Inefficiency of Malaysian palm oil refineries and the impact of different factors on its inefficiency

This study aimed to analyze changes in the inefficiency of Malaysian palm oil refineries using DEA window analysis method over the period 1996 to 2009. We investigated the effects of different factors on inefficiency of Malaysian palm oil refineries. Based on empirical results, the effect of all factors such as vertical integration, types of ownership, foreign investment, location, experience, and liberalization on inefficiency of refineries was significant. Experience, liberalization, and joint venture between private and public sectors showed an increase in efficiency, while joint venture between local and foreign investment and vertical integration increased refineries’ inefficiency. However, palm oil refineries which were located in the states of Sabah and Sarawak were less technically inefficient than those located in peninsular Malaysia

Keywords:

Vertical Integration , Liberalization , Foreign Investment , Data Envelopment Analysis (DEA) , Window Method , Processed Palm Oil Industry