccificalll' aroLurcl 19'10s. thc rubbcr snrallholiicr's

scclor (SPl((i) in Sabah havc a varictl'ol-changed expcricnced. lu vcat'200-5. thc SaLralt lnclLrstlr l{trlrhcr'

lloarcl (l.lGS) rcccivcd of'15.161 hcctarcs application lrotn srrallholdcr's lbr rLtbircr'ltlarrtirrs irLrt ottli.1.053 hcctar-cs that was cnooLlraged causccl by budget/1inal.)cial problctns ([.intitcti irLrdgi:1) lrnti l].108Itcctarcs balancc ol'potcnlial arca ftlr lrrbbcr plantation sti ll not planling (Sabah Irrtltrstt'r, Ilrrbbcr Iirllril.2005b).

Ilcsiclcs" itrconsistcnt ol- rubber rnaturccl alea sizc also an irrportattt problcrtr to srnlrlilroltlcr'srubbsr inclLrstr'1,, in Sabah. According to statislics of rubbcr maturecl arca itr Sabait proviclcd ["ry' Strbllr

Inclr.rstrl, llLtbbcr Iloar:d (t.l(iS). the rr-rbbcr rnalr.rrcd area sizc in snrallltolclcr's scctor u,tls itrcrcltsccl ll'orrt

5i.250 lrcctarcs (l9tt5) to 64.912 hectares ( 1995) and to 69.937 ltcctarcs (2002). IlLrt in vcar l00l^ thc

rLrbbcr rnatLllc nrca sizc in snrallholdcrs scctor dccrcasccl clrasticallv to 15"'1i5 hcclarcs:tncl itrcrcrlsccl

again to 52.250.,17 hcctares in vcar 20011 (Sabah lticlustry'I{Lrbbcl Iloarcl. 2005b).Morcovcr. incoiisislcnt clt- thc rr-rbLrcr proclr-rctiorr rvill caLrsccl tlrc relatccl agcircics clil-llcLrli Lo

translcr tltc ncu tcchnolog.ics.'l'liey'rvill taccd the high rislt 1o transl'cr thc ttcu,tccJtrroiog,.,r,espc,-:il1ir

oulpLlt ltroccssine tcchnologv lvith incor.rsistent proclLrclion. IlLrt accclrciing to statistics o1'r'rritbet

't

prodLlction in Satbah ploviclccl b-v Sabah lndr-rstry ilubbcr tloarcl (l.l(iS). amor-rn1 oi'tlrc nalrtt'ai rttbbi:r'

prodLlction by,snralllrolclcr's seclor in Sabah l.ravc goocl incrcasirrg in vear 2002. 100-l arrci 20()'l

spccilically'11.,161 rrctric tonne.46.834 mctric tontre ancl 6u.26i rnctt'ie [ttnnc. respeetiich il-coupaletir.rith arr.totrnt ol-ltalrrral rr-rbbcr production in year'200 I (drastically dccrcascd of'natr.tral ltrbbcr plodLrctiolr

in srnallholclcr's scctor) spccilically 21 .564 r.nctric tonnc onlr,(Sabah IndLrstr-v l{utrbcl Iloald. l005tr).'l'hc ob.jcctivo ol-tlrc studl, is 1<l creatc onc rnodcl of sniallholdcr's rr-rbtrcr scctor inclr-rstr'),in Sebah.

l'his ntodel is to idcntil_r, tlie lactors inl'lucncing the rubbcr plantin.r:. clcnrand ancl tratural rubbcr strpplr br

srnallholdcrs in Sabah. It is hopccl that the rrodel wi ll proviclc a liarrcrvorl< to anal1,5;c tlrc cl-l'ccts ol-triltjorvariablcs in this inclLrslrv. 'l lre ntaior variables of'thc industr)'. u'hosc rclationship is I'ct cntl'riricllllcstablishcd. arc: (i) thc pricc of'rLrbbcr. (ii)thc price ol'cocoa. (iii) tlrc pr-icc ol-palrr oil" (ir') ltisir viclrlirrlrLtbbcr brcccling arca sizc. (r,) ;lroduction ol- rr-rbbcr. (iv) tccirnolog-r intl.rltrvenrclrL t,tt rubbct'itlarr{irtgtlcrrancl anil natrrral rubbcr sLrp;lly.

il. N{Ot)F].I'IIAMIiWOI{K

'l hc rnoclcl spccilications in this stucly alc basccl on the dvnarrric cconotnctric nrarl<ct nroclcl lirr stot'lthlc

1o dcrrand (Q, C,) as ntarl<cI ccprilibriunr conc]ition. is as firllolvs:

C.: c(C,-1, Pt, Pt-jt, Yt,Zt,IJ)Q,: g(Q.r, Pt, Pt-j,, Zr,Ur)C,: Q,

\\'hcri:.Q, suppll, ol- corrrn.roclitv(ll clcrnanclol-cor.t.rirtoclitr.'l', irricco1-conrrloditv[)r:r lau priccY, incornc/,, olhcr cxo.qcrtoLls VariabclsI i, randon.r variablc

i l.1........ I) \eilr'

llrc llrst trvo cclLurtiotls arc supplv (Qt) and dcrnanf (Ct). rcspcctivclr'. 'l'l.rc1' arc posttriatcd to itc a

lirrrction o1'pricc (P,) and rclcvaltt prcdctcn'nincd (Pt-j. Yt. /,t. Qt-1. Ct-i). 'l'hc thit'cl is tltc nrarlicl

cclLri I ibriurn conclition.

IIl. lttjllllElL l')LANl'IN(; DI,IMANI)

Spccilication ol'thc rr-rbber planting dcr.nand is based on thc nroclcl cicvclopcd bv Alias. i\4. ( lt)fi7) I h'.r

ruroclcl inrprovcnrcnt ovcr clicr nrodels devclopcd by Ncrlovc (l95lt). Wickcns & (irccnllcltl ll97l).I.abys (197i. 1975) clan Alias. M. (l9U5a. 19U5b) irr its cxplicit trcatnrcnt ul'tlrc nc\! crolrs lrlrrrrting.dccisiorr lirr longlcrm commoditl,. I3ricfl1,'. thc Alias. N4. (lgti7) nroclcl" is as lbllor'is:

(1,: ./ (Q,, Xl,, X2r, U,)

Whcrc:(1, planline

Q, rcal viclclXl, rubbcr priccXl, sLrbstitr-rtccon.llroclit),'pricc

(l )

(2)(3)

(4)

f

- -l

[], ral']doln variablc

IrclLraliorr (/l) is thc planting lunctioti.'l'hc sLrb-rnodel is s1-rccillcd as a tirnctiorr o1-pricc ol'conrrlorlirv ririilothcr croqctroLts vzrriablcs. Irollor.ving to Alias. M. (1987) approach. rr-rbbcr plarrting clcrrrlrncl clin bcs1-rccilicrl as:

lll',: .1 (l)lt' POI),, (;OVt, LAl, Ur) (5)

\\'h c rc.

lll), rubbcr plarrtinu dcntaud[)l{, rubbcr priccl)Ol', palm oil price(iOV, qo\,cnlnrcnl cxpcltses ofnatr-rral rubbet' industrl,Lr\, nunrbcr o1'statc larrcl ii;lplication that sLlcccss rranagccl per )carI J, ra]rdonr variablc

Iiliclly. thc rubbcr plarrting b1'srnal lholdet's in Sabah rvas inllr-rcrrccd by pricc o1'rr,rbbcr'(orvn pricc). pricc

appiication ihal sLrcccss ntatragcd pcr ),car.

'l'o csicr ol'thc cstirnation rtrcthoci. cclr-ration (5)above can bc rvrotc in Iog lincar cclLration. it a-s liillons:

ln ltl),= p0 + pl ln l,ll,+ B2 ln POP, + B3 ln (iOV, + B:l ln LA, * p, (6)

\\,'hclc.l'lrc clcllnition ol'variables sarrc with eqr-ration (51

tlo rcggrassion intcrcept.

[] l. P2. [].1. [j4 & P5 cxpcctccl paranrctcr.ttr riil)(l()n) variltlrul.

IV. NA'I'UIIAI, }TTJI}III]R S[JI'I'I,Y

NatLrral rLrbbcr sLrpplf in this stitciv cxpandcd to trio sutr-nrodcl spccilrcalll,thc lubbcr nrairrr.crl arca si.,crlltldcl artcl thc rratrrral rubttcr prclcluction nrodol. Iloth o1'natural rubbcr sr-tppl-r, rcsllotlsc in this stuLjrbasccl on lhc tloclcl clcvclopccl b-v YLrsoff. I{. (1996. 1999a. 1999b. 1999c) clan Ilcrnali YLrsril'l'r,/ 11(ree8).

a. llubbcr Maturcd Arca Size

Spccilicatittrt ol thc rLrbbcr t.uaturccl area sizc is bascd ou tl.rc nrodcl clcvclopccl h1: Yr,rsot-l. l{. (19()(r.l999a. I 999b. 1999c) dan liemali Yr-rsofF el ttl (l 99tl). 'l'hc rrroclel inrprovcnrcrlt ur.,cr clicr nrodclsclcvclopcd bt'Ncrlovc (1958). Wickcns & Grccnficld (1973)" Lab)s (1971. 1975). Moharrrrrircl r\lirs(1985a. 19U5b. i9ti7). Au & Ilovcl (1992). Shanrsuclin. M N.(lc)9.1) cjan N4atl Nasir.slrirnrstrclin i,t irl(199,1) in its cxplicit tt'calutcnt o1-thc tt.cc slocks as capital.

llriclll'. thc rratr-rrcd arca sizc clcvclopcrl bv YLrsol-f . If . ( 1996. l9ll9a. 1999b. 1999c) ancl [icnrali YLrsol'l'r,ra1( I998) is as iirllons:

LN,ll : ./ (PX'l', 2, PKI'1_2 , Kllllr_2 , lll lLr_2, Ut) ()

-)

Whcrc.l,M, Malavsian cocoa r.r-trturccl hclcra-{c[)X'1 ,i N4alaysian cocoa pricc lag 2 r,cars

l)Kl', , Malavsian cocot.tLtt clrv plicc lag 2 vcarsI< Ill{r-, N4alavsian labor-rr cost pcr cocoa haratcgc lag 2 ycarslll,l{,-i ' inlclcst ralc to agriculturc scctor loan lag 2 r,cars

lJ, randorr variablc

lrclrration (7) is thc rr-rbber n.tatul'cd arca size. 'l'he sr-tb-tnodcl is spccillccl as a lirnclion itl'ltricr: ol'

conrnroclity,ancl otchcr cxogclroLrs variablcs. All cxogcn<)Lls variablcs nral(c lag 2 on assulltllliotr tl)al

cocoa thrccs can vicld in about two vcars attcr planting.

lrollrrn'ing to Ytrsol'1. I{. (1996. 1999a. l99qb. 1999c) and Rcmali Yr-rsol-l-at trl (1998) approach. tlrc

n-rbbcl rriatr-rrecl hcctara,gc lirr this stLrci), can bc spccilied as:

LM,: (PR,-s, POPI-5, GOVI-5, LAt-s, Ut)

I)i nrana.

l.M, thc tlrc rubbcr matlrrcd arca sizcPIt,-. rLrirbcr pricc lag 5 1,'carsPOP, . palnr oil rr-rbbcr pricc Iag 5 r"cars(lOV, . govcrnrrcrlt cxpclrses o1'natural rubber indLrstrl' lag 5 vcarsl.A, . uurrbcr oi-statc larrcl a;lplicatiori tliat success n.titnitgccl p<:r lcar lltg 5 r,cars

li, ranclon'rvarialr]c

pricc). thc pricc ltalnt oil (con'rpctilor plant). -qovenllcnt cxpcnscs o1-natural rttbbcr indrrstrv attcl ttLtttrl'ritt'

ol-stltlc Iand appliurtion thal suoccss managccl pcr year. All cxogcnt)Lrs variiiblcs tttalic llt;t 5 orr

assrrn'r1.rtion that rubbcr tltrccs catr yiclci in abclr-rt 5 y'cars aficr planting.

I'o casicr o1'tl.rc cstirnation nrcthocl. eclLratiou (tl) abovc can be r.vrotc in log lincar cquation. it as lbllou's:

ln LM,: P0 + pl ln PR,-5 + B2 ln POPt-s + B3 ln GOVt-s + B4 ln LA,-.+ p,

Whcrc.'l'hc dcllrritiun ol'variablcs sarnc with eqLration (8)

ll0 rcggrassion intcrccpt.

ll1. 02. []3" [].1 & 05 crpcctccl paramctcr.

tl, t'lltlrlotti r ltt'ill,t'1.

b. Nirlural llubbcr Procluction

Spccilictrtiun of'llrc rr-rbber prodLtctiolr is based on thc troclcl clcvclopccl bv Ytrs<tl'1. It. (1996. i()()():1.

1999h. i99t)c)dan Rcrnali Yusol'l-et ul (199t1). 1"he ruoclcl in-rprovcmenl ovcr clicr moclels clcl'ciopctl bv

Ncrlovc (195U). Wickcrrs clan Gleenllcld (1973). I-ab1's (lS7i. 1975)"'l'an (19ti.l). N4olrarnnrati Aiias

1lc)fl-5a. lq85b). Au & []o1,cl (1992). Shamsudin. M. N. (1993) and N4ad Nasir Shanrsr-rdin ct ul (lt)().i)inits cxltlicit lrcatlncnt o1-tl)c trcc slocks as capital and constraining thc harr,csting dccision br thc crislittrrplocltrvtivc capacitv. Otlrcr tlrau. this nroclcl also r-rscci by llasri Abciul & Zainrah (2002) 1o stLrcll ltalnr oiiinc1uslr1.

(fi )

(e)

11

tlrirtll'.thcYLrsol-1-.R.(1996. 1999a" 19qSb. 1999c)ancl llcnrali YLrsoll'ct crl(l99lilnroclcl.isasiirllous:

Qr: I'(l\,1,, X5r, X6,,'l'I,lK. LI,) (l{))

Whcrc.

Q, pnr<1rrclion

\'1, nralLrrccl lrcclalagcX5, c1r-ranlitrol'labourX6, clr.rirrtitvof'lcrtilizcrI'l .K lirnc trcncl pl'ox\ to tcchnologl,Ij, ranclonr valiab]c

l:tluation (10) is thc proclLrction lirnction.'l'he sr-rb-rnoclcl is spccilicci as a lirnctiou ol nralrrrcci ur.cl sizc ol'

coinrrroditv ancl oLchcr cx()llcnoLls variablcs.

Iiollor,ring 1o Yusol-1. R. (1996. 1999a. 1999b. 1999c) and I{crlali Yusof'1-cl trl (.1998) approaclt. llrclrrbbcl n-rbbcr production lbr this stLrdv can bc spccilrcd as:

ItS, : 1(llssr, LM,, (-'II,, 'fllc, Ur) (l l)

Whcn:.I{:. t'rtlrl,,'t'pttrdttr'littttIiS5 r'r rl.hcr'1'rrt',ltrcliott irr rr verlt'u!ltli.M, rLrbbcln-ratut'cclhcctaragc(ll l, \\callrcr/rainI'1 .(' tinrc trcncl pl'ox\, 1o tcchnology' iurprovctlct.tltl, ran(l()lnvariablc:

Ilricflv. llrc pr'<tcliiclion ol-natural rLrbbcr b),smallholclcrs in Sabalr was intlLrcuccd br rr-ibbcr irroiltrclitltt iir

'l'o casicr ol'thc cstinration nrcthocl. cqLlation ( I l) abovc can l)c \vrotc in log lincar cqlraliorr" it as lirllor'r's:

lnll,S,:[30 t-Bl lnltSS,+82 lnLM,+ B3lnCll,+p4ln'l'llC',+pr, (12)

Whclc.'l'hc dcllnition ol'valiablcs saurc ivith cclLration ( i I )

F0 rcggrassiorr intcrccpt

lll.02^ []1. P.1 & P5 cxpectecl parameter

fLr randonr valiabcl.

v. liMt,ttilCAL ITHSUL'r

I hc sclcction ol- 1hc variablcs in the cclLralion spccificalion is basccl on lhc Llrcolr atrd staLi-'tical

ciraractcrastics u,hiclr arc right colrcsion ark. the signilrcant inlbrrlativc variablcs l{'. tlic i:r'alLrc.l)Lrr'bin-\\'alson (l)W)" I)rrrbin-li ancl llrcusclt-(iodlicy Scrial C'orrclalion [.M'lcst.

)

Rubber Palanting Demand: 'lhe results forthe equation of the rubber planting demand as bclow (OLSestimation):

*r.**In RP = 11.810 + 0.659 ln PR, - l.l22ln POP,+ 0.110 ln GOVt

(e.0e0) (8.326)

+ 0.103 ln LA,(r.8r6)

(-6 384) (4.203 )

Il' 0.91.lt: 16.145r)w 1992

Notc: 'r' Sigrrilicant at thc 5 pclccnt lcvelNLrrnbcr in thc [rracl<cls arc values ol-t.

lhc rcsLrlts shori, tlrzlt thc clrangc in thc planting clcnrand o1'rubbcr can bc crplaincd lrv thc i'rlicc o1'

rr-rbbcr. thc pricc ol'palnr oil" govenrmer.rl expclrscs o1- natLtral rr-rbbcr inclustrv. iincl nttnrhcr ol'statc lancl

applicatiun tlrat sLlcce ss nranagcd pcr ycar'.

[]rom thc results. thc pricc olrribbor is signiticant at thc 5 pcrcent lcvcl to cxplain tlrc clrarrgc inthc planting dcuriinci cll- rr-rbber. '['hc estirrated elasticity of thc planting denrancl ol'rLrbbcr to 1)rc pricc ot'

rrrbbcr is 0.66 ([] 0.659. p .000). [t mcans. ccleris pru'ihu,s 1br cvclr'onc pcrccnl incrcrrsc in thc lrricc oi'rubbcr. thc planling dcnriincl ol- rtrbbcr lvill increasc by 0.66 pcrccrlt.

Ilcsiclcs. thc rcsLrlt also shou,that thc pricc o1'palnr oil is signillcant at thc 5 pcrccnt lcvcl iocxplain thc clrangc in thc planting dcrnand o1'rr-rbbcr. 'l'hc cstirratccl clasticity' ol- thc plantinu clcnrarrci oi'rr-rbbcr to thc pricc ol-palnr oil is -1.12 ([], ,-l .122. p.-.000). lt nrcans. cclcri.r puribus lirr cvcrr'on() pclccniincrcasc in thc pricc of'cocoa. thc planting dcmand ol'rubbcl rvill ciccrcasc lrv -1.12 pcrccrtl.

'l'he nrentioned resull also indicate that govcnmrcut cxpelrses ol'natr-rral rLrbbcl irrdLrstrr is

signilicant at thc 5 pcrccnt lcvcl to cxplain thc changc in thc planting demancl of rr-rbbcr. l'hc cstinrlrtct!clasticity, ol- tlrc planting clelnand of rubber to govcnlnrcllt cxpcnscs o1- natut'al rtrbbcr inclr"rstrf i:i 0. I i

(0 0. I 10. p .000). It rrcans. celeris paribus lbr cvery one porccnt inct'casc in gorcrnntcttt crpcnscs ol'natulal rubbcr inclr-rstr1,. the planting dcnrand ol'rutrtrer rvill incrcasc by 0.1 1 pcrccnt.

Ilubber Maturcd r\rca Size: 'l'hc results lbr the ecpratior.r ol- thc r.naturcd arca sizc o1-rr-rbbcr as bclou'(OLS cstinration):

ln LNI: I l.3t,l + 0.1:l7ln PIL,-. - 0.1rl5ln POP,-r + 0.010 ln (lOV,-r( r6.rJ22) (3.278) (-3.e24) (.0.219)

+ 0.057In LA,_q

(0.e.i0)

R:l 0.931

t, 8 I .568r..M (s) 1.r61

Notc: * Signilicant at thc 5 perccnt lcvclNLrnrbcr irr thc Llracl<cts arc valr-rcs ol'1.

(13)

(14)

6

'lhc rcsults shou, thal thc changc in thc r.r.ratr-rrcd area sizc o1'rubbcr carr bc cx;llainccl b1' tlrc pricc o1'

rLrbbcr arrd thcr pricc ol-palrr oil (conrpctitor"plant). All thcsc infbrn.rativc variablcs arc in tlrc lirrrn ol'a 5

)cars clclaycd clata.

Irrorn thc rcsulls" the pricc ol-rubbcr at 5 rcars ligo is signillcanl al the 5 pcrccnt icvcl to c\plainthc changc in thc maturccl arca sizc ol'nrbbcr.-l-hc cstirratccl clasticitv ol-the rnaturccl arca sizc o1'rrrbbcr'

1o thc pricc o1- rr-rbbcr at 5 ycars ago is 0. l5 (P='0.1,17. p' .00i). It lrlcans. calct'i.t ltctrihu,s lbr cvcrr oncpcrcenl irrcrcasc in thc price ol-rubber at 5 years ago. thc rraturcd arca sizc ol-rr-rbbcr rvili incrcasc br 0. l5pcrccr.)t.

llrc rcscarch also shows that thc price o1'palrn oil at 5 vclls ato is sisnillelrrit al tirc 5 pcrccrrL

lcrrcl 1. cxplain tl.rc changc in lhc n-ratured area size o1-rr-rbber.'['hc cstirnatcd clasticity'of'tirc rnrrtLrrcri arca

sizc o1'rubbcr to thc pricc o1-palm oil at 5 ycars ago is -0.15 (fl,',-0. 145. p'.000). It nrcans. ct:tari,s lttrrihtt.tlbr cvcry onc pcrccnl incrcasc in thc pricc o1'palrn oil at 5 ycars zlgo. tlre rnatr-rrcd arca sizc ol'r'Lrbbcr u,iliclcclcusc b1' 0. I 5 pcrccr.lt.

Natural llubbcr I'roduction:'l'he results fbr the ccluation o[-thc prociLlction ol-nzrtural nrbbcl as

bclou, (25l.S cstimation):

In lLS, = - tt.025 + 0.327 In llSS, + l.379ln LM, - 0.04,1 ln ClI,+ 0.0-19 ln 'l'E(],(-,1.141i (4.165) (9.816) (-0.s18) (2.lll)

I{r 0.961r, 104.0i 8

h 0.067

Notc: r' Signilicant at tlic 5 pcrccnt lcvclNumbcr irr 1hc bracl<cts arc valucs of' t.

'l'hc rcsults shon that the charrge in thc prodlrction o[- natural rubbcr can bc c.\plaincd lrv lltcrr:itural rurbbcr proclLtction in a ycar aso. l-]ratured arca sizc o{'rLrbbcr alrcl tir-r.tc scrics pro\\ t()

tcchnology i rnprovemcnt.l:ronr thc results. thc natural rubbcr production in a 1,car ago is signillcant itt llrc 5 pcrccrrt Icvcl ttr

crplain thc chalr.qc in thc production o1'rubbcr.'['hc estirrated clasticitv ol'thc natural lLrbbcl prrrciLrclion

o1'rubbcr 1o thc natural rr-rbber procir-rctiotr it-r a 1,ear ago is 0.3:l ([]'1.327. p .(X)3). lt nrcr.tns. dc'/t'r'l,r'

purihu,r fbl cvcrl'onc pcrccnt incrcase irr the r.ratural rubbcr production in a ycar ago. thc nzrtulal rLrbbcr

prodr-rctiorr rvill incrcase b1" 0.23 pcrcent. It also mcans. tolal of thc r.ral.ural rubbcr proclr-rction is dcpcnci tostagc ol'ltatuaral rutrber in lasl year.1'herel'ore. the previor-rs perfbrr.nancc o1-nattn'al lr-rbbcl procluction is

inrporlaut to rcccnt natural rubber prodirction.'l'his rcscarch also sl.rorvs that maturcd arca sizc ol rubbcr is signilicanl at thc 5 pcrccnt lcvcl 1o

cxplain thc changc in thc prodr-rction ol rr,rbllcr. 'l'hc eslirnatcd e lasticity ol'thc natLrral rtrbbcr protlttctiono1'rr-rbbcr to maturccl arca sizc ol- rr-rbber is 1.a (p 1.379. p" .000). Il n.rcans. cctct'i.\ Tttrrihus lirr u'ct'_r' ottc

pcrcclrt incrcasc in nraturccl arca sizc of-rubber. the rratr.rral rubbcr proclLlctiou u'ill inclcasc br' l.l7()percont.

l'hc trcntiorrcd rcsult also indicatc that tinrc sclics pl'ox\/ to tcchnologY irrprr)\ r'lrLnl is

signilicant at thc 5 pcrcctrt levcl to cxplain thc changc in thc prodr-rctiorr ol' rLrtrbcr. 'l lrc cstirr.ratcrl

clasticill, ol- tlrc natural rr-rbbcr production of rubbcr to tin.rc scrics proxy to tcchrrologt inr1.rrol'g1,,",,, It0.05 (p 0.04q. p .044). [t mcans. celaris ltctribus lbl cvcrr,ouc perccnt incrcusc in Lirrrc selies pror_r t,r

tcchnoJogv irrprovcmcr-rt" the natural rr"rbber procl-rctiot.r lvill irrcrcasc by 0.05 pcrccnt. l1 also nrcan. titcrusccl o1'tcchnologv cspccially irr production technology still lolv by srrallholdcr''s in Sabah.

(ls)

7

vt. Morxlr, vAl.Il)A'l'I0N

I'hc ntocicl bcing ciiscusccl is considcred sound bccause it lirltlls all the criteria ol'cconotnics. statistics lncl

cconornctrics.'l'ruc spccilicatiorr nrodcl urcal'rs thal t.he choserr variatrle catt rcprcsclrt tirc rcai sittrittiort

u,hcrcby anothcr sintr-rlatiorr tcst can bc done on thc rnodcl (YLrsoil. tt.. 1996: f)inclvl< & I{Lrbinl'clti. l9t)l).Conllrntation ol'this r.nodcl is vcrf importanl becausc a modcl rvith wron.c, spccilication uill uirc \\r'orr!r.

e:lirnltitrrt artJ itrl.l ieal i,rtt.'l hclc arc sot.ne: othcr ways to mcasLrre thc accLrracy o1-thc nrodcl sr-rch as thlougir 'l'ltc llrtr.,t ,\'lcttrt

,\tltruratl 1r-r'ror'(ltN4S1:.1.'l'lta Meun,4 lt,solule l:rror (MAIr). 'l'he )vlcun ,lh,tolula l'trt't:rttttyc l'-r'r'rtt'

( i\4A I)l r ) and'l'h c i l'.s I n e q u u li h, (' oei/i c i ent (.1)').

Iior I{MSIr" MAIi and MAP}l statistical ntctlrods nlcasLlrc thc clcvitttion valucs in rclatiorrs to thc

lrirc valuc. Ilthc valLtc is gettiug srnall. it nre.ins that thc cstirnatcd valuc is goittg to bc accrtralc (Yirsol'1.

l{." 1996t [)inclvk & ILLrbinlclcl. 1992).'l'lic rcsults ol-thc rcscarch regarding ITMSI]. N4Al., arrd \4Al'l: arc

shou,n lrclor,i, in 'l ablc -].

.[ABI,E 1: SIMULATION STATISTICAL RESUI,TSua1 i on RMSE N4ALI

Itr,rbber planting dernand (RP) 0.121 0.094

I{Lrbbcr nratr-rrccl alca sizc (l.M) 0.022 0.01 9

Natural rubber production (RS) 0.045 0.03 5

Whcrc.R P IlLrbbcr planting dcn.rand

I Nl ltLr[rl.er rrurtrrrcd rrt'ce sizcItS Nalural rr-rbbcr proclLrctiolt

I{N'lSll 'l'hc Rool Mcan Scluarcd Error.MAll 'l'hc Mcan Absoiutc llrror.Mr\l)I: 'l hc N4can Atrsolutc Pcrccntagc [:r'ror.

'l'ltcil's lner-lLralit,v Cocl-llcient ntcilsures the accr-rlacl,ot-thc r.nodel latrcl cstjrrratiort tt1'corttltltrittrl

thc valtic ancl lnrc valuc of'cndogen variablc. 'l'hc valLtc ol'U larlls bctu,cctt 0 and l. I1'tl 0. lllccapabilitl,ol'tlrc n.roclcl 1o cstimatc is pcrlcct. 'l'he capabilitl, ol thc nrodcl pcrltct rvhr:n t.l 0. or

sitnr"tlatirln valLrc ancl actual valr"rc arc cclual lbr all treatnlont period.'l'hcil's Ir-rcquality Clot:l-llcicrrt can be divided into threc tnain cvalr.tations calkl proporlittns oi'

incclr-ralit-v u,hich arc IJN'. Usand [J('.'t'his statistis rlethod (l.JNr ancl t]s) is lot'n.rcltsLtrit'tg thc rrristai<crrt ltartcausccl by thc dillcrence ir.r cstinreted valuc and true valuc. Il'thc valuc gctling stlall (closcr <tr cclLral 1o 0.).

it rrcans thc nrodcl u,hich has bccn r-rscd is considcrcd good and thc valtrc is accr-rt'atc. As lir thc [,r( r,alttc.

il'tlrc valuc is closcr to 1 or cqual to l. the nrodel is considcrcd gooci altcl tlrc cslinralcd valr-tc is also

accuratc (l{ernal i Yusol'1. 1996; t'iridyk & Rr,rbinltld. 199 l).'l'irc lcsr-rlts rcgarcling thc l'hcil's InccltraliLr

Cocf'llcicnt or [..] slatistic arc sowlt in 'l'ablc 2.

- vrw! lrrs4 I0.168 I-l0.i4l l

TABLII2: I.IEIL' S INEOUALITY COEFFICIENT tl STATISTICA T, RESUI,TS

!:qq41pr* I{P

I,M

LJ ti LJ. LJ"

0.008 0.000 0.023 0.9110.9til0.001 0.000 0.018

R.S 0.002 0.001 0.0r5 0.9tt4

Whcrc.RP Ilr-rbbcr planting cicnrancl

l.V l( rrbl.cl r)liltr.n crl ule u size

-l

8

I{S Natr-rral rubtrcr proclr-rctiot.r

[] l'heil"s lncqr-rality Cocl'llcicnt[]\r ]]ias [)roportionI Is Variancc ProporlionI ' ( trr ltt'irtttu,.' I)to;'rtr1'1i611

Ilorvcvcr'. thcrc arc also other rr"rethods than can be usccl to lreasLrrc thc accuracv ol'thc sirnttlrrLioir

suclr as rncnsuring tlrc capability ol'thc nrodcl to leach tr-rrnitrg poirrts in cxact clata. lror tlrc tirrrc bcirrg.

clata lbr ltcriocl 197 l-2004 u,as uscd, onc sinrulation had bccn carried out to scc thc cnpabililr,ol thc

nroclcl to rcaclt tltc historical clata.'l'hc rcsults lionr [iigurcs 1.2 and i shoiv that [lasic linc sirlulationrcsults can acltic.u,c lhc trr-rc valr-re. lJascd on thc abovc muitionecl thrcc critcria. this rloclcl catr cottsicicrcd

as a r.alici nrodcl iind be usecl lbr othcr sin.rulations.

II'IGURI,IS 1: SIMULATION OI'RUIIIIER I'LANTING DEMANI)

llcctare3500

:loo()

25(oO

2C)()0

1 {;OC)

1 OO()

50()

C)

1975 '1 985 -1 990 19S)5 :2()()O ye:rr

RP F<PF

FIGURES 2: SIMULATION OF RUBBER MATURI'D ARIIA SIZE

Ilectare72000

6aooo

64000

60000

56000

52000

4aooo1975 1gao 1985 1990 1995 2000

[-' tM rrrzrFl

l\,/ ---\/\l\ll

1i\i'\i

Year

L)

A/\

/t l' \r1 \/

I

FIGURES 3: SIMULATION OF NATURAL RUBBER PRODIICTION

llectare44000

40000

36000

32000

2aooo24000

20000

1 6000

1 2()()01975 1 9AO 1 945 1 990 1995 2OOO Year

RS FRStr

Where,RS : Actual RSF : Predicted

IIV. SUMMARY AND POLICY IMPLICATION

As a whole, the equations that are being assessed satisfy the aspect of affordability of the equations. by

explaining the phenomena that happened in the smallholder's rubber sector industry in Sabah. As for the

planting demand of rubber, the search results show that price of rubber, price of palm oil and governmcnt

expenses of natural rubber industry.As forthe matured areasize of rubber, the price of rubber and the price of palm oil that lagged 5

years are found to be important in explaining the changes in the matured area size of rLrbber by

smallholder's in Sabah. The production of rubber, the natural rubber production in a year ago. rnaturcd

area size of rubber and time series proxy to technology improvement are all imporlant factors that

contribute to the output of natural rubber by smallholder's in Sabah.

The results of this research put forward a number of policy implications. Seemingly, the natural

rubber industry still important and contributes meaningfully to the smallholder's income and welfare. Inorder to ensure the survival of the smallholder's rubber industry, several measures should be taken intoconsideration. This research brings about empirical evidence that serious threats to thc smallliolder'srubber industry are problems pertaining to the price of rubber. The estimated elasticity of the rubber

planting demand and the rubber matured areasize of the price of rubber are 0.6'/ and 0.i5, respictevily. 11

means, rubber smallholder's will care to change of the price of rubber in process to make decision about

rubber planting activities. If the price of rubber is good will be encourage smallholder's to be dcvotcd and

active in rubber planting activity.The results also show that the rubber planting demand is influenced by the price of compctitor

commodity specifically palm oil. The deference of the price of rubber and price of palm oil should be

good, relatively. The estimated elasticity of the rubber planting demand of the cross price is 1.12. ltmeans, rubber and palm oil are competitor commodity in smallholder's sector in Sabah. Therefore, the

price between these commodity should be good relatively so as smallholder's rubber do not rcplanting

they rubber area with pahn oil.The research also evidenced that time series proxy to technology improvement can be inf'luenccd

the production of natural rubber by smallliolder's in Sabah. The estimated elasticity of the nalural n"rbber

production of time series proxy to technology improvement is 0.05. This indicate that the used of

IO

tecitnologl cspccially irr production tcchnologv still low by srnallholclcr's it'r Sabah.'l'hcrclbrc. thc polic-r

ol'transf'crring anci applying of'agricr-rlture lechnology cspccialli,procltrction tcchnologr shotrlcl hc

clcvclol.r and i rrpl cn.rcn1.

Ilcsiclcs. the impoftant rcsuhs frorr the research is thc rr.rbtrcr rnalr-rrcc1 arca sizc can bc irrllucrrcccl

thc proclLrctior.r o1'natural rubber br.'smallholdcr's in Sabah. -l'he estirnatcd elasticit-v olthc nalural rr-rbbcr

prodrrction ol-rubbcr to matured arca size of rubber is 1.4. It lneans. the rubber tttalurcd rubbcr ulrca \\,lts

ltaving in.rportant contribution to stagc o1''nalural rubber by srnallholder's it.t Sabah.'l'hcrclirrc. tltc rubbcrplanling in a big scalc shor-rld be apply. It pulposc. to nxrintarrcc arrd incrcasc ol- rr-rbbcr nraturcd rtrca sizc

in thc lirturc. []csiclcs. a big ol''sizc rr-rbbcr planting also will bc incrcascd of ltirrring rr-tbbcr prodttclionancl linalll' to irrcrcasccl b;- smzrllholdcr's vield.

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t3