KULIAH MINGGU 4 AGRCULTURE SECTOR

Dr. Zainizam bin Zakariya zainizam@fpe.upsi.edu.my 015-48117727 Block 10, p12, level 3 KSAS

TOPIC
Overview of Agriculture Sector Government Policy on Agriculture Contribution and significant of the sector Problems and Challenges Summary and Conclusion

MINISTRY OF AGRICULTURE & AGROBASED INDUSTRY

MINISTRY OF PRIMARY INDUSTRY & COMMODITIES

Food Subsector
Crop

Industrial Commodities
Palm Oil Rubber Cocoa Wood & Timber Pepper

Livestock Fisheries

MINISTRY OF AGRICULTURE AND AGRO-BASED INDUSTRY

DEPARTMENT OF AGRICULTURE

MALAYSIA AGRICULTURE BANK (BPM)

MALAYSIAN AGRI. RESEARCH & DEVELOPMENT INSTITUTE (MARDI) FEDERAL AGRI. MARKETING AUTHORITY (FAMA)

DEPARTMENT OF VETERINARY SERVICES

FARMERS ORGANIZATION AUTHORITY (FOA)

DEPARTMENT OF FISHERIES

MALAYSIAN FISHERY DEVELOPMENT BOARD (LKIM)

MUDA AGRI. DEVELOPMENT AUTHORITY (MADA)

MALAYSIAN PINEAPPLE INDUSTRY DEVELOPMENT BOARD (MPIB)

KEMUBU AGRI. DEVELOPMENT AUTHORITY (KADA)

Overview of Agriculture Sector

Blessed with natural resources such as rubber, oil palm, tin, cocoa etc, agriculture was the dominant sector until mid 1980s
GDP, export and employment

After mid 1980s, mfc has been the major contribution to economic growth After 1998, agriculture sector has been significantly reemphasised to
increase food SS for domestic consumption assist a large segment of the rural Malaysian population supply labour and raw materials to non-agriculture sector overcome BOP deficits in food crops

Government Policy on Agriculture

Can be divided into 4 stages
Stage 1
1950s and early 1960s - Rubber and Timber

Stage 2
1960s-1970s Oil palm and land development

Stage 3
1980s-1990s - Food security, productivity and sustainability

Stage 4
2000s-2010s biotechnology and new agriculture

Stage 1 (1950s and early 1960s )

With blessed with endowment resources, rubber, tin and timber became the major contributor to economy growth
40% of the GDP 60% of the total export 80% of the total employment

Due to problems with slow growth of agriculture sector, the sector could not sustain the growth Need to diversify the agriculture sector

Stage 2 (1960s-1970s)
Main focused on land development to boost the agriculture sector and alleviating poverty in rural area Many land authorities have been established
FELDA The Federal Land Development Authority RISDA Rural Industry and Smallholders Development Authority FELCRA Federal Land Consolidation and Rehabilitation Authority

FELDA is the biggest authority land development agency in Malaysia

Stage 3 (1970s 1990s)

NEP (1970-1990)
Eradicating poverty and restructuring the society In-situ program LADA, MADA, KEMUBU, KETENGAH, KEJORA

NAP1 (National Agriculture Policy 1) was launched in 1984 for a period of 1984-1991 due to inability of NEP to reduce poverty in rural. Aims
Maximizing income from agriculture activities Raising productivity, expanding production of traditional export crops Development and promotion of potential export crops At least 80% self-sufficiency in dom foods production
Opening new land schemes, expansion of in-situ project,

Was introduced in 1984 to modernized & revitalized the agriculture sector, to lesson poverty & raise efficiency Focus on expansionary policy on export crop i.e. oil palm & cocoa

Objectives: The maximization of income through optimal utilization of resources in the sector Increase the food production for local market such as paddy, vegetables, fruits & poultry

Main strategies involved (land development, In-situ development, support services) Strategies: Government invested heavily on institutional building new land developments for oil palm & cocoa (by Felda, Risda, Felcra) in-situ development to resolve uneconomic farm size & low productivity among small holders (aimed to improve productivity in existing agricultural areas by providing infrastructure and other services)

1st National Agriculture Policy (1984-1991)

Focus on expansionary policy on export crop i.e. oil palm & cocoa Government invested heavily on infrastructure institutional building new land developments for oil palm & cocoa in-situ development to resolve uneconomic farm size & low productivity among small holders

Abundant land & adequate manpower

Emphasis on NAP1 (1984-1991):To develop the export oriented sector

 NAP2 (1992-1998) was launched in 1992 to fulfil the strategies underlined in the NAP1 with obj
balance of development bet agr and non-agr Attainment of sustainable development

Only survived for 6 years due to currency crisis in 1997

Shortage of livestock product and increased in M of food products

Was introduced in 1992 It was undertaken as Malaysias Vision 2020 which introduced in 1990 This policy encouraged alternatives use of agricultural land for higher value added activities It was market oriented, commercialized, efficient, competitive & dynamic

Objectives: The maximization of income through optimal utilization of resources in the sector Increase the food production for local market such as paddy, vegetables, fruits & poultry

Strategies:

1.

Emphasis of NAP 2 To further strengthen and enable agriculture sector to contribute substantially to the economic growth of the nation Increasing productivity, efficiency & competitiveness Increasing land areas for palm oil (plantation crop) Development of agro-based industry Acceleration the transformation of the sector into a dynamic and commercialized sector

Optimization of resource utilization was encourage to diversify out of export crop cultivation into other activities 2. Acceleration of Agro-based industrial development which generate more off-farm opportunities for smallholder to earn additional income 3. Enhancement of R&D are needed to overcome the production process, labor and other constraint in the agriculture 4. Greater participation of private sector were needed in order to transform the agriculture sector into a competitive and efficient sector 5. Human resource development is a key strategies to achieve increased productivity and output of both labor and land

2nd National Agriculture Policy (1992-1998)

Greater focus on issues of productivity, efficiency & competitiveness Shifted from new area development to in-situ development

Addressing the linkages with other economy sector

Emphasis of NAP 2 (1992-1997): Increasing productivity, efficiency & competitiveness Increasing land areas for palm oil (plantation crop) Development of agro-based industry

 NAP 3 (1998-2010) was introduced in 1998 with the obj to

enhance food security Increase productivity and competitiveness of the sector Deepen linkages with other sectors Create new source of growth for the sector
Net exporter of agro-eco-tourism National Park, Halal industry, biotechnology

2 major strategies

Agroforestry approach focus on agro-eco-tourism

Product based approach focus on new sources of growth

3rd National Agriculture Policy (1998-2010)

Further development of agrofood sub-sector as well as agro-based industries 1997 Asian Financial Crisis : Need to find alternative to manufacturing sector Agro-food sub-sector to be engine of growth

Emphasis of NAP 3 (1998-2010): Increasing the competitiveness of the agricultural sector Maximizing income through : Optimum utilization of resources Increasing agriculture contribution to national GDP Increasing income of producers

Productbased Approach

The AgroForestry Approach Aimed to tackle the problem of resource constraints(land & labour) and focuses on sustainable agricultural development Agriculture and forestry are viewed as mutually compatible and complementary Aimed to create a large production base for both sector

Is adopted to reinforce and complement the cluster-based agro-industrial development Identified in the 2nd Industrial Plan (19962005) i.e. processed (halal) food from livestock industry, juices and cocktails from fruits or salad dressing from oil palm

Stage 4 (2005-present)
Biotechnology National Policy (BNP) was launched in 2005
main focus - to capitalizing on the potential resource endowment in the country biotechnology to improve income and productivity of the sector

To Increased Value Added

Increased Production

9th MP (20062010) TARGETS

Increase SelfSufficiency Level
To Contain Import Bill

Improving the service delivery system

Increasing agricultural production including new sources of growth with greater private sector participation
POLICY THRUST
Expanding agro-based processing activities & product diversification

Enhancing incomes of smallholders, farmers and fishermen

Strengthening marketing and global networking

The Importance of Agricultural Sector

Backbone of the economy
Poverty eradication Development to rural areas

the importance of Agriculture sector

Improve balance of trade
Increased food production

Increased self-sufficiency

The Importance of Agricultural Sector

Backbone of the economy
Economic development for the country is typically viewed with the primary sector Source of feeding role for other sector by producing cheap food L and raw materials it plays role in diversifying and shielding the economy from external shock.
The increase in earnings of major commodities, particularly palm oil and pepper as well as food commodities, enabled the sector to retain its workforce and withstand the economic downturn of 1997-1998.

Poverty eradication

NEP, NAP1 and NAP aimed to reduce poverty incidence

In 1970 70% poverty in rural areas reduced to 14% in 2009

 Development of rural areas By promoting the agricultural sector, we are bringing development to rural areas thus reducing imbalance in urban-rural development especially in the less developed states. Land for agriculture use Increased food production
Agricultural area - 6.6 million ha (20% of total area in Malaysia in 2010, MOA, 2010)

The sector contributed not only as a supplier of raw materials to the resource-based industries, but also in term of food production (refer Figure 3) Malaysia aims to be centre/hub for halal food production

 Increased self-sufficiency

- In the past, the country relied on other countries to meet a significant proportion of our food needs. - Lately, countries which have traditionally supplied us with food experienced growing population and are rapidly industrializing (eg Thailand, Vietnam, Indonesia). They may not be able to supply us food as much as before. - Furthermore, currently Malaysia is only self-sufficient in the production of eggs, poultry and fruits. - For food security reasons, we must try to increase selfsufficiency in other foods especially meet, rice and milk.

 Improve balance of trade

The food import bill has been a long standing problem in Malaysia.
In 1970, the country had a deficit of RM407.8 m and the food import bill has been growing steadily to over RM15b in 2005

In 2010, X>M = RM1.2b

X Rm15.5b as compared to RM14.3 for M

The Contribution of Agricultural Sector

GDP

Employment

Contribution of Agriculture sector

Export

The Contribution of Agricultural Sector

GDP
Agriculture sector contributed to 70% of the total GDP but started to decline in 1980s

Employment Agriculture was a major source of employment, providing over 50% in 1960s, declined to 11% in 2010

In 1960 60% 0f the total GDP. The share decreased to 22.9% in 1980, 18.7% in 1990, 8.4% in 2000 and decreased further to 7.6% in 2010

However, labour productivity improved reflected by the increase in value added per worker
From RM13,120 in 2000 to RM21,299 in 2010

due to the increased use of labour-saving technologies, thus causing labour shortage as local labour force moved into economic sector for higher wages; the beginning of mechanization in the sector and improved farm management

 Export
Agricultural is an important foreign exchange earner.
From rubber products to oil palm products

Export earnings increased from RM 13.9b in 1985 to RM 35.4b in 1995 and RM134b in 2011 (DOS,2012). The major export earning comes from palm oil exports;
palm oil, palm kernel oil, palm kernel cake, oleo chemicals and finished products exceeded RM 6.3 billion in 1993 to RM 26b in 2010
23% of the total export in 2010 (9th MP)

Problems and Challenges

Poverty in agriculture
Agriculture has often associated with backwardness, low productivity & poverty In 2008 poverty rate was 4% but higher in rural and in agricultural sector
Paddy farmers 34% Rubber smallholders 16% Agriculture 16%

Land use for agriculture

Agr lands have become the victim of new development project

Land are a great assets to the economy if they were fully utilised for productive uses according to the soil suitability
6.36 million land; 83 % for estate

Housing estate, new industrialisation project etc

 Scale issue

Farm size is a big issue particularly in rural

Small & uneconomic land holdings
65% paddy planters work on holding < 1 ha production cost become higher and inefficient, low productivity

Foreign workers

Due to lack of mechanization & automation to substitute for the out migration Leads to a massive inflow of foreign workers 2010 25% of total employment were foreigners Problem
25% were in agriculture sector 35% in mfc

unskilled workers unable to drive productivity increments Reduce the pressure of farmers to upgrade their technologies

 Food security

A major concern of the government especially after 1997 financial crisis Def access by all people at any time to the food needed for a healthy safe (FAO, 1983) 3 main important reasons

The dependency of food imports could be reduced In 2010, the country needed to import
Beef (72%), Mutton (90%), Milk (95%), rice (10%)

Availability of safe & nutritionally adequate food both at the nat/household level Stability in the SS of foods at any time Everybody has accessed to sufficient food to met its needs

Challenges
Transforming small scale agro-industry into commercial ventures Ensuring adequate, quality, safe and nutritious food

at a reasonable price
Reducing full dependency on labor force in the agricultural sector

Ensuring sustainable development of the agricultural

sector Increasing competitiveness of the national

Prospect and opportunities

Agricultural entrepreneurs and professionals
Biotechnology, biodiversity require young skilled Important aspect of agriculture-based industry

New source of growth

Halal food industry, agro-eco tourism

Trade liberalisation AFTA, WTA have a major consequence on agriculture sector

Increase in X

Summary and Conclusion

Agriculture sector in Malaysia has undergone a significant change over the last four decades
From traditional to modern to biotechnology

Due to changes in government policy, contribution of the sector have been decreasing in terms of GDP, employment and export This is however not due to the decreasing of total output but mainly due to a lower growth rate recorded

 Despite the decline of agricultural contribution to GDP and employment, its continues to receive high priority in national development planning. Why?
Due to hard-core poverty in this sector remains significant. Poverty eradication encompasses an important issue in national development progress. The agricultural sector is seen to be necessary or very important in reducing the urban-rural disparity gap