Commodity Income Management: Selected Southeast Asian Economies

This research paper examines commodity income management in Southeast Asian economies, focusing on coffee in Vietnam and palm oil in Malaysia. It analyzes the impacts of price volatility on producers and evaluates various state interventions, including supply management, diversification, and transition schemes, to provide recommendations for stabilizing commodity revenues.

• Vietnam's coffee industry experienced significant growth to become the world's second largest grower by 2002, but its heavy reliance on international markets—with 92 per cent of beans exported—made it highly vulnerable to price volatility. A price slump between 1999 and 2002 saw export returns drop from US$601 million to a low of US$300 million in 2002.
• Price volatility in the Vietnamese coffee sector caused severe economic hardship and social unrest in the Central Highlands, particularly in Dak Lak province where coffee accounts for over 95 per cent of local incomes. Ethnic minorities, who provided much of the labor and land, faced declining profits and lacked the credit or skills to diversify into other crops.
• Vietnam's attempt to stabilize coffee prices through a stockpile program of 90,000 tonnes of Robusta beans failed and resulted in US$15.45 million in losses for the Ministry of Trade. The failure is attributed to the lack of a world monopoly or cartel, as other producing countries increased their quotas to compensate for the reduced supply.
• Malaysia's palm oil industry is a critical economic pillar, accounting for 30 per cent of the world's traded edible oils and fats supply and contributing over MYR27 billion in annual exports since 2003. However, the sector has faced volatility due to oversupply from a surge in planting after the 1997 Asian economic crisis and instability in Indonesia.
• Malaysia successfully reduced its dependence on rubber by diversifying into palm oil and subsequently pursuing vertical diversification. Through agencies like the Federal Land Development Authority (FELDA), Malaysia moved from upstream production into downstream portfolios including milling, refining, and marketing, which catalyzed broader light industrialization.
• Malaysia employs a transition scheme where a levy on palm oil during high-price periods is used to subsidize the use of palm oil for electricity generation when prices fall. This mechanism was used in 2001 at Tenaga Nasional Berhad (TNB)’s power station in Butterworth to help recover crude palm oil prices by reducing excess stocks.
• The Philippines' use of quantitative restrictions (QRs) and protectionism for rice led to inefficient management by the National Food Authority (NFA). This resulted in high domestic prices for consumers and exaggerated price fluctuations for producers, with protection tariff rates increasing from 16 per cent in the 1980s to 41 per cent in the 1990s.

APA

Lim, H., & Wei, L. T. (2007). Commodity Income Management: Selected Southeast Asian Economies. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/trade_price_case_southeastasia.pdf

Chicago

Lim, Hank, and Lim Tai Wei. Commodity Income Management: Selected Southeast Asian Economies. International Institute for Sustainable Development, 2007. https://www.iisd.org/system/files/publications/trade_price_case_southeastasia.pdf.

Wikipedia

{{cite report |last1=Lim |first1=Hank |last2=Wei |first2=Lim Tai |title=Commodity Income Management: Selected Southeast Asian Economies |publisher=International Institute for Sustainable Development |date=May 2007 |url=https://www.iisd.org/system/files/publications/trade_price_case_southeastasia.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{lim2007commodity, author = {Lim, Hank and Wei, Lim Tai}, title = {{Commodity Income Management: Selected Southeast Asian Economies}}, institution = {International Institute for Sustainable Development}, year = {2007}, month = may, url = {https://www.iisd.org/system/files/publications/trade_price_case_southeastasia.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }