THIRD COUNTRY TRAINING ON AGRICULTURAL FINANCE February 2004, Hanoi, Vietnam CURRENT SITUATION OF AGRICULTURE IN MALAYSIA Prepared by: Ng Tak Wa Bank Pertanian Malaysia February 2004

Contents 1.Importance of the Agricultural Sector 2.History of Agricultural Development 3.National Agricultural Policies 4.Agricultural Commodities 5.Agricultural Institutions 6.Poverty Eradication

PART I IMPORTANCE OF THE AGRICULTURAL SECTOR

Overall Statistics Population (2003): million Land area: 330,252 square kilometers Employment (‘000): Labor force Employment Unemployed Unemployment rate3.5%3.4%

Importance of Agricultural Sector  Main contributor to the national economy in 1960’s to 1980’s.  This sector laid the foundation & was the driving force behind the economic growth of the country which progressively led to the transformation of the economy towards industrialization.  Strategically important as a provider of food.  Vital source of raw materials for the agro & resource-based industrial development.

GDP Growth By Sectors (%)

Share of Agriculture to GDP,

GDP Contribution By Sectors,

Employment in Agriculture

Share of Agricultural Exports

PART II HISTORY OF AGRICULTURAL DEVELOPMENT IN MALAYSIA

Agricultural Development in Malaysia 1960’s & 1970’s  Agriculture was the main pillar of the Malaysian economy in the 1960’s.  Average growth rate of 8.5% per annum.  Rubber, palm oil, saw logs & pepper accounted for 42.0% of agriculture sector production.  Expansionary policies on paddy and export crops (rubber, oil palm & cocoa).  Development of new lands and in situ development.

Agricultural Development in Malaysia 1980’s  Average growth rate recorded during this period was 1.3 per cent per annum.  Growth came mostly from the increase in outputs of palm oil, cocoa & sawlogs.  Malaysia experienced rapid expansion in the manufacturing sector and this altered the relative importance of the agricultural sector.

Agricultural Development in Malaysia 1980’s (continue)  During this period, Malaysia continued to focus on new land development & consolidation of uneconomic farm size through in-situ development.

Agricultural Development in Malaysia 1990’s  Average growth rate between of 1.40 per cent per annum.  Palm oil sub-sector accounted for over 40.0% of overall value-added.  Rubber, cocoa & saw logs experienced negative growth.  Greater emphasis was given to address productivity, efficiency & competitiveness issues facing the agricultural sector.

PART III NATIONAL AGRICULTURAL POLICIES

National Agricultural Policy (NAP) Agricultural development since independence has been guided by the National Agricultural Policies (NAP).  NAP 1 (1984 – 1991)  NAP 2 (1992 – 2010)  NAP 3 (1998 – 2010)

NAP 1 (1984 – 1991)  Aimed at maximizing income from agriculture through effective and efficient utilization of resources and the revitalization of the sector’s contribution to the national economy.  Pursued expansionary policies on export crops, in particular oil palm and cocoa.  In–situ development to resolve the problems of uneconomic farm size, non-remunerative crops and low productivity especially among smallholders.

NAP 1 (1984 – 1991) In-situ development involves replanting, rehabilitating and consolidating activities on existing agricultural areas that are faced with problems of poverty and low productivity. Land consolidation is aimed at consolidating and enlarging fragmented and uneconomic holdings.

 The policy outlines strategies for expanding food production, greater role of the private sector, marketing reform and accelerated agro-based industrial development. NAP 2 (1992 – 2010)

Address the new developments during the 1992 – 97 period that posed new issues & challenges :-  Establishment of WTO and rapid liberation of agricultural trade. of agricultural trade.  Financial crisis.  High imports of food.  Growing concerns for sustainable development & environmental protection. development & environmental protection. NAP 3 (1998 – 2010)

Objectives :-  To increase food production and stabilize food prices.  To maximize income through the optimum use of resources.  To increase productivity & competitiveness of the agricultural sector.  To reduce trade deficit in food. NAP 3 (1998 – 2010)

Strategies :- 1.To enhance competitiveness. 2.To add value to the whole value chain. 3.To mechanize and commercialize agriculture. 4.To promote Malaysia as the Halal Food Center. 5.To upgrade business environment. 6.To encourage private sector participation.

NAP 3 (1998 – 2010) Strategies :- 6. To encourage innovations and R & D. 7. To draw foreign investment to help local business to upgrade their technology. 8. To enhance vocational skills and training. 9. To upgrade business environment. 10. To adopt an integrated approach in agricultural development.

PART IV AGRICULTURAL COMMODITIES OF MALAYSIA

Main Agricultural Commodities  Food Products  Industrial Crops  Forestry and Timber- based products  Others Economic Crops (Coconut, Pepper, Tobacco & Miscellaneous Crops)

Food Products Food Crops  Paddy  Fruits and Vegetables o Livestock o Fisheries

Industrial Crops o Oil Palm o Rubber o Cocoa

SUMMARY Increase in the production of oil palm. Decline in the production of rubber, sawlogs and cocoa. Oil palm is the main contributor to the GDP from agriculture (35% in 2003). Self sufficiency in fruits, poultry and eggs. Not self sufficiency in rice, vegetables, beef, mutton, pork, milk and food fish. Target to increase food production and to be net exporter of food. Continued dependence on the import of rice.

Agriculture Land Use (‘000 hectares)

Agricultural Value-Added,

Value Added of Major Commodities, 2001 – 2003 (RM million)

Value Added of Major Commodities, 2001 – 2003 (RM million) * Including livestock, cocoa,fruits,copra, vegetables,tobacco,tea, flower, pepper and pineapple.

Self sufficiency Level of Major Food Commodities (%)

Forecast of Value-Added For The Food Sector

Forecast of Production of Major Food Commodities(‘000 tonnes)

Trade Balance of Foodstuff 2002 (RM million) Target : To be a net food exporter by year 2010

Trade Balance of Foodstuff 2010 (RM million)

Production and Hectarage of Industrial Crops

Exports of Industrial Crops, (RM billion)

PART V AGRICULTURAL INSTITUTIONS

Agriculture Institutions Agricultural development in Malaysia is entrusted under the following 4 ministries :-  Ministry of Agriculture  Ministry of Primary Industries  Ministry of Rural Development  Ministry of Land and Cooperative Development. Development.

Ministry of Agriculture Roles & Functions Responsible for improving the incomes of farmers, livestock breeders and fishermen by efficient utilization of the nation’s resources, manages food production for domestic consumption and exports.

Ministry of Agriculture Departments under the Ministry :-  Department of Agriculture  Department of Fisheries  Department of Irrigation & Drainage  Department of Veterinary Services

Ministry of Agriculture Agencies under the Ministry :- o Agricultural Bank of Malaysia o Malaysian Agriculture Research & Development (MARDI) Development (MARDI) o Farmers’ Organization Authority o Federal Agricultural Marketing Authority Authority

Ministry of Agriculture o Fisheries Development Authority of Malaysia Malaysia o Kemubu Agricultural Development Authority (KADA) Authority (KADA) o Muda Agricultural Development Authority (MADA) Authority (MADA) o Pepper Marketing Board

Ministry of Primary Industries Roles & Functions: Oversees the development of the primary commodities covering R & D, production, processing and marketing in respect of timber, palm oil, rubber, cocoa, pepper, tin, copper and other minerals.

Ministry of Primary Industries Departments and agencies under the Ministry :-  Forestry Department  Malaysian Rubber Board (MRB)  Rubber Industry Small Holders Development Authority (RISDA)  Malaysian Palm Oil Board (MPOB)  Forest Research Institute of Malaysia (FRIM) Malaysia (FRIM)  Malaysian Timber Industry Board

Ministry of Primary Industries  National Tobacco Board  Malaysian Cocoa Board  Tin Industry Board (Research & Development) (Research & Development)

Ministry of Land & Cooperative Development Agencies involved in agricultural development :-  Federal Land development Authority (Felda) (Felda)

Land Development Under FELDA (As at ) CropAcreage (Hectare) % Oil Palm314, Rubber132, Sugarcane4, Cocoa1, Others Total453,758100

Ministry of Rural Development Agencies involved in agricultural development :-  Federal Land Consolidation and Rehabilitation Authority (FELCRA) Rehabilitation Authority (FELCRA)

FUNCTIONS OF FELCRA The rehabilitation of unsuccessful state managed schemes. The consolidation of unused government land fringing villages for the purpose of providing additional land to small farmers so as to enable them to possess economic size land holdings. Youth land development program to develop unused marginal government land to provide land to unemployed rural youths. In situ development project.

PART VI POVERTY ERADICATION IN THE AGRICULTURAL/RURAL SECTOR

Incidence of Poverty The incidence of poverty in Malaysia is based on the poverty line income (PLI). The PLI is defined as an income sufficient to purchase a minimum basket of food to maintain household members in good nutritional health & other basic needs such as clothing and footwear, rent, fuel and power, transport and communications, health care, education and recreation.

Poverty in Malaysia YearSectorIncidence of Poverty No. of Poor Households 1990Urban7.1n.a Rural21.1n.a Total16.5n.a 1995Urban Rural Total Urban Rural Total

Strategies For Poverty Reduction In Agricultural/Rural Sector  Providing employment opportunities in higher-paying jobs, while welfare handouts were reserved for the aged and disabled who could not find employment.  Since the poor were largely engaged in agriculture, there were encouraged to be involved in modern farming and non-farm or off-farm activities.

Resettle the landless and those with uneconomic holdings in new land development schemes; Undertaking in-situ development of existing agricultural land through rehabilitation and consolidation of the land, replanting of old commercial crops with new higher-yielding clones and better planting techniques; Programs For Poverty Reduction In Agricultural/Rural Sector (1)

Integrating agricultural and rural development with downstream processing of farm products and encouraging village industries and rural entrepreneurship to generate additional sources of income; Introducing double-cropping or off-season cropping for paddy, inter-cropping and mixed farming on the same plots of land to supplement the income derived from main crops; Programs For Poverty Reduction In Agricultural/Rural Sector (2)

Programs For Poverty Reduction In Agricultural/Rural Sector (3) Establishing farmers’ markets in urban centers so that farm produce can be sold directly and fetch better prices;Establishing farmers’ markets in urban centers so that farm produce can be sold directly and fetch better prices; Providing training and education on topics pertaining to farming as well as work attitudes and values to motivate participants to become more productive farmers;Providing training and education on topics pertaining to farming as well as work attitudes and values to motivate participants to become more productive farmers;

Programs For Poverty Reduction In Agricultural/Rural Sector (4) Providing industrial and vocational training for the rural manpower, coupled with credit facilities and related support, to enable them to be employed in non- farm occupations or start their own businesses in rural areas and urban centers; Improving educational access as well as providing text books and financial assistance to children of poor households;

Programs For Poverty Reduction In Agricultural/Rural Sector (5) Providing infrastructure and social amenities as part of a broader program to improve the quality of life of all Malaysians. For the rural population, they include the provision of portable and piped water, electricity, roads, medical and health services and schools, including rural hostels. Providing micro credit for the financing of income generating projects.Providing micro credit for the financing of income generating projects.

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