The Impact of Government Intervention on Comparative Advantage of Coconut Farming: A Systematic Review

2.1 Comparative advantage of coconut

As stated by Danna-Buitrago and Stellian [13], a key element within economic theory is represented by the notion of comparative advantage. Based on the Ricardian theory, variations in relative productivity give rise to trading trends, which can then serve to uncover hidden disparities in relative productivity [14]. Nonetheless, several research works have underscored the shortcomings of the Ricardian theory, such as its failure to address income distribution and the evolution of trade terms over time [15-17]. Their approach postulated that even when sharing access to and preference for the same technologies, distinct countries possess varying levels of productive resources [18]. According to the Heckscher-Ohlin theorem, countries will specialise in manufacturing commodities that employ their relatively abundant factors more intensively. Furthermore, it contends that disparities in the comparative advantage of a commodity stem from discrepancies in the quantities and proportions of its constituent elements [19]. The Ricardian theory advocates for specialization in activities where a country has a comparative advantage. In the case of coconut farming, the comparative advantage might lie in factors such as climate, soil conditions, or expertise. Governmental actions that support and enhance coconut farming align with the principle of specialization, allowing Malaysia to capitalize on its strengths in coconut production.

The Balassa RCA index is favored by many due to its straightforward computation. This index relies on an industry's economic efficiency and serves the purpose of pinpointing a country's robust and weak export sectors, while also evaluating its trade strategies [20, 21]. The RCA indices offer diverse ways to assess trade performance. For example, the computed values can be employed for comparing different industries, whether on a countrywide or regional scale [21, 22]. Another use involves contrasting the calculated value with a neutral reference point. Some studies have employed the RCA indexes to appraise the relative strengths in agricultural trade, both nationally and regionally. This is crucial due to the prominent role of agricultural trade within the overall economy, with its substantial impact on domestic agricultural production, employment, and global food security. For instance, research revealed that Serbia exhibited a comparative advantage in agricultural trade when compared to European counterparts, yet this advantage was not present in relation to Asian nations. The Ricardian theory underscores the importance of international trade based on comparative advantage. By supporting coconut farming through favorable policies, Malaysia can strengthen its position in the global coconut market and engage in mutually beneficial trade relationships with other countries. This aligns with the theory's emphasis on maximizing gains from trade by specializing in the production of goods and services in which a country has a relative advantage.

As stated by Ismail and Yusop [23], an assessment of comparative advantage investigates the potential for resources utilized in a specific economic sector to yield greater profitability in an alternative sector. For instance, the rise in import expenses and the depreciation of the Malaysian ringgit might induce a change in comparative advantage, favoring production techniques that make use of domestic resources.

2.2 Government intervention

To find out if Ghana has a comparative advantage in maize production given the impact of current international pricing and national regulations, Scheiterle and Birner [24] carried out an empirical analysis. They use the Policy Analysis Matrix (PAM) to assess how the government's FSP affects the system of maize production to achieve this goal. This assessment examines the way a policy influences private and public revenues, expenditures, and profits within a budget-oriented approach. As highlighted in Okubo's [25] study, higher transportation costs tend to foster concentration in a specific location, while lower transportation costs encourage broader regional diversification.

As indicated in the research conducted by Mohanty and Peterson [26], to maintain its self-sufficiency in wheat, India might have to enhance its wheat output at a notably accelerated pace compared to rice production. This could be accomplished with limited or no government intervention, given that wheat holds a comparative advantage over rice in the primary cultivation areas, as suggested by the PAM assessment. However, the significant advantage of an expansive agricultural enterprise and the goat sub-sector can be chiefly attributed to their ability to operate with higher cost efficiency. Nevertheless, the influence of government policies, particularly those involving non-tariff measures related to poultry and livestock production, has revealed a slight impact on domestic output, as observed in the research by Mohamed et al. [27]. The concept of comparative advantage, frequently linked to alterations in a nation's resource endowments, is broadly employed to elucidate trends in global trade. Government policies can influence trade dynamics within agricultural sectors. While variations in trade patterns for commodities like grains, cotton, oilseeds, and, to a lesser extent, meat products, along with an aggregate measure encompassing all agricultural goods, are largely accounted for by a country's resource endowments, elements denoting governmental intervention do not play a substantial role in elucidating trade patterns, according to Peterson and Valluru [28].

Up until recently, the Malaysian government has placed an increasing emphasis on raising agricultural productivity and developing new technologies [29]. There has been a downward tendency in coconut production, despite widespread encouragement to increase production [9]. To attract the younger generation, the government implemented various incentives aimed at strengthening and rejuvenating the business sector. These incentives include the National Agricultural Skills Training Programme (PLKPK), the Young Agropreneur Programme, the National Young Agropreneur Council (MAM), and micro-lending facilities [30]. Furthermore, the Malaysian government aims to reduce its dependency on coconut imports through the augmentation of domestic coconut production. Several strategies and projects were developed based on the National Agricultural Policy and the Malaysian Development Plan as guiding principles [30].

2.3 Relationship between government intervention and comparative advantage

Numerical evaluations and analysis studies have shown that both direct and indirect government interventions outperform taking no action in terms of consumer surplus, market results, environmental performance, and social welfare [31]. Furthermore, the impacts of government interventions on performance improvements are the same whether they are direct or indirect. This finding supports the idea that government intervention can be strategically employed to boost profitable sectors like agriculture. Comparatively, Ajefu and Barde [32] underscore the limitations of relying solely on market forces without government intervention.

Wang et al. [33] suggest that positive effects resulting from certain government policies do not exhibit incremental growth over time. This lack of sustained growth could be attributed to weak policy implementation in trade matters, coupled with the overall contraction of global trade. It indicates that favorable policies alone might not lead to consistent positive outcomes in the absence of comprehensive and effective implementation strategies. The results of the policy analysis matrix indicate that local selling prices for dates are lower than their global prices, motivating farmers to export dates [34]. This underscores the role of price differentials in influencing export decisions in agricultural markets. However, Gaubert et al. [35] suggest that while subsidizing "national champions" in closed economies can lead to excessive market power, it might have beneficial effects in open economies. This finding underscores the need to consider the broader economic context when formulating industrial policies. Hassan et al. [36] suggest that the company's performance improved after deregulation. This indicates that the deregulation of the energy sector in Nigeria had a positive effect on the performance of Oando Group. Deregulation likely allowed for increased market competition and operational flexibility, contributing to the improved performance of the company.

Farmers in Danish agriculture are having difficulty refinancing and keeping a profit because of the recent financial crisis. In Latvia, agriculture crediting has just recently gained major governmental support [37]. In the UK, banks and farmers have long-standing links, but these ties are deteriorating because of reduced returns from producer investments in agriculture. The study of Wentzel and Steyn [38] focused on the potential benefits of government intervention to attract foreign direct investment (FDI) in the manufacturing industry in South Africa. It suggests that introducing or modifying incentives can enhance the country's competitive advantage, making it more appealing to foreign investors. Government intervention in this context is seen to stimulate economic growth and development by leveraging external investments. According to Shi et al. [39], subsidies can lower the barriers for entrepreneurs to start their businesses, leading to an increase in the number of startups. However, these subsidies might not necessarily boost the overall worth of entrepreneurship, particularly in terms of investment and the growth of high-tech entrepreneurial wealth. This highlights that while subsidies can boost the quantity of startups, they might not always translate into improved entrepreneurial outcomes. On the other hand, Aliyeva et al. [40] concluded that a nation may not need to prioritise agriculture or expand government intervention if it does not have a competitive advantage in this area. Liberalisation of international commerce may be a better strategy for guaranteeing food security. This suggests that the policy focus should be determined by a country's comparative advantage and economic realities.

To ascertain whether Ghana has a comparative advantage in maize production given the impact of current global pricing and domestic regulations, Scheiterle and Birner [24] carried out an empirical analysis. They use the Policy Analysis Matrix (PAM) to assess the effects of the government's FSP on the system of maize production to accomplish this goal. This analysis scrutinizes the way a policy influences private and public earnings, costs, and profits within a framework grounded in budget considerations. Based on the findings of Okubo [25], increased transportation expenses encourage centralization to a specific area, while reduced transportation costs encourage spreading activities across regions. Uneven diversification leads to a steady balance wherein, for moderate transit costs, the less populous location experiences higher wages and a reduced external influence, and conversely for the more populous location.

As per the research conducted by Mohanty and Peterson [26], for India to maintain its self-sufficiency in wheat, it might be necessary for wheat production to experience a notably more rapid growth rate compared to rice production. Given that wheat holds a comparative advantage over rice in the primary cultivation areas, as indicated by the PAM ranking, achieving this could potentially require minimal or no government intervention. The primary reason for the substantial advantage of a very large farm and the goat sub-comparative sector lies in their ability to function with enhanced cost-efficiency. Nonetheless, governmental policies, specifically those of a non-tariff nature about to livestock and poultry production overall, have demonstrated minimal impact on domestic output, as outlined in the study by Mohamed et al. [27].

Feng et al. [59] in Appendix Table 1 in demonstrate that, irrespective of the type of subsidy, government support can strengthen the flexible contract's comparative advantages. However, the same outcomes are shown by the comparativeness measures, Social Benefit Cost Ratio (SBC) (1.11) and Domestic Resource Cost (DRC) (0.83). The Nominal Protection Coefficient Ratio (NPC) (1.01) and Effective Protection Coefficient (EPC) (1.05), which have values greater than unity, suggest that export promotion of rice production is supported. This demonstrates how the current policies to comply with competitiveness [60]. This finding supports the idea that government intervention can be strategically employed to boost profitable sectors like agriculture. The potential advantages of government action to draw foreign direct investment (FDI) in South Africa's manufacturing sector were the main subject of Wentzel and Steyn's study [38]. It suggests that introducing or modifying incentives can enhance the country's competitive advantage, making it more appealing to foreign investors. Government intervention in this context is seen to stimulate economic growth and development by leveraging external investments.

Agricultural production systems with yields above a certain threshold contribute positively to economic growth and household profits [24]. Production systems that record negative social profits and depend on government intervention are those whose yields fall below this threshold. This highlights the significance of productivity benchmarks and the part played by government action in bolstering less successful systems. The results of the policy analysis matrix indicate that local selling prices for dates are lower than their global prices, motivating farmers to export dates [34]. This underscores the role of price differentials in influencing export decisions in agricultural markets. Furthermore, according to Ma and Li [61]: (1) There is a cutoff point for the HWC manufacturer's subsidy coefficient when deciding between outsourcing and self-saving. (2) In cases where WSSC and the manufacturer have a comparable technological advantage, government subsidies encourage HWC firms to choose outsourcing as a cost-saving measure. (3) In the event of a water-saving mode, government subsidies for investment costs are a more efficient way to get improved environmental performance.

Even with the stringent laws in Guatemala, US, Mexico, China, Thailand, and India, the comparative advantage is strong up to seven or nine sugar categories, according to the findings of Sheetal et al. [62]. Furthermore, even with Canada, Brazil, and Colombia's indulgent restrictions, the comparative benefit only holds for two or three sugar categories. Similarly, Pérez-Méndez et al. [63] findings indicate that the subsidies received had a favourable impact on both conceptions. Based on the calculations, we can determine that the Principality of Asturias' implementation of Measure 123 has made investment projects possible that, during the last analysis period, would have yielded returns of 8% and 32% for forestry and agrifood companies, respectively. Consequently, it may be said that this measure's implementation was successful. Additionally, the actual protection coefficient was 1.56 and the nominal protection coefficient was almost 1.48.

The value of the first element indicates that the government backs the domestic producer indicated earlier, and the value of the second indicates that the domestic producer stands to gain more from government action than from its non-intervention [64]. Likewise, Balogh and Jámbor [65] conclude that the 2008 wine CMO reform reduced European winemakers' ability to compete globally. The EU appears to have overlooked addressing emerging global issues such as climate change, shifting agricultural and food prices, the rise of New World wine exporters, and shifting wine preferences among consumers by focusing solely on vineyard reorganization and planting rights.

To maintain Australia's competitive edge in agricultural exports, authorities will need to keep striking a balance between measures that boost the industry's financial success and those that represent public expectations of support for the farming community [66]. Additionally, it was discovered that Chinese businesses benefited from government interference by getting assistance for the advancement of their human resources. Excellent access to a wide range of inputs, including technology, building materials, and machinery, benefits China as well. India, conversely, gains from the heightened competition due to its more "hands-off" approach to government policies that focus on fostering a business-friendly environment. These policies include favourable taxation, laws and regulations, code/standard systems, and market entrance policies [67]. Correspondingly, the operational and survival of agricultural firms, such as family farms in Slovenia and agricultural enterprises in Ukraine, have been primarily impacted by the availability of state support, as confirmed by their historical experience and practices [68].

On the contrary, Ito et al. [69] claim that the disruption was not successfully remedied despite later government involvement in the rice futures markets. This points to the complexities of managing disruptions caused by external factors and the challenges governments might face in stabilizing commodity markets.

According to Shi et al. [39] the government of China provides enough subsidies before an entrepreneur enters the market to support the start-up. The initial firm size is still less than that of the US, though. Should the subsidy be awarded after the entrepreneurship, the impact will be so minimal as to increase by a mere 0.5. It is implied that the caliber of entrepreneurship won't be altered by a one-time payment. Additionally, Aliyeva et al. [40] conclude that if a country lacks a competitive advantage in the agricultural sector, Government intervention in this field may not need to increase or be given priority. Liberalisation of international commerce may be a better strategy for guaranteeing food security.

This suggests that the policy focus should be determined by a country's comparative advantage and economic realities. Similarly, Agricultural crediting is very new in Latvia and is substantially subsidised by the government; in Denmark, farmers are having difficulty refinancing and making a profit after the agricultural sector went through a financial crisis [37]. A spike in price volatility would also considerably increase revenue risk in addition to eliminating direct payments, which would reduce dairy production's competitive advantage for risk-averse decision-makers [70]. Similarly, in 2007, the policy intervention resulted in a negative revenue divergence by driving down the domestic price of wheat relative to the international price. Wheat was still in short supply on the global market in 2008, which led to price increases [71]. However, Padilla-Bernal et al. [72] explained the fact that the difference between the price of tomatoes at the market and their economic worth surpasses the discrepancy resulting from the exchange rate policy that overvalues tradable inputs, along with the interest rate subsidies and electricity costs associated with pumping irrigation water.

The examination of the impacts of government intervention on the comparative advantage of coconut farming in Malaysia reveals a complex interplay between policy measures and economic dynamics. Through a systematic review of relevant studies, it becomes evident the important role that government intervention plays in determining comparative advantage, assisting domestic producers, and influencing economic outcomes across a range of industries. Subsidies, rules, and investment initiatives are examples of how government policies can positively impact profitability and competitiveness, which benefits both home businesses and the economy. However, the concept of comparative advantage, which underlines the efficiency gained from specializing in activities, is significantly influenced by governmental actions in the context of coconut farming. The research that has been reviewed shows that government interventions can affect coconut farming's comparative advantage in both positive and negative ways. Supportive policies such as subsidies, research funding, and infrastructure development aimed at enhancing productivity and competitiveness can bolster Malaysia's position in the global coconut market.

This study also reveals how some government interventions negatively impact the agricultural sectors' comparative advantage by causing lower profitability, higher revenue risk, and distorted market dynamics. Such interventions have the potential to undermine agricultural firms' comparative advantage by impeding their ability to compete successfully in both domestic and international markets.

Furthermore, this review highlights that out of the twenty articles examined, no single article was authored in Malaysia. This suggests that there needs to be more research conducted in Malaysia on this subject. Supportive policies such as subsidies, research funding, and infrastructure development aimed at enhancing productivity and competitiveness can bolster Malaysia's position in the global coconut market.

This study has revealed that government intervention could influence comparative advantage both positively and negatively. Also reveals different kinds of government interventions available to enhance comparative advantage. Therefore, future studies should focus on those factors preventing the government from influencing comparative advantage.

Our study utilized three databases: Scopus, Web of Science, and Emerald. However, this selection may have limited the number of reviewed articles due to our inability to access other databases. Therefore, future research endeavors should consider exploring additional databases to enhance the comprehensiveness of the literature review and capture a broader range of relevant articles.