30

CHAPTER 5

Agricultural Practices of Malaysia 5.1 Introduction Agriculture is an important sector in the economy of Malaysia. During independence in 1957, the agricultural sector contributed about 46 % of the gross domestic product (GDP) and 80.3 % of the employment1. However, as the country‟s economy developed and transformed Malaysia from an agricultural into an industrial country, the percentage contribution of the agricultural sector to the GDP declined to 7.52% and total employment in the agriculture sector accounted for only 11.8%of the total labour market. Despite the relative reduced role of agriculture in the country‟s economy, this sector is given prominence in government policies because of its continued importance in earning foreign exchange through exports of palm oil, rubber and fruits, its contribution to employment and its role in ensuring food security for the country. The Ninth Malaysian Plan emphasizes agriculture as the third engine of growth and seeks to revitalize agriculture by adopting commercial and large scale agriculture and the use of new technologies2.

5.2 Historical development of Malaysian agriculture The pre-independence development of Malaysian agriculture was shaped by the interest of the British colonialist. One of the major developments during this period was the introduction of rubber and the development of plantation agriculture. The British needed rubber for their industrial expansion and the colonial administration encouraged the establishment of rubber plantations such as Dunlop Plantations, Guthrie Plantation and Harrisons and Crossfield. Malaysia became the world‟s top producer of rubber. In addition to rubber, tea plantations such as Boh Tea, were also established in the highland areas because of the high market demand for tea. Later on, other crops such as cocoa and coffee were also grown by the plantations. However, British agricultural policy of this period neglected the provision of opportunities for the indigenous Malays to participate in plantation agriculture. Hence they were left in subsistence agriculture producing rice, fruits and other food crops largely for domestic consumption while the British and other communities expanded their interest in commercial agricultural production and dominated the export economy3. In the post Independence period (1957-1970), the government set up the Federal Land Development Authority (FELDA) and the Federal Land Consolidation and Rehabilitation Authority (FELCRA) that enabled huge tracts of land to be cultivated with plantation crops by settlers. Smallholders were encouraged to switch from subsistence crops to cash crops such as rubber and oil palm. At the end of this period there were 123,000 ha of oil palm compared to 1,315,000 ha of rubber were

H.N. Ridley (left) the "father" of rubber in

Malaya, succeeded in his fight to

introduce the tree that brought great

profit to many European agencies that

sold Malayan rubber to the world.

31

planted. Agriculture, led by rubber and oil palm were the dominant contributors to the Malaysian economy, providing the benefits of foreign exchange income, capital creation and employment4.

The period 1970-1984 (New Economic Policy (NEP) Period) saw efforts by the government to address the racial income disparity by emphasizing smallholder agriculture development. FELDA and FELCRA intensified and expanded their programs with emphasis on oil palm. Rice producers were favoured by price controls and provision of input subsidies and middlemen were removed when Lembaga Padi dan Beras Negara set up their own rice mills. Rubber smallholdings were organized more efficiently through RISDA. At the end of the period Malaysia was dominant as the world‟s top producer for natural rubber (39.8%) and palm oil (58.8%). From 1984 onwards, agricultural development was

driven by the National Agricultural Policy (NAP). The first NAP (1984-1991) emphasized linkage of agricultural production with agro-based industries while the second NAP (1992-2010) addressed challenges to agriculture such as competition for labour and capital with other sectors and the need to increase efficiency and productivity. The third NAP (1998-2010), the revised NAP2, introduced product-based approach which emphasized on satisfying the specific needs of niche markets and consumers world-wide as well as ensuring food security. At the end of 2004, a total of 6.4 million ha. of land were used for agriculture of which 60.6% was for oil palm and 20% for rubber. This means about 80% of Malaysian agricultural land is dominated by these two industrial crops. 5.3 Characteristics of Malaysian agriculture 5.3.1 The estate and smallholder subsectors

Generally, the agriculture sector in Malaysia can be divided into estate sub-sector and smallholders sub-sector. The estate sub-sector is highly commercialized and efficiently managed by the professionals. By definition, estates are land holdings that are larger than 40.5 ha (or 100 acres). Usually, they are owned by private companies, public-listed corporate entities or even public land development agencies. These companies are only involved in the production of industrial crops such as cocoa, rubber and oil palm. On the other hand, smallholders sub-sector is less commercialized and the average farm size is 1.45 ha. It is estimated that smallholdings are operated by 1,033,065 farmers and the crops grown include the industrial crops, rice, fruits and vegetables.

The estate sub-sector owns the

largest area of oil palm

32

Table 1. Land Use in Malaysia

Item Area („000 ha)

Percentage (%)

Total land area 32,855

Agriculture area 7,870 23.95

Arable land (rice, vegetables, root crops) 1,800 5.48

Permanent crops (oil palm, rubber, coconut, cocoa, fruits)

5,785 17.61

Permanent meadows and pastures 285 0.87

Forest area 20,630 62.79 Source: World Agri Trade (Malaysia) Sdn Bhd. 2010. Asean Agro Trade Business Review Directory 2011-2012. Putrajaya. EAEC Review Publishers

Besides the historical factors that resulted in the prominence of oil palm and rubber, the climatic conditions of Malaysia are also suited for growth of perennial or permanent tree crops. Located near the equator, Malaysia's climate is categorised as equatorial, being hot and humid throughout the year without any clear dry seasons. The average rainfall is 250 centimetres a year and the average temperature is 27 °C. These conditions are ideal for the growth and production of the tropical perennial tree crops all year round. Malaysia can be considered to be mountainous with more than half the land over 150 m above sea level, thus limiting the area for arable farming. 5.3.2 Industrial Crops

Malaysian agricultural land use has been and continues to be dominated by perennial industrial crops, chiefly oil palm, rubber, coconuts, cocoa, coffee and tea. Oil palm and rubber alone occupies more than 80% of the agricultural land area. a) Oil Palm

Oil palm (Elaeis guianeensis) occupies the largest area of crops grown in Malaysia and palm oil is the biggest foreign exchange earner among all agricultural commodities and products. Malaysia accounts for 39% of the world‟s palm oil production and 44% of world‟s exports. Oil palm originated from Sierra Leone, Africa and was first grown as a plantation crop in Malaysia in 1917 at Tenamarran Estate, Batang Berjuntai, Selangor10. Besides the plantation companies, oil palm planting was promoted with the set up of FELDA, that opened large areas of forest for planting of oil palm by landless settlers as part of the effort to raise their economic status and to eradicate poverty. Oil palm can be harvested 25 to 30 months after planting and each palm can produce between 8 and 15 fresh fruit bunches (FFB) a year, each one weighing 15 to 28 kg each. The economic life of the oil palm tree is about 20 years. Oil is extracted from the pulp of the fruit (palm oil) or from the kernel (palm kernel oil). For every 100 kilograms of fruit bunches, typically 22 kilograms of palm oil and 1.6 kilograms of palm kernel oil can be extracted. Currently, 60% of oil palm is grown by large plantation companies while 40% are under small holders including FELDA, FELCRA, RISDA and state land schemes11. In terms of exports, palm oil and palm oil products contribute 10% of Malaysia‟s total export value.

Oil palm occupies about 60% of

agricultural land

33

Fig. 1 Area of Oil Palm in Malaysia in the Last 30 years.

Fig. 2. Percentage of oil palm grown by estates and other entities b) Rubber

Rubber (Hevea brasiliensis) was the first major plantation crop introduced into Malaysia in 1877 when seedlings were brought in from the Amazon Basin of Brazil. At first rubber was mainly planted by plantation companies including Harrison & Crossfield, Boustead, Sime Darby and Guthrie which resulted in total area of rubber planted in Malaysia by 1921 reaching 531,346 ha12. Rubber was the dominant plantation crop for eight decades up to 1989, when oil palm (1.59 million ha) hectarage overtook that of rubber (1.55 million ha). Some of the factors causing a switch from rubber to oil palm were the declining price of rubber brought about by competition from

34

synthetic rubber and the increasing cost and declining availability of labour. From then on most of the rubber is grown by smallholders which constitute over 97% of total planted area of rubber (Table 2).

Table 2. Rubber Planted Hectarage

Year Planted hectarage („000 ha)

Estate Smallholding Total Area

1990 348.70 1,487.96 1,836.66

2000 123.78 1,306.90 1,530.68

2005 57.37 1,213.93 1,271.30

2006 54.15 1,209.40 1.263.55

2007 53.40 1,194.70 1,248.10

2008 61.10 1.185.90 1,247.00

2009 61.10 960.44 1,021.54

c) Coconut

In Malaysia, coconut ranks the fourth most important crop in terms of the hectarage planted, after oil palm, rubber and rice. In 1981, the total area planted to coconut was 409,348 ha, but by 1995, it drastically declined to 248,380 ha, which represents about 5% of the country‟s total agricultural land area. The rise of oil palm as the major source of cooking oil is one factor that caused the decline of the coconut industry. By 2007, the area further declined to around172,000 ha13. As in the rest of the countries in the Asia and Pacific region, smallholders dominate coconut production, with an average farm size of 2.8 ha and producing about 93% of the total coconuts in the country. It is estimated that 90,000 farm families are involved in coconut production. Coconuts are grown for the production of fresh coconut flesh and coconut water for food and as a beverage as well as coconut oil. Due to the limited size of most smallholdings, the small number of trees, the limited labour requirements of the coconut crop, and the limited returns provided, most families cannot survive on the incomes from the coconut crop. A new value-added product that is currently enjoying good demand worldwide and could rejuvenate the coconut industry is “virgin coconut oil” or VCO. Many local entrepreneurs have ventured into the virgin coconut oil industry due to the high demand from local and overseas markets. The prices of virgin coconut oil in the local market are currently high at between RM40 and RM150 per kilogram. This situation has attracted the attention of many local entrepreneurs, especially those planting coconuts to produce the oil14. Virgin Coconut Oil is processed using fresh coconut meat or what is called non-copra. Chemicals and high heating are not used in further refining, since the natural, pure coconut oil is very stable with a shelf life of several years. This oil has a very high level of antioxidants and is used in skin and hair care as well as for general good health because of its antimicrobial properties. d) Cocoa

Cocoa has been commercially planted in Malaysia since the 1950s while cocoa processing began in the 1970s. Most of the planting areas are situated in Sabah, but most of the grinding and manufacturing are based in

Virgin coconut oil, a product

that can boost the industry

indsutry

Cocoa planted under coconuts

35

Peninsula Malaysia. Over the years, the planting sector has been slowing down, but the processing sector has seen tremendous growth. Malaysian cocoa products (such as cocoa butter, cocoa powder and chocolate) are exported to over 80 countries. One of the special characteristics of Malaysian cocoa butter is the high melting point, which is beneficial for chocolate products in warm countries. Currently, Malaysia is the fifth largest cocoa processor in the world. Cocoa used to be a major industrial crop with estates growing up to more than 400,000 ha. of this crop at its peak in 1992 after which it declined to the current hectarage 45,000 ha. because of pest problems (especially cocoa pod borer) and drop in prices of cocoa worldwide. A majority of cocoa is grown in mixed planting with coconuts. The continuous reduction in local production of cocoa beans resulted in the lack of locally produced cocoa beans to meet the increasing demand for local grindings which is expected to expand further to between 350,000 and 400,000 tonnes by 201015. As a result, the local cocoa grindings industry has to resort to the importation of cocoa beans to support its growth leading to significant outflow of foreign exchange.

Fig. 3. Hectarage of Cocoa in Malaysia Table 3. Hectarage of Crops in Malaysia Source: Ministry of Agriculture and Agro-based Industries and Ministry of Plantation Industries and Commodities

Crop Hectares („000)

2000 2005 2010

Oil palm 3,377 4,049 4,555

Rubber 1,431 1,250 1,179

Padi 478 452 450

Fruits 304 330 375

Coconuts 159 180 180

Cocoa 76 33 45

Vegetables 40 64 86

Tobacco 15 11 7

Pepper 13 13 14

TOTAL 5,893 6,383 6,891

36

e) Other Industrial Crops

Besides the four industrial crops mentioned above there are other industrial crops that occupy a smaller planted area, namely coffee, tea and sugarcane. Coffee is mainly grown by smallholders particularly in the state of Johor and Selangor. The major type of coffee grown is the Liberica coffee which is favoured by the local consumers. Only about 5% of the coffee grown is from the Robusta and Arabica types.

Sugarcane is planted for processing into sugar only in the northern states of Perlis and Kedah. Two sugar plantations in Chuping, Perlis, are owned by state companies, the Perlis Plantation Berhad and FELDA Plantations. Sugarcane is planted in these areas because of the distinct dry seasons characteristic of the northwest that is important for sugarcane to mature and accumulate sugar. Production of sugar of 274,620 tonnes from locally planted sugarcane meets about 10% of the domestic consumption. The rest are imported as raw sugar from countries such as Australia, Fiji and Thailand.

The first tea plant grown commercially in Peninsula Malaysia was from China, as early as in the seventeenth century. However, it was only in the early twentieth century that tea cultivation became important. The tea that was grown in the early twentieth century was imported from India. The variety of tea, known as the Assam variety, is still grown in Peninsula Malaysia. The tea produced is sold locally and overseas.

The main tea growing areas are located in the Cameron Highlands, in the state of Pahang. Here, tea is grown at an elevation of 1000m to 1700m above sea level. The remaining tea growing areas are found in lowland areas, mainly in the states of Selangor and Perak. The favourable physical conditions present in the Cameron Highlands - abundant rainfall, long hours of sunshine and well-drained acidic soils, have contributed to its importance as a tea growing area in Malaysia. The main type of tea produced in Peninsula Malaysia is black tea.

Table 4. Hectarage and Production of Minor Industrial Crops in Malaysia

Crop Hectarage planted (ha)

Production (tonnes)

Value (RM „000)

Coffee 3,160 20,591 12,355

Sugar cane 4,400 274,620 21,697

Tea 1,900 9,120 22,800

f) Rice Besides industrial tree crops, the next major crop in Malaysia is rice as it is the staple food of most Malaysians and is considered a strategic crop. Total area of land allocated as rice growing areas is 450,000 ha, making padi the third largest agricultural crop after oil palm and rubber. About 300,500 ha of rice are planted in Peninsula Malaysia and 190,000 ha

37

in Sabah and Sarawak. Rice has been a traditional crop grown by farmers in many parts of the country especially in the alluvial coastal regions. Currently, rice growing is concentrated in eight granary areas in Peninsular Malaysia where various inputs such as irrigation, drainage and rice-mills are provided and rice is grown in two or more seasons in a year. The eight granary areas are:

Kuala Muda area in Kedah/Perlis (MADA)

Alluvial plains of Kemubu area, Kelantan (KADA)

Seberang Perai, Penang

Kerian/Sg Manik, Perak

South west (Barat Laut) Selangor

Kemasin Semarak- plains of Kemasin River, Bachok/ Kota Bahru

Besut, Terengganu (KETARA)

Seberang Perak The eight main granaries contributed about 70% of the national rice production16. Together with the secondary areas, they account for 85% of total rice cultivated areas. The balance of another 15% of planted area represents the non-irrigated rice areas, which include rain-fed rice fields and hill or upland rice which is mainly concentrated in Sabah and Sarawak. Padi is a highly subsidized crop as the cost of production is relatively higher than in neighbouring countries. Padi growers are given subsidies for purchase of seeds, fertilizers, herbicides and insecticides and the prices for the rice they produce are guaranteed for the growers and controlled for the consumers. Currently, Malaysia produces 71% of the rice consumed but the target is to achieve full sufficiency for rice by 2015. The average yield per hectare of padi is 3.556 tonnes.

Fig. 4. Harvested rice from different rice ecologies 1995-200017

Mechanized harvesting is

practised in rice production

38

Table 4. Distribution of rice land among the states of Malaysia

State Harvested area (%of total harvested area)

Kedah 31.05

Sarawak 19.41

Perak 11.81

Kelantan 11.38

Perlis 6.45

Sabah 5.74

Selangor 5.52

Pulau Pinang 3.83

Terengganu 3.28

Pahang 0.63

Melaka 0.39

Johor 0.26

Negri Sembilan 0.25

g) Fruits

Next to padi, fruit crops occupy the largest cultivated area of food crop in the country with over 375,000 ha. of land area planted with various tropical fruits. The fruit industry is a small holder based industry involving 270,000 farmers. In 1995, the area under fruits was 257,600 hectares out of which 86,210 hectares were planted on a commercial basis. For the 1985-1995 period, the production of fresh fruits increased at the rate of 4.8 percent per annum from 638,100 tonnes to 1,019,900 tonnes. Export values of fresh and processed fruits increased from RM182.4 million in 1985 to RM335.6 million in 1995, while import values of fresh and processed fruits also increased from RM257.2 million in 1985 to RM444.3 million in 1995. Overall, Malaysia is still a net importer of fruits and fruit products. The major fruits being exported by Malaysia are watermelon, papaya, star fruit and durian. Most of the raw materials required for processing are outsourced from other producing countries due to the lack of comparative advantage in producing fruits for processing. The prospect for fruit and vegetable production is also bright due to the expected increase in the demand for domestic food products. The per capita fruit consumption is expected to increase from 49.9 kg in 1995 to 65.1 kg in 2010, representing an annual increase of 1.8 %.The area under orchards is expected to increase from 257,000 ha. in 1995 to 373,200 ha. in 2010.

Mixed orchard

39

Table 5. Hectarage Planted and Value of Products of Major Fruits 2010

Fruit Hectarage Value ('000 RM)

Durian 104,655 1,392,077

Bananas 29,790 476,255

Rambutan 25,460 171,685

Dokong 16,130 97,260

Duku Langsat 12,715 45,420

Watermelon 11,750 309,465

Cempedak 11,158 130,251

Mango 9,760 83,545

Mangosteen 7,685 79,703

Langsat 6,925 69,282

Duku 5,775 65,047

Jackfruit 3,962 63,155

Limau Manis 3,915 49,969

Papaya 3,403 68,419

Dragon Fruit 2,510 39,160

Guava 1,525 50,598

Starfruit 1,276 31,618

Salak 1,190 15,824

Sapodilla (ciku) 1,115 18,149 (Source: Agro-Food Statistics 2010. Ministry of Agriculture and Agro-based Industries)

h) Pineapple

The pineapple industry is the oldest agricultural export crop. Due to economic reasons, pineapple farmers have changed to other crops particularly, oil palm, which brings more income and is less labour intensive. Pineapple cultivation can be divided into two production systems, namely the smallholding and the estate sectors. Pineapple estates accounted for an average of 62% of total pineapple area in Malaysia. In 1980, an area of about 7000ha. was planted with pineapple under the estate system. This was reduced to 4.8

thousand ha. in 1989 but has now remained stable at 5000 ha. Smallholders pineapple area is declining and stands at about 3000 ha. i) Vegetables Vegetables are smallholder crops in Malaysia, with an average farm size of less than one hectare. Vegetable production area is concentrated in the states of Johor, Perak, Kelantan and Pahang where the four states account for 75% of total vegetable production in Peninsular Malaysia. Johor is the largest supplier of

Malaysia is a net importer of

vegetables

40

the tropical vegetables while Cameron Highlands has traditionally been the growing areas for temperate vegetables such as cabbages, lettuce and tomatoes. Total annual production for all types of vegetables is only 330000 tonnes while the requirement is estimated at about 400 000 tonnes. Besides domestic consumption, Malaysia exports vegetables worth RM 160 million in 1995 which include cucumber, spinach, long beans, chilli, Chinese mustard (sawi) and kailan with the main export market being Singapore. However, Malaysia imports about RM242 million worth of vegetables annually and the main vegetables imported are onion, shallot, garlic, potato, chilli, cabbage and processed vegetables. The industry faces several constraints, including lack of good varieties, problems of pest and diseases, and problems of seed supply. The annual per capita consumption is expected to increase at a rate of 1.8 % per annum to reach 63.6 kg in 2010. To meet this demand, the area under vegetables production is expected to increase from 42,240 ha. in 1995 to 86,200ha. in 2010 resulting in a projected output of 1.6 million tonnes of vegetables in 2010. Table 6. Malaysia: Food Balance Sheet for Vegetables and Fruits 20069

PARTICULAR VEGETABLES1 FRUIT2

Supply (SS) (tonnes)

Local 642,796 1,873,092

Import 265,808 47,973

Total Supply 908,604 1,921,065

Demand (DD)(tonnes)

Local 1,007,979 1,524,770

Export 76,094 209,583

Total Demand 1,084,073 1,734,353

Shortage/Surplus (SS-DD)

-175,469 186,712

No of farmers for selected commodity

31,911 107,827

Total no. of farmers 40,920 162,463 1Vegetables (15 commodities): Chinese Mustard, Long Bean, French Bean, Tomato, Cabbage

Chilli, Okra, Pumpkin, Ginger, Chinese Kale, Angled Loofah, Cucumber, Water Convulvolus, Brinjal and Kacang Botol 2Fruits (15 commodities): Pineapple, Watermelon, Starfruit, Papaya, Guava, Manggo, Durian,

Rambutan, Sappodilla, Duku Langsat, Mangosteen, Jackfruit, Banana, Honey Dew

j) Floriculture

The floriculture industry has contributed significantly to the agricultural sector giving a net value of RM 290 million in 2010 which is about 0.15% of GDP. This includes cut flowers, orchids and non-orchids for the domestic and export markets. Total area involved with floriculture industry in 2010 was 2,421 ha. in 2010 compared to 1,780 ha. in 2007. About 50% of the floriculture production areas are located in Johor while the second largest area is in Pahang (mainly Cameron Highlands). Selangor has the third largest floriculture production area especially located by the International Airport such as Subang, Sepang, Petaling and Kuala Langat areas. Orchids are the most planted commodity, mostly in Johor and Selangor which produced 173.6 million cut orchids valued at RM 104.1 million. The non-orchid sub-sector had a value of RM 129.5 million in 2010.

Floriculture is a high-value

industry

41

Table 7. Floriculture in Malaysia: Area planted and Production

State Hectarage Production („000 cuttings)

Johor 1361 225,367 Kedah 30 686 Kelantan 33 4,318 Melaka 31 588 Negeri Sembilan 20 3,193 Pahang 369 131,119 Perak 135 32,435 Perlis 3 353 Pulau Pinang 4 85 Selangor 292 60,323 Terengganu 10 231 W.P. Kuala Lumpur 7 899

Peninsular Malaysia 2,295 459,599

Sabah 52 7,335 Sarawak 66 1,111 W.P. Labuan 7 103

MALAYSIA 2,421 468,168

k) Livestock production

Malaysian livestock production is characterized by two contrasting subsectors. The non-ruminant industry comprising the poultry and swine production is a highly commercialized subsector where large corporations are involved and total supply of the products are more than sufficient to meet domestic demand. High technology systems are being used for poultry production that includes closed housing and computerized ration formulations and feeding method. In contrast, the ruminant subsector is mainly operated by smallholders and has shown little progress over the last decade with self-sufficiency levels for beef, mutton and milk remaining at 28, 10 and 5%, respectively. In

terms of monetary value the ruminant subsector contributes only 8% of the livestock production of the country while poultry and swine contributes 67 and 25% respectively.

The poultry industry is highly

developed in Malaysia

42

Value of Livestock Products in Malaysia 2008 To reduce the level of importation of ruminant products, the government has endeavoured to increase beef production to a target of 40.6% self-sufficiency by 2015. The national cattle herd size has to be increased through expanding cattle integration in oil palm, rubber and coconut plantations and the feedlot system.

Table 7. Beef Production Based on System

Systems 2000 2005 2010

% tonnes % tonnes % tonnes

Integration 15 2652.2 23 6,564.2 37 16,650

Feedlot 20 3500.2 30 8,562.0 26 11,700

Traditional 65 11,365.6 47 13,413.8 37 16,650

Total 100 17,500.0 100 28.540.0 100 45,000

Source: Department of Veterinary Services, Malaysia l) Aquaculture

Fisheries and Aquaculture The fisheries and aquaculture sector has proven to be an important supplier of animal protein. The industry plays a vital role in providing social and economic stability to the industry players and fisherman as a whole. The marine capture fishery is the overall major

Oil-palm and cattle integration

Beef feedlot production

43

provider to the fisheries sector, while considerable volumes of aquaculture are produced for export and local consumption.

The fisheries industry, particularly deep sea fishing and aquaculture have received government incentives to further commercialize and to establish economy of scale by consolidating small ventures. Aquaculture is the farming of aquatic organisms, including fish, mollusks, crustaceans and aquatic plants (FAO in Parker, 2002). Also known as aquafarming, the term is distinguished from fishing, by the idea of active human effort as opposed to simply taking them from the wild. Subsets of aquaculture include fish farming (raising of fresh water and brackish water fishes, lobsters and prawns in ponds), mariculture (aquaculture in the ocean which includes raising of mollusks), algaculture (production of algae and seaweeds) and the growing of cultured pearls. Species of fresh water fishes include river carp, catfish, giant fresh water prawn, tilapia and carp, while brackish/marine fishes include sea bass, tiger prawn and crabs. The prawn industry from both marine capture fisheries and aquaculture is the most important commercial commodity in terms of value in the export market.

Seaweeds culture farm in Pulau Bum Bum, Semporna, Sabah

With the depletion of fish supplies from marine capture fishing, the aquaculture production in Malaysia is showing steady growth over the last decade. In 2009, about 24,000 producers were involved in aquaculture, producing 472,000 tonnes of fresh-water fish with a value of RM 2.32 billion. In comparison, capture fishing landed 1.39 million tonnes of fish with a value of RM 6.29 billion. Marine capture fishermen numbered around 125,632. Seaweeds farming has contributed largely in providing income for the coastal communities in Sabah. Seaweeds are cultivated mainly in Semporna, Kunak, Kudat and Lahad Datu (Table 8).

Table 8. Production of Marine Fish, Aquaculture and Seaweeds

Item 2003 2004 2005 2006 2007 2008 2009*

Tilapia fish farm

44

Number of fishermen and aquaculture lists

110,547

110,960 111,344 118,047 120,905 126,950 149,618

Marine fish „000 tonnes

1,283.26

1,331.65 1,209.60 1,379.77 1,381.27 1,450.44 1,393.22

Aquaculture „000 tonnes

196.87 202.22 207.22 212.03 268.51 281.94 472.31

Marine fish value (RM million)

4013,61

4,241.45 4,017.52 4,939.32 5,053.51 5,308.91 6,322.57

Aquaculture value (RM million)

1,172.31

1158.46 1,196.01 1,291.75 1,341.33 1,408.39 2,321.97

Seaweeds tonnes*

- 30,956.90

31,426.20

43,200.00

90,298.50

111,298.20

138,855.90

Seaweeds value (RM million)*

- - 15.71 6.91 18.05 22.26 27.77

Seaweeds acreage (ha)*

- - - 5,949.37 6.684.19 7,730.57 7,538.46

Source: Agriculture Statistics Handbook 2008. Ministry of Agriculture and Agro-based Industries, *-Department of Fisheries Malaysia

Sea bass cage culture in brackish water.

45

Table 8. Production of Marine Fish and Aquaculture

Item 2003 2004 2005 2006 2007 2008

Number of fishermen and aquaculturalists

110,547 110,960 111,344 118,047 120,905 126,950

Marine fish „000 tonnes

1,283.26 1,331.65 1,209.60 1,379.77 1,381.27 1,450.44

Aquaculture „000 tonnes

196.87 202.22 207.22 212.03 268.51 281.94

Marine fish value (RM million)

4013,61 4,241.45 4,017.52 4,939.32 5,053.51 5,308.91

Aquaculture value (RM million)

1,172.31 1158.46 1,196.01 1,291.75 1,341.33 1,408.39

Source: Agriculture Statistics Handbook 2008. Ministry of Agriculture and Agro-based Industries

5.4 New sources of growth for Malaysian agriculture 5.4.1 Herbs & Spices, Pharmaceuticals, Natural Products

A new sub-sector in Malaysian agriculture that is currently experiencing rapid growth is the herbal industry. It is expected to grow at 10 to 15% per annum and the government has targeted the herbal industry to be another growth sector after information and communication technology.7 The market value of the industry at RM 7 billion in 2010 is expected to increase to RM 29 billion in 20208. The shift in health care awareness towards natural products with therapeutic value provides vast opportunities to Malaysia to become a significant global player, with her rich biodiversity. While various herbs are grown by small holders all over the country, the government has embarked on a large scale herbal plantation, specifically the East Coast Economic Regional Herbal Plantation Project. A plantation area of 406 ha. has been planted in Dungun, Terengganu and another 327 ha. has been planted in Lipis, Pahang as the initial herbal plantation projects. Some of the common species of herbs that are grown in Malaysia are shown in Table 9.

Tongkat Ali (Eurycoma

longifolia), one of the

important herbal crop

46

Table 9. Species of medicinal herbs commonly planted in Malaysia

Common Name

Botanical name Uses

Tongkat Ali Eurycoma longifolia

antimalarial, aphrodisiac, anti-diabetic, antimicrobial and antipyretic

Hempedu Bumi Andrographis paniculata

treatment of gastro-intestinal tract and upper respiratory infections, fever, herpes, sore throat, and a variety of other chronic and infectious diseases

Kacip Fatimah Labisia pumila facilitate childbirth, post-partum medication, treatment of dysentery, rheumatism and gonorrhoea

Misai kucing Orthosiphon stamineus

used as an analgesic, diuretic, astringent and antiemetic; used to treat conditions like bronchitis, small pox, diarrhoea and as a brain tonic

Dukung anak Phyllantus niruri Used to treat kidney stone, malaria, asthma and liver related diseases. Also used as a diuretic and to increase appetite. In Malaysia it is used to treat diabetes, hypertension, diarrhoea, itchiness, jaundice and as antidote for insect bites.

Pegaga Centellia asiatica It is used to heal wounds, improve mental clarity, and treat skin. It can also boost mental activity and treat high blood pressure, rheumatism, fever, and nervous disorders.

Mas Cotek Ficus deltoidea used to help womb contraction and as aphrodisiac for men and women, reduce cholesterol and blood sugar level.

5.5 Agricultural marketing 5.5.1 Export crop sector

Agricultural marketing in Malaysia depends on the types of crops and commodities

as well as the type of producer. In the case of palm oil production, there are three main types of oil palm producers: independent smallholders, producers in land development schemes, and private estates. In the land development schemes such as FELDA, the agency is also involved in the marketing of produce. Similarly, other land development agencies such as FELCRA and RISDA are also involved in marketing of the produce of the settlers. The agribusiness framework for the palm oil industry in Malaysia is depicted in Fig. 1 In the production sector, each group of producers exhibit different production and marketing characteristics. The independent smallholders are characterized by low productivity and dependence on private middlemen for the sale of their produce. Marketing of smallholders produce in the land development schemes is done through the marketing unit or mills owned by the parent institution. For instance, FELDA buys and sells fresh fruit bunches at the farm level, processes them into processed palm oil, and sells this to either local or foreign manufacturers. The private estates have a highly organized marketing system. Generally, there exists a high degree of vertical integration. A plantation firm not only has its production farms, but also milling and processing plants. Hence, raw materials are easily absorbed into their

47

mills and refineries, before the processed products are sold to domestic industrial users or foreign manufacturers. A similar marketing framework also exists for rubber growers and producers.

Fig 1: The Agribusiness Framework for the Oil Palm Industry

5.5.2 The Food Sector

The food production of Malaysia is characterized by small farm size with minimal involvement of the private or corporate sectors. In the case of rice, average farm size for most farmers is 1.06 ha. Besides these there are also a few rice estates run by FELCRA (about 4000 ha) in Seberang Perak granary area. Fig 2:Agribusiness Framework for the Rice Industry

48

Rice is of strategic importance to the economy as it is the staple food of the majority of the population. As such there are a lot of government interventions to ensure “a sufficient level of rice to the country while ensuring high price to the producers and stable price and high quality rice to the consumers”. The instruments of intervention include inputs subsidies, cheaper water irrigation rates, price subsidies, government-owned milling activities, price control (from farm to retail) and monopoly of rice imports. Fig. 2 shows the agribusiness framework for the rice industry. The monopoly of importing rice is given to the BERNAS Berhad which is also given the task of managing the supply chain of rice in the country.

The typical marketing system of fresh produce such as vegetables and fruits is presented in Fig. 3. Most of the produce goes to multi-layered middlemen before they reach the consumers. For instance, in the case of vegetables, the produce has to go through assemblers or transporters who normally work for wholesalers in the local market. The wholesalers, in turn, transport the produce to wholesalers in the terminal market. At the terminal market, produce is sold to either retailers or small time wholesaler. In other words, the produce is handled by four or more middlemen before it reaches the consumer. The farmers normally sell their produce to the local assemblers or wholesalers‟ agent on a consignment basis. The farmers are paid after the produce has been sold which may take more than a week. Produce are generally not graded and post-harvest handling is still the weakest link in the system. Prices are not transparent at the farm level, in fact they are discovered through the “whispering system” between the buyer and the seller. Producers are normally in a weaker bargaining position relative to the buyers or wholesalers who are equipped with market information and networking.

Under such a marketing landscape, there are minimal incentives for the industry to grade and standardize or even to innovate to create value added. Products are sold in bulk and undifferentiated and market prices do not reflect the quality and specifications. Post

Fig. 3 Comparison Between Conventional Agri-Food Marketing and the New Supply Chain

49

harvest losses are in the range of 10% to 40% due to poor handling and with little incentives provided by the market for high quality produce. 5.6 The New Supply Chain for Agri-food

The conventional agri-food marketing system as discussed previously is undergoing a transformation toward the “new supply chain” pushed by external and domestic “drivers”. The external driver is the rapid development of large retail chains from developed economies which made possible by globalization and free flow of capital across borders. These large retail chains integrate the wholesale functions into their own company to become self-distributing chains. Operating on a large scale these retail chains were able to introduce cost-saving innovations such as centralization of procurement, use of preferred supplier registries, formal contract with suppliers and promulgation of private quality standards.

The domestic drivers are consumer‟s income and changing consumption pattern and lifestyles. Malaysia is classified as an upper-middle income country, and considered as one of the most developed of the developing countries. A little less than two-thirds of Malaysia‟s population live in the urban areas. The industrial-urban expansion has created new consumers who have relatively more purchasing power and health consciousness, who began to dictate their strong influences on the agro-food system. These consumers demand high quality produce which are based on international standards. In 2005, there were 81 hypermarkets in Malaysia where 83% of them are foreign-owned. Among them are Giant (Hong Kong), Jusco (Aeon Group, Japan), Carrefour (France) and Tesco (UK). Local retail chains include Parkson, Ocean, The Store and Mydin. 5.6.1 Federal Agricultural Marketing Authority (FAMA)

The Federal Agricultural Marketing Authority (FAMA) is an agency under the Ministry of Agriculture and Agro-based Industry. Set up as a statutory body in 1965, FAMA is responsible in the supervision, coordination, regulation and improvement of the marketing of agricultural products, which include fruits and vegetables, for domestic, export and import markets.

As the Government‟s marketing arm for agricultural products, FAMA organizes marketing activities, set targets and product standards, monitor performance, develop marketing strategies and tools as well as initiate innovative programs to promote Malaysian agricultural products.

One of the marketing strategies developed by FAMA is the Farmers‟ Market (Pasar Tani) where farmers bring their own produce and sell them directly to consumers in weekly open markets. FAMA targets to have 1,000 farmers' markets with about 60,000 farm produce entrepreneurs by the end of the 10th Malaysia Plan (2011-2015) period. The Farmers‟ Market has been in existence over the last 25 years and is one of the successful projects of FAMA. The latest innovation is to introduce the “Business on Wheels” where producers sell their products in the Farmers Market that are stored in specially designed caravans.