Malaysia’s lagging agriculture sector — Murray Hunter

DECEMBER 3 — Malaysia, whose agriculture sector led the economy for decades into the 1970s, is falling behind Indonesia, Thailand, Vietnam, and other regional players like China, Taiwan, and Korea in terms of innovation, technology, knowhow and methodology and product and value chain development.

The country’s long neglect of the sector and narrow focus on plantation crops at the cost of encouraging crop diversity has left the country with serious issues and challenges.

Despite the fact that the sector contributes 7.3 per cent to national GDP, it employs 1.5 million workers, fully 10 per cent of the workforce.

Agriculture’s dominance of the economy ended in 1981, when then-Prime Minister Tun Dr Mahathir Mohamed’s massive push towards industrialisation.

While the sector was rejuvenated somewhat by Dr Mahathir’s successor, Datuk SeriAbdullah Ahmad Badawi, through massive fund increases, it has never really recovered.

The plantation sector is operated by primarily government linked companies (GLCs) and large public listed estate companies.

Utilising around 5 million hectares, palm oil production contributed RM40.2 billion to GDP in 2018. The high profitability of palm oil as a crop over the years has deterred the development of alternative crops.

However, palm oil production in 2018 declined by about 2.5 per cent over the year before.

In March this year, the European Commission dealt the industry another blow, concluding that palm oil cultivation has caused deforestation and decided that palm oil as a feedstock in European biodiesel will be phased out by 2030.

Malaysian plantations are working towards achieving Malaysian Sustainable Palm Oil (MSPO) certification, which requires estates to meet a list of specific environmental standards and workers’ rights before January 1 in an attempt to alleviate EU concerns.

In addition, there are concerns over health issues with consuming palm oil, which will take a lot of resources on the part of the palm oil lobby to counter.

With the expected decline in world demand for palm oil, Malaysia, Thailand and Indonesia are trying to consume more domestically as biodiesel.

However, Malaysia with its diesel subsidies is struggling due to the relatively high cost of palm oil, vs subsidised diesel. Malaysia cannot afford to be complacent over palm oil any longer.

It’s a mature market where production is set to decline over the coming years, where alternatives are needed.

Malaysia is still the world’s 5th largest producer of rubber behind Thailand, Indonesia, Vietnam, and China. Rubber production is almost totally in the hands of 600,000 smallholders.

However, with prices drastically depressed due to severely weakened demand from China, reports claim that more than half of Malaysia’s rubber holdings have been abandoned.

Even with the Malaysian Rubber Board providing incentive payments to cover lower prices, rubber production has dropped by almost 20 per cent in the last year. The rubber industry is set to shrink until demand outstrips supply once again.

Historically, Malaysia’s rice production has only produced 60-70 per cent of the country’s consumption. Approximately 200,000 aging padi farmers on plots ranging between one and five hectares cultivate padi in the country.

Padi farming only produces marginal income, even with the subsidies provided by the government to farmers. Unlike padi farmers of the past, farmers today usually don’t multi-crop padi, vegetables, fruits, coconuts, and raise fish, poultry, and livestock.

Padi production lacks standardisation and doesn’t have Good Agricultural Practice (GAP) or HACCP certification.

Often unregistered pesticides are used, leaving chemical residuals. Thus, food safety and traceability are issues.

Although Malaysian padi yields are on a par with Thailand, they are behind Philippine, Indonesian, and Vietnamese yields.

Farmers mostly don’t own mechanical equipment, so must hire an array of contractors through the production process.

Due to Shariah law on inheritance, land holdings continue to be broken up between families, making padi farming even more difficult.

Large belts of idle land, estimated at 119,273 hectares, can be seen across the country partly due to family land disputes. Farmers have no involvement through the supply chain, so opportunities to add value to rice are non-existent.

Under the present padi farming system, there is no way farmers will be able to improve their incomes.

The only future for padi farming to benefit farmers is to develop co-operatives that manage economically viable estates made up of a group of farmers holdings.

These co-operatives should be for the benefit for the farmers, run by the farmers, and owned by the farmers.

These co-operatives could plant, cultivate, harvest, brand and package value-added products like red and brown rice varieties that have higher market end opportunities.

Contract farming initiatives creating padi estates have shown to reduce costs by 50 per cent and increase yields up to 30 per cent.

Other agricultural activities include cocoa production, which in the 1980s looked promising before most plantings were wiped out through disease.

Although production is still dwindling, some entrepreneurs are producing boutique beans and developing downstream niche chocolate production.

Vegetable and fruit production produce 40 per cent and 66 per cent of the nation’s needs respectively.

Production is gradually increasing with an impetus of new younger farmers, who are trying to make businesses out of their farms.

However, knowledge, experience, knowhow, are still being built up. Soil and environmental conditions are poor in many areas, with nutrient lacking soils, polluted water sources, with chemical contaminants present.

Disease has almost wiped out potentially promising niche industries like dragon fruit. Many producers are still nascent to certifications and supply chain management.

Malaysia currently only produces around 20-25 per cent of its beef, goat and mutton requirements.

Despite many previous government initiatives to bolster meat production, there is a chronic shortage of grazing land on the peninsula, and in some cases public abattoir facilities are not certified.

Likewise, dairies supply only a fraction of local demand. In contrast, the privately developed and operated poultry industry has been developed as a successful state of the art, fully integrated industry, not only producing all of Malaysia’s poultry needs, but Singapore’s as well.

Smallholders have tended to be minimally educated and are now well into their 60s. Padi fields, rubber plantations, and dusuns (fruit orchards) have been left idle with no one to take over.

This is in contrast to farmers in other countries who take over from their fathers with technical and business degrees and vision.

Local Malaysian farmers have been indoctrinated by the agricultural backgrounds of their localities and that their land holds limited crop opportunities.

They have been scared by scammers who tell them to plant bananas, lemongrass, chili fertigation, agarwood, and teak, only to fail technically or have no buyer once the crop is ready to harvest.

Young people don’t want to take over the family farm holding because they want to find better opportunities.

This is one of the weaknesses of the Ministry of Agriculture and subordinate agencies. These organisations lack the ability to empower the youth of rural communities through outreach and extension.

There is also no vision of how integrated communities should be created and developed into multiactivity local-sustainable micro-economies.

Malaysia, unlike Thailand, doesn’t have model integrated farms that demonstrate and teach communities how to farm and create cottage industries.

While Malaysian academics write academic papers with an eye to promotion, their Thai counterparts are in the community helping the people create products, processes, brands, and markets.

They enrich community sustainability. This is a prerequisite to develop and expand coconut production and create multiple downstream industries using coconut materials to produce coconut oil, virgin coconut oil, coconut milk, activated carbon, copra, processed coconut products and even animal feeds.

The Ministry of Agriculture’s research priorities have been developed by bureaucrats rather than industry. Research priorities need to be focused on the problems and opportunities of today, for current stakeholders.

Research has been left to small units at the Malaysia Agricultural Research and Development Institute (Mardi). This would include products like ginger, chili, onion, garlic, cabbage, sweet corn, eggplant, okra, long beans, avocado, asam jawa – tamarind – figs, grapes, mangoes, cashew nuts, and macadamia nuts, etc.

The successful food processing firm Adabi Consumer Industries is unable to purchase all its needs locally and is forced to import raw materials.

Unlike Thailand and Taiwan, little has been done to help communities develop downstream products like dried and canned fruits, processed foods, dairy foods, snacks, ice cream, sausages, pies, and burger patties, etc.

Institutes like Mardi may show the minister and media some of these products in exhibitions, but rural communities rarely get to see them, let alone learn how to produce them.

Little is done to create branding paradigms other than the slogan “Malaysia Best.” While Sabah and Cameron Highlands tea companies have successfully used geographical branding, halal farming is largely ignored even though the global halal market is growing by double digits. Organic and ethical products hardly exist.

The Pakatan Harapan government has decided that rather than put effort into meeting the country’s current agricultural challenges the rural community depends on, it will invest time and resources into smart farming.

This is an opportunity for consulting and technology companies to make a lot of money, and bureaucrats travel overseas on junkets to smart farming exhibitions at taxpayers' expense.

But smart farming will not revitalise existing farming in the country. It will assist new entrepreneurs with access to expertise and capital to pick up grants and incentives. Smart farming is set to be the next white elephant, just as the biotech initiative was.

Malaysian agriculture is at a crossroads. The whole sector needs rethinking. People with experience and knowledge of the issues are in the country.

Before committing to smart farming, which does have a place in some niches, the potential future directions of the sector need to be discussed openly, so a new thought-out direction can be set in Malaysian agriculture.

The government needs to work on transforming what already is, help rural communities that are in need, rather than look after its own with one more white elephant.

* An earlier version of this article was published in the Asia Sentinel

** This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail.

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