RESTRICTED

Report No. PA-86a

This report is for official use only by the Bank Group and specifically authorized organizationsor persons. It may not be published, quoted or cited without Bank Group authorization. The,Bank Group does not accept responsibility for the accuracy or completeness-of the report.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

INTERNATIONAL DEVELOPMENT ASSOCIATION

AGRICULTURAL SECTOR SURVEY

MALAYSIA

(in three volumes)

VOLUME III

ANNEXES 6 THROUGH 9

July 7, 1971

Agriculture Projects Department

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GLOSSARY

CURRENCY EQUIVALENTS

US$ 1.00 = M$ 3.061M$ 1.00 = US$ 0.33

WEIGHTS AND MEASURES (English system)

1 long ton = 2240 lbs = 1.016 metric tons1 kati = 1.33 lbs1 picul = 100 katis = 133 lbs1 long ton = 16.8 piculs1 gantang = 5.6 lbs1 acre = .h05 hectares

ABBREVIATIONS

DID = Drainage and Irrigation DivisionEPU = Economic Planning Unit

FAMA = Federal Agricultural Marketing AuthorityFELCRA = Federal Land Consolidation and Rehabilitation AuthorityFLDA = Federal Land Development AuthorityFMP = First Malaysia Plan (1966-70)GMP = Guaranteed Minimum PriceMARDI = Malaysian Agricultural Research and Development InstituteRI(R)B = Rubber Industry (Replanting) BoardRRIM = Rubber Research Institute of MalaysiaSMP = Second Malaysia Plan (1971-75)SMR = Standard Malaysina Rubber

MALAYSIA

AGRICULTURAL SECTOR REVIEW

TABLE OF CONTENTS

VOLUME I (General Report)

VOLUME II (Annexes 1 through 5)

Annex 1 - RiceAnnex 2 CropsAnnex 3 - Sabah and SarawakAnnex 4 - Irrigation and DrainageAnnex 5 - Livestock

VOLUME III (Annexes 6 through 9)

Annex 6 - Agricultural Credit and Marketing

A. Agricultural CreditB. Marketing

Annex 7 - Forestry

A. General OverviewB. The Resource BasesC. Resource Administration Policies and ProgramsD. Wood Based IndustriesE. Development StrategyF. The Sarawak Hill Forest Project

Appendix 1: Log Measurement in Malaysia

Annex 8 - Land Development

A. Resource BaseB. Past DevelopmentC. Land Rights and AlienationD. Land TenureE. Future Land DevelopmentF. Conclusions and Recommendations

Annex 9 - Statistical Annex

ANNEX 6Page 1

M-ALAYSIA

AGRICULTURAL SECTO RREVIEW

A. Agricultural Credit

Demand for Credit

1. The agricultural programs under the Second Malaysia Plan have not

yet been formulated in sufficient detail to provide the basis for aquantitative estiniation of the likely demand for credit. Some indications

of the probable lines of agricultural development and the resulting creditrequirements are, however, beginning to emerge. Outside tlhe estate sector,

a major demand for credit will be created by the projected expansion of the

double cropping of padi. The expansion of the area under double croppingwill increase the credit needs. The requirements of production credit for

the iluda and Kemubu projects have been estimated to reach M$ 27 million and

M$ 6 million respectively. Sizable requirements, roughly of the order ofM$ 10-12 million, may also be expected in other padi areas which are or will

be irrigated e.g., that covered by the Besut project. The recent abolition

of the fertilizer subsidy may also be expected to add to the need for

credit. Even those farmers who can, at present, finance their cultivation

expenses from their own resources may need to borrow, once their use of

rtilizer and othier inputs rises to the levels recommended by the extensiongency.

2. Credit must also be related to the need and prospects for furtherdiversification: the increased cultivation of feed grains, sugarcane, banana,cocoa, tapioca and pineapple, etc. Diversification will create a demandnot only for production credit but also for longer term funds to finance

initial investment in clearing, levelling and developing land. This will

be particularly important where crops will begin to yield only after afew years. A major potential demand for credit is smallholder cultivators of

rubber, both for increased purchase of inputs for rubber production and fortuie introduction and establishment of new crops. Institutional credit will

be particularly relevant for crops whiclh are being cultivated for the firsttime, since traditional sources of credit and other services may not beavailable to the farmer for new crops. Again, credit needs will be more

crucial where the participants in programs of development are small and med-

ium scale cultivators with limited resources of their own: for example,

smallholders need larger funds for rubber replanting than they now receiveunder grants from the Rubber Replanting Fund.

3. Demand for term credit in particular can be related to severaldevelopments. Farm mechanization has increased appreciably in doubledcropped areas like Province Wellesley and Tanjong Karang and is essentialfor the new crop timetable of Muda and Kemubu. Machinery needs are likely

to extend to other areas and crops as intensive cropping expands and new

ANNi:X 6I'a g 2

areas are openied up. Io the extent that activi ties sucli as lanid development

are taken up by tile Federal 1. and Development Authority (FI,DA) and similar

stLate organizationis, credit facilities will be required by these bodies,

which incur tihe initial outlays ont land clearing, planting, etc. , rather

than by teic settlers who pay these cosLs in instalments spread over a

number of years.

4. Animal liusbandry organiized on modern and commercial lines is anotiher

area of likely demand for development credit. Specifically, possibilities of

coimnercial beef farming in Sabah and of the development of the table bi-rd in-

dustry on the basis of confined housing throughout Malaysia have been idcn-

Lified in thiis connection. Different type of operators wiho enter the poultry

businiess, for instance, will] have different credit needs: eC.g., cultivators

who will be taking up poultry as an ancillary occupation versus specialized

operators witlh close links to feed suppliers and marketing charnniels.

5. Finally, building up the infrastructure required for handling

the increased productioni of padi under the M'luda, Kemubu and other irrigation

schenmes nias credit irmpli cations. Term credit will be needed for the

inistallation of facilities and working capital for purchase, processing,

storage anid transportation of padi and, to some extent, other crops. Thie

establishimiient of artificial driers, in particular, will be important. The

capital requirements for the purpose will be large, wlhether these activities

are all taken up by the Federal Agricultural Marketing Authority (FAAMA) or,

as hoped, to a large e::tent by tlec private sector.

6. In summary, the existing supply of agricultural credi t is not

adeqluate for Malaysia's development needs. Some subsectors are better off

than others. The estate sector commands sizable resources of its own

and can look tLo commercial banks for working capital. The land settlement

programs organized by the FLDA and similar bodies have so far been largely

financed by Governnment. It is the sinallhiolder who is most handicapped in his

access to credit and hence is particularly in need of more support.

_xisting Supply of Agricultural Credit

7. Noninstitutional Credit. Although data are not available for

all sources of private agricultural credit, it is clear from various sample

investigations that private sector agencies are of major significance. Some

idea of thie general situation can be gathered from the data in Table 1,

provided by tlhree socioeconomic studies conducted by the M1inistry of

Agriculture and Cooperatives in 1968 in two states and one province.

Provision shops account for a fairly large share of the total borrowings.

Their extended credit is almost entirely in kind. Suppliers of timber,

furniture, clothes, etc., also provide their goods on credit to a limited ex-

tenit. Friends and relatives account for a sizable part of the cash loans.

Consumlption purposes, especially houselhold expenses, account for a large pro-

portion of the borrowings in Malacca (66.3 percent) and Kelantan (50 percent)

while, in Province Wellesley, the borrowing for productive purposes is pro-

portionately larger (61 percent of the respondents reported borrowings fronm

padi dealers, 16.9 percent from moneylenders and 2.5 percent from rice-millers).

ANiiEX 6Page 3

Studies in respect of growers of coffee, coconut, pineapple and rubber and of

fishiermen also show a similar preponderance of private credit, especially

that extended by dealers and middlemen. Credit is extended as well as

recovered not only in cash but also in kind; the latter is, in fact,

predominant in the transactions with dealers.

Table 1: SOURCES OF CREDIT, THREE SURVEYS

ProvinceMalacca Kelantan Wellesley

Cash Kind Total Cash Kirnd Total Cashi Kind Total

Owners of livestock - - - - 5.0 2.3 1.5 1.3 1.4

Pavun shiops 17.2 - 2.8 21.8 - 11.7 12.6 - 6.2

Provision shops - 76.5 64.2 - 50.0 22.9 - 59.0 29.6

Macchine sthops - 10.7 8.9 - - - - - -

Furniture slhops - 1.3 1.1 - - - - - 3LaRadio slhops - 1.8 1.5 - - - - 6.1 3.

Drapers - 0.9 0.8 - - - - - -

Timber shops - 2.4 2.0 - 30.5 13.9 - -

Feed shops - 4.9 4.1 - - - - - -

Fertilizer shops -- - - - - - - 5.2 2.6

Tractor owners - - - - - - - 2.3 1.1

Padi Buyers - - - - - - 23.5 4.7 14.0

Landlords - - - - 0.5 0.7 - -

Coconut dealers - - - - - - - - -

RWicbcr dealers - - - 2.0 - 1.3 lb -

1R';Ltives 37.7 0.5 6.5 43.8 1.9 24.4 5.8 2.9

F Lends 14.7 - 2.4 13.8 - 7.8 - - -

Cooperatives 19.8 - 3.2 0.9 0.9 0.5 57.5 8.0 31.1

Farmers' Assoc. - - - - - - - 8.3 4.2P'adJi Planters' Bd. - - - - -

2,ovcrnumcnt 2.5 0.5 0.8 - - - - - -

Mortgage of property - - - 17.1 - 9.3 - -

OtIers _.0 0.5 1.7 - - - - 5.1 2.6

Total 100.0 100.0 100.0 1((.0 100.0 100.0 1]00.0 100.0 100.0

/a Includes relatives.

/b Includes sewing machline shtops.

8. Rates of interest are not always fixed specifically in percentage

terms by private creditors. But real rates often work out in practice to

be quite hiigh, if account is taken of produce prices or other conditions

accompanying the loans. Under the widely prevalent padi kuncha system,

for example, the farner who has borrowed one measure of padi from the dealer

has to rcturn to the latter two measures after harvest. It is estimated tnat

pawn shops charge rates around 30 percent. According to the preliminary re-

sults of a studiy conducted by thlc Banki Negara and the FArTA, rates of 60-80)

percenit are not uncommon. Suclh highi rates can be accounted for by the risk

ef. le fiault , tlhe gse;neal siiort age of crccdi L, LIIe cOsL of adminis Icr inn neIi C rotII

sn.a11 loans, and tle L :sC C i-nSLig combmination of functionrs ilicliudi ,-; jilOc)jyiu1id ir1f

nmirke_tiing of produce andt tinc retailintg of provisionis in tlhe sarne personts or

tgroup of related. picrsons. However, it lias been observed in Province l-. jIS--

Iey tiI: t , ifter tile i lt roCUnCt i on of dnouble cropping anti tile resIL ti Iri, i no eis-

in farm incouleis andLI redUCtiOn in crop failUres, shopikleepers aind piidi dIealks o.

weore' geileral Ly molre willi.ng to finance small farmers tLhan before and tlhe C n-

ic--'st ci rla g,es teided to 10 lower Lthull in otiher parLs oL the count.ry. It

iiy, tlheretoIc, bUt:. IIhoped ti at tIle s.tpply anid lle terms of privaitte cc;eit i

ilprove a,s [ani tg beconies increasingty risk--tree a3111 renuiinerat ve.

*:i. IooheraL ve coo.,perative structure ii 'falaysin afor a; i cul.-

turLii credit (onsists of rural credit societies and li ultipurpost (mOperevives

at tile basc, banking, unions al tile intermediate level, and trh b.nk 1lcrlasrtam

at tiLL C apex. 'Therc arc- about 1,180 ruraL thlrift and credit socideties baseid

on an- lInii ted li abi lity , wi L1 a membe rship of 56 ,500 and shiare C.i)i tal anod

d e posits aggre gatingc, I,1$ 9.7 million. T'Lhe societies advaiiced 14!$ 2.7 million

tDo miiembers durin,g 1969 and the total lcans outstanding stood at MS 7.3

mi 1. ioni. One source of fuinds was the so-called '"padi kLIochia loanil", dlicle

was provided to thc cooperatives for fighiting the practice of mnakiling

forward sales of padi to dealers. Of the 14$ 2.9 million outstaniding to

government on Lltis accounIt, nearly M$ 1 million was overdue. Rural

cooperatives in talalaysia have beern disappointing. Some have been fairly

successful in rice miilling for home consuimptioni but the performance in

agricultural credit has been generally poor. Cooperatives have been weak

because of inefficient management, lack of cooperative education and!

trainiing, crop failure in certain years and certain areas, the inadequacy

of leadershtip, anid tihe tendency of members to look upon cooperative credit

as "government" money wlhicih need not be repaid. Those rural credit

societies which are functioning unsatisfactorily are now being liquidated

and the total number hias. thierefore, declined to 1,180 from 1,640 at the

end of 1J966.

10. The presenit trend is towards consolidation rathier than expansion.

The aima is to have societies whiclh conmimand a sufficieintly large area of

operations and volume of business so that they can employ full-time paid

staff. There are 315 multipurpose cooperatives at present and more are

being organized. Thlough these societies are to undertake credit, supply,

anld markteting, Ilieir principal acLivity has so far been the marketing and

willing of padi, and, in tLle case of a few, distribuLion of consumer

goods and marketing of fishi and rubber. Only 35 of these societies were

k:iigaged in the provision of credit, and these advaniced loans of 11$ 300,500 in

1969. Loans from cooleratives generally carried initerest at 6 percent wihen

advanced out of thieir owa resources. The scale of finance per acre consists

of M,$ 40 in cash and fertilizer worth M4$ 10. Loans in excess of `4$ 300

are secured by collateral of land.

11. Of the banking unions, three were converted into branches of the

Bank Kerjasana, four were liquidated, and most of the otlhers are dormant.

Tlie r.management of the Bank Kerjasama, the apex financing body for rural

cooperatives, has been recently reorganized. The Bank's membership consists

ANNE1X 6Page 5

of 850 cooperatives and over 2,000 individuals whom it finances directinstead of through the societies. Its outstanding loans stood at M$ 14million at the end of November 1970. For these 11 months of the year, atotal of M$ 6.43 million was lent. By far the major part, M4$ 4.35 million,

was for land acquisition, development and redemption; some M$ 1.13 millionwas for machinery (pedestrian and four wheel tractors and transport vehiicles);in addition small amounts were for padi purchiase (M$ 300,000), seasonal pro-duction loans (M$ 560,000), and fertilizer (M1$ 90,000). The loans for trac-tors carry interest at 8 percent per annum, run for three to four years, andare secured by mortgage of land. The Bank's resources consist of sharecapital (14$ 3.2 million), savings and fixed deposits (M$ 8.5 million),reserves and unappropriated profits (M$ 0.7 million) and Government loans(M$ 10.2 million). There was a substantial growth in the Bank'soperations, resources and organization in 1970 and furthier expansion isexpected in the coming years. Of the loans corresponding to the dues toGovernment, about M$ 3.2 million appears to be bad or doubtful.

12. The initiative for organizing cooperatives in Mtalaysia has comelargely from the Government rather than the people. Most societies cannotemploy trained and full-time staff because their operations are small.Recovery of loan dues has been poor, resultinig in some instances from cropfailure but more often from political or other pressures. The movementhas not thrown up adequate leadershiip and member education has been insuffi-cient. More recently, spurred by tthe challenige posed by thie farmers'associations the Bank Kerjasama and the Cooperative Department are tryingto revitalize the cooperative credit structure by promoting viable units ona multipurpose basis. However, it is too early to evaluate the results.

13. Farmers' Associations. Of the institutional agencies in the field,the farmers' association is the latest. It seeks to supply credit, inputsand marketing services on an integrated basis (the so-called Taiwan pattern).The Ministry of Agriculture supports these institutions by providingoffice buildings and the free services of Government officers. The planis to set up 206 sucli associations by the end of the Second Malaysia Plan,together with 11 state level associations and one at the federal level,covering in all about 100,000 ouit of a total of 600,000 cultivating families.So far 60 associations hiave been organized withi a membershlip of about 35,000.Each association consists of several small agricultural units (of about 50members each). Its affairs are dlirected by an elected board but administra-tion is mainly by a full-time general manager assisted by five section lheads,viz. Administrative, Economic, Credit, Extension, and Accounting. Thie Asso-ciationis are eventually expected to undertake various activities suicl asfarmn maclhine services, transport, processing, etc. At tlhe moment they dealmainly In credit and supply of inputs.

14. The associations advance production credit only in kind, at aboutM$ 50 per acre, charging Interest at 12 percent per year. Their aim, hiowever,is to provide, in due course, supervised cre(lit incorporating technical guid-ance and supervision. IEachi association expects to have, with Government ns-sistance, an operating center witlh provision for offtce space, store, tractor

slhed, etc. Several of the associatLions (lo not yet have thleir full compleuument

of staff. Current staff is compl1)osed of Gov,'rnmceiiL officers whose salariusirv pa id for by Cove rniiicnt. 'lik associatLL( s are, liowever , ex.pected

eVenlually to earin enOuIgh inComeI1 tron tlheir credit and Lloncredi t bUSilr.S';Lo be able tl pay for sucli staff. Apart fr-on a few financed by thl bankPerLaniian, mosl ot the assoc at-iorns derIvc thlhiir rct S(otrccs Inalni.y frormi

en(trasce fees anid shalre coantribLut ilols (un)linium of M"; I per meutbe r) . Up-to-date dlata are lnot available but particulars of the work tin of the associta-Lions are giveln in Table 2.

Table 2: FARMERS' ASSOCIATIONS(end of December 1969)

Number: 24Mie ibe rship: 15, 864Sihare caplital: M$ 129,485Number of small agricultural units: 338Net profit from Economic SecLion: (supply, marLeting, tractor services)

H$ 2088,876Loans outstanding: m$

Secured: :3,294ULnsecured: 130,950Overdue: 1,553'fotal: 135,797

'Total assets: M4$ 1,372,448

15. Considerable expanision of the activities of the farmers'associations is envisaged in the Second Malaysia Plan. 'T'heir disbursementof credit Is tentatively estimated to rise to M$ 16.9 million in 1971 and1I$ 39 .3 miillion in 19 /5, the bLulk of it being in the Mluda and Kemubu areas.'t'he associations are also to be provided long-term credit for buying andoperating tractors. Under the accepted pattern, 200 agriculturalassisLtants will bL reqjuired to serve as general niaragers of the associationsand 1,0()0 junior agricultural assistants to be in charge of individualsections. Even many of the existing associations are short of such staff;therefore, it is being considered whiether the less qualified field assistantscan substitute for the junior agricultural assistants, who are and will bein shiort supply.

16. It is hoped that, unilike cooperatives whicth have sometimesbeen domilnated by persons other than farmers, thlese associations will besolely guided by the interests of farmers (in fact, nonfarmers will not beallowed to become members). Further, unlike the cooperative, it is claimed,thie farmers' association is assured of full-time management by trainedstaff of the Agriculture Department. It is still to be seen whether allthe merits claimed for them will be actually realized in practice. Theircoverage and scale of operations have been relatively modest so far,partly because of a policy of going slow -- a policy dictated by theunhappy experience with agricultural credit in the past and the limitationsof staff. To expect expansion on the scale envisaged therefore seemsunrealistic. In fact, it is doubtful whether these associations, which

are in many respects similar to cooperatives, can avoid the problems and

ANNEX 6Page 7

constraints which have affected the latter. Illustrative of these factorsare the lack of adequate staff, inadequacy of farmer leadership, paucityof resources, and the inclination of farmers to look upon membershipmainly as a passport to credit.

17. The record to date raises doubts that sound business principleswill govern the working of the associations. The provision of Governmentstaff free of charge is not a good omen. The staff provided, in addition,are not very commercially oriented. The aim of providing sophisticated"supervised credit" services seems hardly practicable, given the limitationsof staff and resources. There are already instances of poor or delayedrecoveries and of stagnation in the volume of credit disbursed. It is,in these circumstances, difficult to assume that farmers' associationswill, in all cases, live up to expectations.

18. Commercial Banks. The commercial banking system of Malaysiaconsists of 16 domestic banks, five banks incorporated in Singapore, and17 banks incorporated in other countries. These banks have in all,329 banking offices spread over 93 centers, and an average of 32,800 personsserved per banking office. Bank deposits form nearly half of the moneysupply. Banking facilities, however, have yet to reach some smaller townswhich are gaining a new significance in the wake of increased agriculturalproduction.

19. The contribution of commercial banks to agricultural credit inMalaysia mainly takes the form of accommodation provided (1) to therubber and other estates and (2) to rice mills for enabling them topurchase padi. The latter reaches the cultivator to some extentindirectly, i.e. through padi dealers, in the form of advance for padipurchases provided to farmers in anticipation of produce to be deliveredby themn. A classificationi of advances by purpose is given in Table 3.

Table 3: ADVANCES BY COMMERCIAL BANKS, 1969-------M$ million--------

June December

Rubber 87.6 104.1Palm Oil 18.4 28.0Pineapple 10.4 10.5Forestry 33.7 37.0Other 11.8 11.5

Total Agriculture 161.9 193.1

Total Loans and Advances 1,847.8 1,998.9

20. The Bank Bumiputra and a few other commercial banks are understoodto have begun to evince some interest in financing sinallholders engaged inpadi, fruits, etc. These efforts are, however, as yet concerned mainly withgetting staff trained for the purpose, collecting relevant information, etc.

ANNEX 6Page 8

21. Bank Negara Malaysia, thc central bank of the country, was

actively associated with the work preceding the establishment of thle Bank

Pertanian. The central bank hlas not so far provided any rediscountfacilities for agriculture. As a first step in this direction, the R;lnk

is IIow considering the provision of stuchI facilities to commercial banks

witlh a view to enabling them to finanice the padi purchase operations of

the Padi and Rice Marketing Board whiclh has hitherto generally looked to

the GoveriniLent for the funds required for this purpose.

22. Padi Planters' Boards. Padi planters' boards were set up by

a few state governments for managing certain special funds placed at t[i'Lr

disposal by the central governiment to assist pacli farmers who had

suffered from an earlier reduction in the support price for padi. These

funds have been mainly used for the provision of long-term and mediui,i--term credit to padi farmers. The board in the Kedah area, es.ablislied

in 1955, has so far advanced about 1$ 9.2 million to 3,450 farmers for

redemption of mortgaged lands acquisition of new land, purchase of

tractors, etc. Of the present outstanding amount of about M4$ 3.8 million,

nearly M$ 1 million is said to be overdue.

23. A similar board, established for Selangor in 1961, has advanced

(to October 1970) loans of M$ 135 million for (1) redemption of landsmortgaged before 1960, (2) purclhase of padi fields and (3) purchase

of tractors and rice mill machinery. Arrears of loan repayment aggregated

M$ 159,000 from about 200 borrowers. The board had a staff of only two

persons to cover office as well as field work. It is proposed shortly to

convert the board into a statutory state finance corporation. The Pahang

Padi Planters' Board (established in 1952) used to make loans for

purchase of tractors and rice mills, but it discontinued this business

following unsatisfactory repaymenit experience. Tle 13oard is now mainly

engaged in hiring out powertillers for servicing farms througlh the local

farmers' association.

24. Sarawak Development Finance Corporation. The Sarawak D)evelop-

ment Finance Corporation was establislhed in 1958 to finance schemes of rural

developmaent. Its capital resources consist of two loans from the Sarawak

Governmeniullt -- one at 4 percent and the other interest-free. Besides pro-

viding credit facilities to farmers and fislhermen, the Corporation has

engaged in the management of six rubber landl development schemes, the

processing of heveacrumb at Sarikei, opening up of an oil palm scheme,

and the operationi of a scheme under which local fishermen were to be

selected as skippers of 10 trawlers and assisted eventually to own these

vessels. Loans advanced to farmers (under rubber planting schemes or

land development schemes) and fishermen amounted to M$ 1.4 million and

M1$ 1.27 million in 1968 and 1969 respectively. Of the sum of M$ 1.46

million, which was due for repayment, only M$ 0.75 million was collected.

Only about one-half of the amount recoverable was repaid in 1968 and

1969. This resulted from factors such as the low rubber prices prevailing

during certain years, willful default in certain instances, footrot

disease in the case of pepper, and failure of earlier fisheries schemes

in certain areas. The Corporation also advanced loans on the deposit of

pepper with a view to facilitating orderly marketing of that commodity.

Page 9

25. Sabah Credit Corporation. The Sabah Credit Corporation was setup by statute in 1955 to provide credit facilities for various ruraleconomic activities. The corporation derives its loanable resourcesentirely from an interest-free loan of M1$ 3.22 million provided by theGovernment of Sabah. The Corporation had disbursed loans amounting to M$ 7million since its inception. The rate of interest charged is 7 percent.Of the amount lent, about one half was for animal husbandry activities andabout 40 percent for agriculture. In the Second Malaysian Plan, the Corpora-tion hopes to place greater emphasis on financing local industrial units suclas a rice mill, a saw mill, and a brick factory. Even so, the target ofloans for agriculture and animal husbandry for the Plan period has beenset at M$ 2.7 million.

26. Land Development Corporations. The Federal Land DevelopmentAuthority and some corporations at the state level play an indirectrole in agricultural credit. They clear forest and other lands andundertake the development of rubber or oil palm on such lands, onbehalf of settlers or other cultivators. The credit aspect involvesinstalment payment of the development costs after the crops come tofruition. Thouglh the existing state corporations are largely engagedonly in such activities, some are permitted by their statutes to financefarmers directly. Thus, the Pahang Agricultural and Industrial Corporation --which is yet to commn nce its operations actively -- is considering notonly land developmenit schemes but also schemes whiclh contemplate theprovision of seed, fertilizer and cash on credit to smallholders engagedin the development of tree crops on state lands allotted to them. TheCorporations look to the state and federal governments for theirrequirements of financial resources. These funds are provided (usuallyin lump sums) by the Treasury with reference to the aggregate needs ofthe institutions rather thani on a critical appraisal of the viabilityof individual schemes.

27. Finance Companies. A few subsidiaries of commercial banks, wlhicihare licensed un(ler the Borrowing Companies Act, supply tractors to cultiva-tors and contractors, as part of their hlire-purchase operations coveringcars, radios, etc. The borrowers liave to make a down payment of 20 percentof the value initially ancl pay the balance in 24 monthly instalment includ-ing interest at 10 percent. The tractor is the security for the loan.However, as repossession of the machine is difficult and often unrewardingin view of its rapid wear and tear (especially in the soil conditionsof areas such as Muda), the company usually asks, in addition, forthe guarantee of a tractor dealer to whom there can be recourse ifinstalments fall into arrears. Defaults on the instalments have beenattributed in many instances to the absence of demand for tractor servicesfor several months of the year and the competitive undercutting of chargesfor such services. The finanice companies raise resources for the purposeby acceptinig savings and fixed deposits up to three years.

28. Government Finance for Rubber Planting. Schemes have been inforce since 1952 to provi(le financial assistance to rubber smallholdersto enable themii to reL)lant with moderni hligl yielding clones. Some of the

resourcus Lor this purpose hIIve Come1c I rinl thL cuss collecL.d( by t;overinuim.t

on rubber exports. Til oug l s.kl;l 1 1lold IL I ; I are c dfI IIed as those )f lues t.Iii i

100 acres, few are over 25 acres and Llth averagu hss becen us ui AiI ed al

about 6.6 acres. Over the years, assist.;Ji:ce from thu Goveriimial F '-

repilanting has beeii graduaL1y increuased, in vLew of rising costi, fromli

II$ 500 to M$ 750 per acre. Thke granL partl Ly in cash St1 an partly in kirnd,

is provided in instalments on the basis of work completed. A bonius of

M$ 50 is paid to smallliolders wiffi five acres or less on coinplet ion of

replaniting. Grants liave also been provLded for fresh planting of rubber

by smaliholders. It is estiniated that the schemes have covered abotut 1.1

millioni acres witli replanted or frestily planted high yielding clones. !Lew

plantings liave been substantially accouiited for by the activities of the

FLDA. It is rouglhly estimnated that about 600,(000 acres of rubber in tihe

sinallholder sector remain to be replantet1. The scale of tile grant ap,ears

to be insufficient for meeting the necessary outlay. However, the resources

available in the rubber replanting fund are not adequate for adopting a

larger scale of finanice covering a larger number of acrcs.

29. Bank Pertanian. The Bank Pertanian Malaysia came into existence

in 1969 following enabling legislation. The Bank is empowered to undertake

a wide range of functions in regard to agricultural credit. Its first

activities have been related to a production credit scheme for padi cultivation.

This schemne, and thle Bank itself, are of sufficient importance to be

discussed in sonie detail.

Banik Pertanian

30. According to the statute, the Board of the Bank is to consist

of a chairmani appointed by the Yang Di-Pertuan Agong and not less than six

and not more than eight directors to be appointed by the Minister in charge

of the Bank. At present, ther-e are, apart from thie chiairman, six

directors of whom one is a private attorney and the otlhers are officials

of thle Ministry of Agriculture, the Treasury, the Economic Planning Unit,

Bank Negara, and thie Federal Industrial Development Authority.

31. The main functions envisaged for the Bank are to coordinate and

supervise credit for all agricultural purposes, to provide short-term

and long-term loans for all aspects of agriculture and animal husbandry

(including marketing), and to niobilize savings in the agricultural sector.

W4hile the Bank was to enlarge the scope of its activities progressively as

it built up its staff and expertise, the first task which it undertook --

on a pilot basis -- was the financing of padi cultivation, initially in

the IMuda Area in the first crop season (1970) and, later, the Kemubu area.

32. Withi a view to nmaking adequate arrangements for production credit,

as entvisaged under an agreement between the Government and the IBRD (which

flilanced part of the cost of the Muda River irrigation project), a scheme

w;ls formulated on the basis of an initial study by a Bank mission and

subsequently by private consultants. The scheme envisaged the provision

of production credit by a central organization operating through various

local credit centers -- farmers' associations, cooperatives, private

ANNEX 6Page 11

rice mills, padi dealers, etc. --which would screen, on the basis of

local knowledge, the individual applicants for credit and also be responsible

for collections. The scheeme derived from experience in Province Wellesley

which had shown that, following adoption of double cropping of padi by

smallholders, their incomes grew with increased production and the risk of

crop failures was reduced. Under these circumstances, the private suppliers

of credit and inputs were willing to provide credit not only in larger

volume but also at interest rates whiich were lower than elsewlhere in the

country, thiough still ratlher high. It was, thierefore, hoped trat if the

private creditors could be funded by a central authority, thley could play

a bigger role in meeting production credit needs anid perthaps also lower

their interest clharges. At the same time, their proximity to, and intimate

knowledge of, the farmers should help keep down the cost of administration

of the credit scheme and ensure pronmpt recovery of dues. Further, efficiency

was expected to be aided by competition among the alternative credit agencies

and input suppliers. Finally, the computerized tabulation of the data

regarding loan operations, recovery of dues, etc., helps build up a credit

record for eachi participating farmer. This arrangement would make it

possible to ensure collections, by withlholding future credit if earlier

loans are repaid. The sciheme was thus designed, in its various aspects,

to control and reduce costs and risks.

33. Coupons were issued to cultivators with restricted dates of

validity corresponding to tlhe seasonal phasing of farm operations.

Insecticides, fertilizers, and tractor services could be obtained from

approved suppliers on the presentationi of the corresponding coupons.

Uliough cash could be provided for payment of hired labor for transplanting

and harvesting, tlhere was a general reluctance to make disbursement in

cash for fear that the money would be used for consumption purposes.

This was especially true of farmers' associations. Other features of the

pilot scheme were as follows:

(i) The rate of interest payable by the ultimate borrowers was

8 percent for secured loans and 12 percent for unsecured

loans. Of this, 4 percent was to be retained by the Bank

Pertanian and the balance was to be the commission payable

to the local credit centers.

(ii) While the local credit centers were free to continue their

own rules in regard to security, it was recently decided

not to insist otn the collateral of lanid. The produce is,

tlherefore, the only security.

(iii) Farmers' associations, cooperatives anxd private retailers

who were engaged in the purclhase of padi and stocking of

fertilizer were selected as local credit centers.

(iv) Loans were due for repaymenL at the end of the crop

seasons but no specific dates were indicated.

ANNEX 6

Page 12

(v) Advantage was taken of the computer capacity availablein Kuala Lunipur for recording aid processing the entiredata on the credlit operations.

34. Details of thLe Bank's credit operations, up to end of Novemiber1970, are given in Table 4. The Bank Pertanian has so far authorized crediLof the order of about M$ 600,00 anid reached over 1,700 farmers in tile Mudaarea and about 560 farmers ii the KiCKoulbu area. This contribution of theBank is significant, thougii a number of farmers andcl a large part of the areacovered by the respective irrigation projects are yet to be covere(l by th,

Bliak. This was, however, to be expected as Llte operations ini 1970 weri'looked upoIn as ii nmore thani a p)ilot ei fort.

Table 4: PRODUCTION CREDIT OPERATIONS OF BANK PERTANIAN

Loans Loans

Type of Local Number of Number of Author- Actually Amount Collec-

Credit Center Centers Acres Borrowers ized Advanced Due tions Balance

FIRS1 CROP'I-fuda

Farm.ers' Assoc. 2 1,906 332 62,125 45,392 49,705 41,667 8,098

Cooperatives 5 762 97 26,202 13,()11 14,3(2 14,033 268

lotal 7 2,608 429 88,328 58,403 64,007 55,700 8,366

SlCOND CROP

MIudl.l Uj5o November 30

Fari:ers' Assoc. 12 7,191] 1,124 234,242 104,324Cooperatives 1(3 1,725 245 87,051 19,365Private Sector 6 3_JA2 339 _34,796 59,297

Total Muda: 28 12,058 1,708 456,089 189,98'7

Kemiiub u

Farnmers' Assoc. 1 568 274 38,985 3,560Cooperatives 4 964 286 69,504 35,496

Total Kemubu: 5 1,532 560 108,489 39,056

Source: Bank Pertanian, Kuala Lumpur.

35. Only about two-thirds of the credit authorized for the first crop

in the Muda area was actually drawn by the borrowers, as shown below:

MN ElX 6Page 13

Percentage Use

Tractor Service ...... ......... 49Nursery Fertilizer ............. 59Nursery Insecticide ............ 55Basal M4ixture .................. 81Insecticides ................... 49Urea .. 89

Total 66

Various explanations are responsible for the relatively low rate of credituse. For instance, fertilizer was available at lower prices and on credit,from sources other than those authorized under the scheme. Undercuttingof price seems to have occurred in the case of tractor services as well.While in some cases difficulty was experienced in contacting the authorizedtractor contractor and obtaining his services in time, it happened, inother instances, that some contractors charged lower rates in view ofthe competition among them for a limited volume of business. Delay inthe release of water fromn the project to certain areas also partlyaccounted for the shortfall in the use of credit.

36. The operations of private agencies as local credit centers(LCC's), although a basic feature of the scheme, could not be organizedin the first season for various reasons. The initial difficulty was arequirement by the Bank Pertanian that LCC's had to produce a banker'sguarantee to support the credit extended through them. This was, however,later given up in favor of property collateral. Rice millers did notbecome involved in the scheme because they claimed that they rarelyfinanced farmers directly; the somewlhat disturbed conditions in the country,though a temporary factor, also added to their reluctance. The private LCC'sfinally chosen were generally agencies engaged mainly in padi buying,fertilizer distribution and, in a few cases, tractor contracting. Noprivate LCC's were selected in Kemubu, as all thie licensed padi buyersin the area were eitlier cooperatives or farmers' associations and theonly private licensed buyer was a commercial rice mill which was allowedto buy padi only at the mill door. The borrowers selected by the privateLCC's were usually persons with whom they (tlhe LCC's) had long-standingcontacts based on personal knowledge. In several cases, the loans hadbeen secured by land titles, and the lenders could recover their advancesmerely by threatening to bring the land to sale.

37. Coupons for certain purposes were valid only between certain dates.It was soon realized that this feature of the scheme has to be operatedin a flexible manner, as the timing of farm operations depends sometimeson factors over which the farmers do not have sufficient control. Thedates have been suitably extended in some instances and, in the lightof experience further relaxation is being considered.

38. No specific due dates seem to have been stipulated for therecovery of the loans. The recovery from the farmers' associations in thefirst season was considerably delayed. In one farmers' association, wlhich

NINE,,, 0

had repaid only hlalf of the dues till the enid of !'onvember, cli Ffiuiti es intraiusportinjg aind marketing produce accou:nt f'or- the poor ruccovertes.

39. The Bank is contemplating several extensions of its Sf-''"-

It lhas been undertaki g some stu(dies in areas other than iulUda aiL (eT)Ubu

with a view to extendirng prodluction cr:-dit operations to them. 'ilie lbanlalso proposes to take up shortly the financing of tractor purchases byfarmers' afs,sociatioiiSs, cooperntive±,-, contractors, groups of farmcrs and in-dividual farmers. A dowi p)aymerit of 20 percent will be required; interesLat 8 percenlt will be charged oni direct loans, which will bc for Lhreu years-to individual farmiers and two years to contractors. Tractor dea] f.;, mi&.i

be used as local credit centers for routing such loans. On direct 1 i,sto individuals, thie tractor puLrchiased will be usetd as collateral up lo on

thirdi of its value, the balance bein_ provided in the form of shares calestate, and othler equipmiient. The tractor alone would be adequ.,Le coliaturalfor loalls throughi dealers wlho guarantee repayiment, for establislied conLr;ic-tors, and orgailizations like farmers' associations and cooperatives.

40. Resources. 'lTle Bank Pertanian received, on its establishment,M$ 10 imillioin from the Government of Mfalaysia as a paid up capitalcontribution. Its total authorized capital is M$ 50 million, to bewholly subscribed by Government. Thle Bank is empowered to raise furtherfuLnds by borrowing anid acceptance of time and savings deposits, but asyet the need for additional resources has not arisen. As of October 31,

1970, a sum of only M'$ 57,000 has been invested in loans outstanding andthe balance is held largely in the form of fixed deposits with Bank Bumiputra

which carry a rate of interest of about 6 percent. As many staff positions

proposed earlier are yet to be filled, administrative expenses have been

running at about half of those provided for in the budget. As a result,

revenue (largely by way of interest on fixed deposits) has exceeded expenses

by about M$ 162,791 during 1970 (to November).

41. Organization. The approved organization of the Bank consists ofthree Divisions: Program Development, Credit Operations, Administration

and Finance. Apart from the General Manager, only three senior officials

are now in position: one in charge of Administration and Finance on

secondment from Government; a computer systems analyst seconded from BankNegara; and a manager in charge of the Operations Division, recruitedespecially for the Bank. T'here is need for a departmental head to be in

charge of accounts (to replace the officer who has recently resigned), a

person to head the Program Development Division, and an agricultural credit

specialist to advise the latter 1/. The Bank has opened two branch officesto serve the Muda and Kemubu areas, with little staff besides the Branch

Manager. There is at present no manager in the M4uda area as the incumbent

recently resigned.

42. Part of the difficulty experienced in recruiting and retaining

the services of competent personnel which is conmmon to most of the institu-

1/ These posts have been subsequently filled.

ANINEX 6Page 15

tions in >alaysia looking for new staff arises from thie shiortage of skilledpersonnel in the country. Partly, this reflects the fact that BankPertanian is a new institution and has yet to build up its standing inthe employment market. Further, the Bank has not yet formulated its ownstaff positions with pay scales closely related to job responsibility.The services of three expatriate consultants provided by the PAS are nowavailable to the Bank: a fiscal specialist, an organization and methodsspecialist, and an agricultural credit specialist 1/.

Guidelines and Recommendations for Future Policy

43. General Guidelines. The Bank Pertanian should be rapidly builtup, in terms of organization, to operate effectively. Apart from financingfarmers directly where necessary, Bank Pertanian should play an active role inproviding the various credit agencies with the necessary resources, leader-ship, coordination and technical guidance for the formulation and implemen-tation of suitable credit projects and operational policies.

44. It does not appear to be adivantageous for Malaysia to placeexclusive reliance on any single type of credit agency. Instead, a roleshould be assigned in the credit field to all the important credit agencies:viz, farmers' associations, cooperatives, commercial banks, fertilizersuppliers, tractor -lers, etc., as the task of increasing and improvingservices is large anid calls for a multiagency approach. Competition amongagencies can prove beneficial to the farmer.

1!5. Staffing and training for the credit institutions are the mostmportant limitations today. Thley deserve high priority in manpower policy.

46. Credit has to be closely linked with extension on the one handand marketing on the otlher.

47. Bank Pertanian. To carry out the key role assigned to it, theBank Pertalian must become nmore successful in recruiting and/or trainingessential staff. Secondly, it should continue its policy of extending itsoperations, both functionally and territorially.

48. The bank should extend its scheme for production credit in theimmediate future to some more areas wlhere agriculture is fairly risk-free.hle bankc has itself been unidertaking some exploratory studies for this

purpose. Illustratively, mention may be made of areas sulch as (1)Tanjong Karang and Sabak Bernam areas of Selangor where double croppingof padi has been in vogue for several years, and where the licensedpadi buyers are mostly rice milling cooperntives; ancd (2) the Besut areaof Tren1gganu which is covered under an irrigation project financed bythe Asian Development Bank.

1/ As in May 1971, there were in all 4 specialists, 2 of them in the Pro-gram Development area.

ANNEX 6l'age '6

49. As for Lthe extension of functi.ons, apart froni the bank'sdCcisioni to provide loans shortly for purchase of tractors, thlere isscope for venturilng into otLler- areas of investmeiit credit. Hlowever,this will depend oni staff capability to undertake careful exainii ionsof the technical feasibility and economic viability of each iiidivicdualcategory of projects and with refercllce to developme-nt priorities. Amongpurposes for wlhiclh term loanis can be considered are:

(i) Developmenit or levelling, of lanld il areas wlhere mechaniza-tioli is being introduced.

(li) Purcliase of land or rights in land withl a view to malinghloldings viable or enabling tenlants to re.ap the full bene-fits of improved technolog,y.

(iii) Initial investment for orchlards anid plantations, e.g.pineapples and citrus fruits, and coconuts and rubberwhere conditions are favorable for their development.

(iv) Provision of loans to smallholders for replanting of rub-ber so that adequate financing is possible for the entirearea awaiting replanting.

(v) Developmnent of poultry on a conmmercial basis, especiallyfor table bird production.

(vi) ProvisioIn of additional facilities for processing (incilid-ing dryinig), storage and transportation to take care ofthe increased quantities of agricultural produce (espe-cially padi) expected to emerge from time programs 1/.

50. Ale operationial procedures for the production credit schemein ?uda and Kenmubu liave been well conceived and lhave been amended inpractice to meet individual situations. Some furthier steps may, however,

be considered.

51. The basic goal of the production credit scheme is to reaclh alarge inumber of cultivators. rhis call be done only by expanding channelsthrough the enlistment of more private agencies. Now that the pilotstage of Ltie operations is over, it slhould be possible to get more of

the cligible entities to operate as local credit centers. A joint effort

to this end by the authorities of the Mfuda Project and of thle BankPertanian is urgently called for. In Kemubu, it might be that the

wholesalers who arrange for thc delivery of padi by farmers at the mill

door could be enlisted.

1/ It is understood that subsequent to the visit of the mission, the Bank

has been considering loan requests for financing operations in some of

these categories.

ANNEX 6Page 17

52. The local credit centers (especially cooperatives and farmers'associations) should be closely supervised through frequent visits by the bankstaff to the institutions, meetings with their management, etc. It isimportant that the farmers' associations and cooperatives have full-timemanagers dealing with credit business. As experience is gained, it willbe possible for the bank, in later years, to delegate to them moreresponsibilities in regard to the sanction of credit, etc.

53. In view of the delay and difflculty experienced in recoveringloans in the Muda area, it will be advisable to require the borrower toput hiis produce oil tlhe market. Secondly, specific due dates for loanrepayment slhould be laid down for each season.

54. The reasons for the gap between authiorized credit and the creditactually used should be examined more closely -- to what extent have rig;idprocedures been a cause? It may be possible, for example, to be more flexiblewitlh regard to the use of coupons; the farmer might be given greaterfreedom in regard to the type of fertilizer whlichi he may buy ancl the dealerfrom whom he may buy it.

55. It may be that the total denial of credit in cash in some instances-- where farmers' associations serve as local credit center or in the Kemubuarea as a whole -- m. not continue to be justified. The need to employhired labor, at least for an operation like the transplantation of padi,has to be taken into account.

5f,. At present, the bank has only two branches -- in the Mluda area;"Id the other in the Kernubu area. Neither is adequately staffed. The;Lrst order of business should be to provide the office in Muda with abranclh manager. While gradually the local credit centers should be builtup to operate largely on their own, the branches in the two areas have arole to play at this stage.

57. More generally, a number of measures miglht be taken to strengthenthe bank's staff. The establishment of pay scales and job specificationsis obviously needed. As the bank has to compete with the commercialbanks and other private organiizations for its staff, and the duties of theseofficials are somewhat different from those of Government, the pay scalesfor the bank staff should not necessarily follow those of Government.Attention to the bank's "image" miglht help to attract job candidates.Bank Pertanian is not very much known yet and even those who have heard ofit have no appreciation of all that it is expected to do. The bank is nowlocated in a Government building whichi houses many offices of a ministry buthopes to move into a building now occupied by Bank Negara 1/. This itselfshould improve its image. In addition, the bank could publicize itsperformance and plans. The bank should not become discouraged in itsadvertising campaigns, or its contacts with universities, etc. to recruitpromising young men. While there is in Malaysia a general shortage of

1/ This has since been accomplished.

ANNI : iP';lgv 1.

qualified people in many linies, the experience of in.sti.tutions like thle FLI)A

suggests thaL the recrui tncnnt prob lem is not I usolubl.e for a partl(:ular ;in, ciiuy.

5S. There are, at prescent, no facilities in M-falaysia for riJ!ii;,,

agricultural cre:dit staff but thie nee(d for such facilities will increase

slhortly. 141ile some senior personnel may be sent for overseas training,

arrangemenits for a larger number will have to be made locally. B3ankPertanian may organize a special shiort Lerm training course at Kuala Lfumpur

for agricultural credit, in cooperation with thle 1'anlk Negara anid tile

Univer.;iiLy of Malaya (AgricuLtmre DepartmenLt), and wi th- the assis Lance of

conisulLanLts. It is a goodl i.dca for part-i.cp;ints t:) IJnclude emjployeesof tlhe cretdit agencies (icoLud j13g eunmme rcla.1 banks;). The trailnes wil].total about .'(.

59. The Board of Mamagenmeut_ of Bank Pert-anian includes two persons

wilo are not Covernmiiienlt officlals, vi z ., the Director of Rtesearchh of BankNeDzara and a private attorney. T'lme Board( woUld bunefit from tLle association

of a few more persons witl-h specialist knowledge of agriculture and business.The two unfilled seaLs on tile Board miglht wull be filled by persolns withlexperience in conmerte or agricult_uru (banlokers, econormiists, distributurs,

. tc.) -

60. The resources available, witht Bank Pertamiian maiy appear to suffice

fur its presenLt ieeds but wi. [L.1 prove far shorL of needs as op)erationscxpand. 'The fuller coverage of padi double cropping in the Muda and Kemubu

areas and thie proposed extensloni of similar financing, to other areas will

togethe--r involve loans of tlme or(lder of 40 i0 millioni. The bank's capital

of ilO; I( Ililioln Illay, Lthret,fore, be used up in a year or two and tlh-e bank-

will have Lo augmienlt iLs shiort ternii resources by borrowing from Bank

Negara. Mlediiuml or long Lerni fund(s caiiniot, lhowever, be found fromll this

source. Borrowing ironi interniational institutions, therefore, will assume

si;iiificalnce as a potential source of funds as Lhe Bank's terml leading

inicrerses. Banik PertaLniani migLt immcdiately unidertalke prelimi nary

invQstLi,;ation of. tle possib)le contenits of a credit project: e.g. tractors,

producLion of table birds, eLc., so that a suitable project may be formulated

by, say liLe miiiddle of 1971. The bank will, however, require external

tecimimical assistance if the projects are to be developed soon and in a

form tiatL will rendier them suiitable for international financing.

61. Farmers' Associations. Time efforts to organize more farmers'

associations and to enable them to undertake multiple functions are in

the righL direction. At the same time, it is unrealistic to ignore

the limitations affecting their working and to assume that this agency by

itself can meet all the credJ.t requirements. It is doubtful if each of

the 218 farmlers' associations proposed can be provided with the full comple-

ment of one general manager and six section heads in the near future even

if the programs regarding the training of agricultural staff go through.Over the short term, it would be better to concentrate on a smaller number

of more effective associations. This policy would reverse the present

practice of covering only a small proportion of the farm lhouseholds in areas

of operations, a practice said to be dictated by the paucity of staff.

ANNEX 6Page 19

62. While lending operations have been financed from farmer's savingsor the resources provided by Bank Pertanian, government subsidy is extendedthrough office and staffing accounts. The profits earned by the associationsare, in most cases, inadequate for paying for these services. It is,therefore, necessary to study the financial position of individualassociations, and the margins earned by them in different lines of business,to determine the levels of total turnover required for ensuring that theassociations are eventually self-supporting. In this connection, thereporting methods could be simplified and modified so as to facilitate anassessment of their performance.

63. Thoughi the farmers' associations are now expected to provide avariety of services, their emphasis has so far been primarily on extension.Credit and supply have come next and marketing has very much laggedbehind. This weakness, compounded by transport difficulties, adverselyaffected repayments to the Bank Pertanian in the first season in Muda.Farmers' associations should, therefore, actively take up the marketingof produce on their own, working in close cooperation with FAMA.

64. Cooperatives. The apprehensioin that Government is looking uponfarmers' associations as almost the sole agency for supplying ruralcredit has itself spurred the cooperatives to some efforts towardsimprovement, guided and assisted by Bank Kerjasama. It is clear that somccooperatives can play an effective role in credit, marketing and processing.As with farmers' association, the present policy of the CooperativeDepartment is to encourage multipurpose cooperatives to employ a regularmanager or secretary. But it is doubtful if all cooperatives engaged in'uLtipurpose activities have observed this principle. It is suggestedthat Bank Pertanian may channel its credit only througlh cooperatives wlhichmeet this condition. A sound basic requirement is an adequate scale ofoperations. The norm of a minimum memberslhip of 100, which the CooperativeDepartment has suggested, is not sufficient to ensure this objective,especially as the scale of finanice is very low. Mtinimum membership shouldbe highier, e.g. 300.

65. Most multipurpose societies lhave been organized recently byextending the functions of selected rice-mailling cooperatives. As aresult, on the one hand, they have the acdvantage of not inheriting anyold bad debts; on the other, however, they are completely inexperiencedin the matter of credit operations. It is suggested that multipurposesocieties be formed in other ways as well, i.e. by amalgamating two oriore rural credit societies or by organizinig new ones afreslh, especiallyin areas whiere norne exist. Care lhas also to be exercised in combiningthe furictions of credit and( rice-milling in a single cooperative, aslosses suffered in thte latter business might jeopardize the promptrepayment of its dues to Bank Pertanian or Bank Kerjasama on1 account ofthe credit business.

66. It is required that all loans exceeding M$ 300 should be recom-mended by ani official of the Cooperative Department, before they can besanctioned by the cooperative society. This is a practice introduced with

AUNLEX, 6

aI view to preventillng th'e milS o1- thc f"Indid provided by geve rnme t.

W1iile iot uiecesszarily ensurinjg superior s c:rutL iy of Ioani reqluesLts , CLis

procedu ralI requireUM1enlt lddlS Lo I e lays . IL siuil31d be_ revlewed i1 conjuonc-

Lion withi the adeqti;lcy of tl,e supervisory aict vi Lies of [ilank lKerjasaima.

67. InsistLcLce on rnortg;Lge of Land as securiLy for loans of M; 300

and above, even for short-term production credilL, does n1ot appear

necessary. It iLIvolves avoidable inco0ven1ien11ce to the borrower and

the society anid is not realLy 11ecessary for short-term producLioni credit

for whiichl the crop is timc maini security. Thlis crnn bc buttresse(d withl

guarantees by sureties, whiichi is coniisistent wltim cooperative practice.

Also, the scale of cooperatlve creCit is too low nrnd should be inireased

in view of thle rising cost of inpuits.

68. Bank Kerjasama should guide the primary cooperatives and heBlp

build them up as viable units instead of competing with them, as it now

does in several areas, by financing farniers directly. Even if such direct

financing may be inevitable in the initial stages, thie aim slhould be to

gradually establish good prinmary societies and route funds through th-em,

using its branches.

69. Audit of cooperatives is in arrears in many areas. This has

to be expedited as audlit reports are essenitial for guiding thie creditor

institutions like Bank Kerjasama and Bankc Pertaniani, in making their

appraisal of thle working of th1e borrowing society.

70. Finally, there is need for coordination between l3ank Pertanian arid

Bank 1;erjasama, botlh of wliichi finance cooperatives. The two banks should

not compete in the financing of cooperatives, but should agree as to definite

areas of responsibility for credit operations to be assumed by each bank.

Thus, financial information concerning cooperatives should be exchanged be-

tween the Banks and responsibility for short-, medium-, and long-term credit

allocated according to the program of each institution. Both Banks should

work together to strengthen the cooperatives through the proper use of credit

facilities.

71. Commercial Banks. Commercial banks may be expected to continuie

thecir role in finanicinig tihe e,taLe sector of Mlalaysian agriculture. So fair

as the recluiremenits of smallholders are considered, however, their

contribution- is nlot likely to ble significant in the immediate future.

The bLanlks may, however, be able to enter this field in a few years and,

in the meantimiie they have to begin recruiting and training the necessary

staff. As smallholder farming in 1Malaiysia becomes increasinigly commercialized,

modernized and diversified and, similarly, as acLivities Such1 as poultry

and niilk supply also come to be organized on a commercial basis, there will

be widening scope for banks to finance such activities. It will, therefore,

be farsighted on their part to begin to equip themselves for this stage,

and to carry out pilot programs onI a litnited scale. M1eanwhile, the commercial

banks can assist in agricultural development by (1) opening branches and

extending banking facilities in areas in which the demand for these services

is expanding in the wake of increased agricultural production and (2)

finanicing the complex of additional facilities of marketing, processing,

ANNEX 6Page 21

storage and transport required for handling the increaseo( marketablesurpluses of padi and other crops ancd of larger quantities of fertilizerand other inputs used by the farmers.

72. Bank Negara can help in bringing about this reorientation amongcommercial banks, and it also could actively assist the Bank Pertanianin formulating and implemiientl[n its policies and procedures. Bankc Negar;imight provide rediscount facilities to Bank Pertanian, and perhaps to thlecommercial banks, for short--term prodluction purposes wlhen a(ldi tionll funldsare needed.

73. Corporations. I-ost land development schemes are beingundertaken (if not financed) by state-ownied federal corporations (likethe Federal Land D)evelopment Authority) or state corporations such asthose in Jolhore, Trengganu, or Pahiang. It is important to ensure thiatsuch schemes are economically viable and creditworthiy before Government fundsare provided for them. Only the FLDA has, at present, the expertise requiredfor such appraisals. After the Bank Pertanian is equippe(d in regard tostaff, the Federal Government may call on it for appraisal of land developmentschemes which are to be operated or financed by corporations (other than theFLDA) with funds received by Covernmeiit by way of loans. In due course,the bank may even channel governmenlt finance to such institutions.

74. Padi Planters' Boards. The Padi Planters' Boarcls are not wellequipped for undertaking credit operations. Their staffs are limitedand their procedures for appraisal of loan appli1cations and arrangementsfor supervision are inadequate. In the result, recovery of their duesiias been poor. INo role can, thierefore, be assigned to these agenciesin their present form in the future pattern of institutional arrangementsfor agricultural credit.

75. Role of Govcrnme1cnit. The ideal role of Covernment in relation toagricultural credi t is the1n to sup)port the development of creditinstitutions and the infrastructure required for thieir successfull operation.The acceptance of this policy in Malaysi[a implies the withdrawal of Govern-ment from credit schemes in whiich it is at present directly involved.Withdlrawal would have to be accompanied by alternative arrangements forinstitutional credit, and the latter, in turn, would depend upon whetherthie activity is banikable. Thus, Bank Pertanian or similar institutionscan take over the role of Government finance in regard to viable projectsin agriculture. Schemes supported by Government for social reasonsshould be clearly identified as such, and credit institutions should not berequired to uniderwrite subsidly elements with their own operational funds.

76. Ihe following are among the steps wlhich may be taken by Governmentfor facilitating the working of agriculturaL credit institutionls:

(i) Provision of adeq(uatC facilities for agricultural exten-sion, aimed at adoption of improvecd cultivation practiceson whichi the expanding supply of credit is based;

AN'NiI::X '

(ii) CuoperaL iou1 i11 Liln l ('(I .cllect I Ol O ;f' Ib.[ciVilt; yby nuarkItL-

i.ng c.g. Iy :si IStii .s g In thel rec(OVel-y )OF loa;ns (!dut froIi

farmers from sale proce t(is of crops iuiarketcti by fihemi , where

state or{;..niizatLion; (,like lic Pad i. ;wdnl li c ,.Mrke. I.lrn;, iiojrti)

are iU CI i oLt; Of Mirl: It ilrg

(iii) Administrativc and stataLt:ory action to facilitate recovery

of l.oans advan11ce(I by InSLi tUiLionaL agenicies. 'Thus, Govern-

meiiL inay help enlsure' quick court actLioni in the tvenit of

defaullt;, e.L,. for procCediilg, ag,iLL SL Llic a:;sets of tuie de-

falUlt- r, make provisi LI for a quiick and simple procedure

for mortgaginj, lanid as security for loan:s, and permi t.ling

tire Malay Reservation lanid Lo be imortgaged to credit ins Li-

tutiolis;

(iv) SecondinLg suitable GoverU1n1enLt staff for Ltie managument of

crtdit instLituLionS,

(v) Arranging; foI tii:iuey LIyui t aiid satisfactory supervisiOI Of

Govurnment sponsIOred credit agencies lik.e the farmers' asso-

ciattons and Cooperat_ivtes;

(vi) Imnproving, comnmunications,; generally, ald roads in particular,

in areas wILere i iceruased agricultural. surpluses have Lo be

collected andi transported to Ltic market.

Possible Cre-dit Sclhemnes

77. TracLors. 'Ile us(. of LracLors lhas becomeic popular in the small-

hold.l.r sector of M'alaysian ai,,riculture m.3ainly for thle double croppiLng of

padi, beginniing in areas like Province Welleslicy and(l now cxLending to the

Muda and Kemubu areas. For tihe optimal use of water and the culLivation

of two crops, the gap L)etween the harvestin6 of tle first crop aind thie

sowing of tire second crop has to bei muclh abridged. This time schedule, in

tlie judgrment of agricul.turalists, cannot b)e kCept uLnless operations such

as lanid preparation are mechanized, especia.lly because a seasonal shortage

of labor is ailso likuly.

78. 'hliere are no reliable figures in regard to thle inumber of tractors

in use in Malaysia buL a rouglh estimate sugggests tliat, outside the estate

secLor, thiere were on]y 1,030 four-wheel tractors and 730 pedestrian trac-

tors at tlhe end of 1968. Tire ownership of whlichl was (civided as follows:

Four Wheel Tractors Pedestrian Tractors

Governmenit 156 61

Contractors 582 26

Farmers 292 64()

'Lhcese numbcrs have probably increased in the past two years. The switclhover

to tractor cultivation in preference to manual labor or buffalo has begun to

A'N'NEX 6Page 23

gather momentum in the MIuda area and is also expected in Kemubu, though toa smaller extent.

79. The performance of conventional and pedestrian tractors isbe.tng studied by the Muda Agricultural Development Autlhority. Someevidence suggests the pedestriani model gives lower productivity, higlhercost of cultivation per acre, and less efficient use of labor and capital.According to these studies, operation of pedestrian tractors on tlle farmsof owners alone will be uneconomic in view of the small size of the farms,and, at the cultivation charges prevalent in the 1iuda area, they cannotcompete witih the four-whieel tractors for servicing otlher farms. Thel4uda authorities hiave been endeavoring to promote a multipurpose tractorwlhich can perform the rotary tillage funlction, harvesting (by having acombinecl lightweight harvester mounite(d on it) , and the transportation ofpadi from the field to local collection points, and also the use of largecombine harvesters. A related objective is that of promoting groupownership of machines by farmers' associations. This is expected toincrease the productivity of the maclhines by providling adequate work forthem, improving their mainitenance, redlucing theli r costs of operation, andalso serving as a check on the charges of private service contractors.

80. Credit facilities for purcihase of tractors are now availablefrom the finance .L ;.panies and the Bank Kerjasama, the former on htirepurclhase terns, anid the latter by way of a straiglht loan supported bycollateral of land. Apparently, the experience of the companies inregard to the recovery of montll-y instal.meiits has not been happy; and,fulrthermiiore, the repossession of tractors may iiot be of much value inview of their wear and tear. Tractor services have had financial difficul-ties due to the competition among contractors in Kecdali which1 led them toundercut their charges, shortfa].ls in demand for tractor services, andthe absence of alternative uses for the tractor during most of the year.The demanrd for credit for the purchase of tractors, lhowever, appears tocontinue: hire purchase sales by time com.mpanies, as well as time nunmber ofloans for power tillers (about 4t00) mmade by BaTnk Kerjasama, have beenincreasing. The demanid for tractor servi-ces may rise in the near futureas the difficultics and delays faced -in the initial state of tile Mludaschemiie are sorted out and an increasing; acreage begins to benefit fromirrigation projects.

81. It seems clear that monithily instalments of repayment -- as underthe hire purchase schuems -- are not approprialte for tractor loans, sincetihe income is restricted to four montlhs in all in areas like M'uda wherethtey can serve only padi cultivators. Also, because a borrower can usea tractor for one a season and then let it be repossessed wlhen the wearand tear has depreciated its value substantially, loans to farmers forthis purpose slhould be secured not only by the tractor but also by mortgageof laind. And, for all. loani applicants, an estimate should be made oflikely income and profit from this business wtth a view to assessing therepaying capacity.

ANNEX 6

82. As mientiotned earl icr, llank 1'crLtinian ihas ft na I izedl a scheme of'

tracL or loan s anld p rop;o. es to implemet IItL s I io I 1y . A crun(1 la I pect of

the scheme conicernis Lhe determlination of repayiLng capacity in IrspecL of

eachi borrowing farmler or con t:rac tor andiI tie formnulation of C rLit normii

of luillilIluln hl TldiLIg for cutltivaLi-on and/or- bius.! i2s IIIl trillS oL. LracLor

operations wlhichi borrowers will have to saiLfsfy. While undertaking thlus

business in a l:imited voluJme to start wtLh, tlhe liank may collect informa-

tion, in conisultationl with the Project aitlLhoritLes of Muda, Kemubu an(1

lesut and genierally withl the iMinistry of AgricuJlturc, on (i) the probable

demanid for tractors ald (ii) the economics of the business of tractor

operation for individual fErmers and contractors (the acreag;e cultivated ,

the numkiber of days an(Id hlours for which the machine is used, arrangemenLs

fur maintenance, gross income, net profiL, etc). It is on tile basis of

sulch iniformation that a detailed project couild be formulated, if it is

decided to seek external financial assistance.

83. Anlrnal Husbandry. Two schemes whiicth miglht be organize(d on a

coimmercial basis in tile animal husbanidry sector, and which might require

institutionial credit facilities, are outlined in the annex on livestock.

Of Lhese, the one with more immediate prospects concerns the development

of a table bird industry on a moderniized basis. Confinement hlousing and

controlled feedinig are expected to reduce mortaLity and help bring, down

prodluction costs. While capital for processini, equipment, etc., may be

re(quirud at a later stage, each OperaLor wil iieed, roughly, M$ 1 per bircd

for iIvestlllellt ill thOUSiLIg and equipmlenlt. If it is assumedl that, say, 60

percent of the estimated demand for 85,,000 tolns of poultry meat (in 1975)

could be met from commercial production, on the basis of three r"growouts"

per year, per poultry farm, tile initial investmenit required mLght be of

the order of M$ 12 million.

84. The other project relates to tile developmenit of commercial

farm;l:s Inr Sabah for production andl export of beef, over an area of about

200,000 acres. 'rhis will call for an investment of the order of M1$ 5

million for purchase of catt:le and tlie developmenit of pasture. This can

be actively conSidered, however, only afLer preliminary investigations now

in progress are compluted. Silmilar sc(lcmess, tlhoughi oni a smaller scale,

may pirove feasible itn other parts of the country.

8i5. Marketiu) anid Processing. The increased production of padi In

Lte I!uda, K{einubu, anid Besut project aruas is throwing up the niee(d for

additional faciliLies for dry ing, milling, sLorage, transport, etc.

'I'lh CovernieenLt hopes that tlte private sector will play an important role

in bililding up this intrastructure. However, it has, at the same time,

becn proposed, under tile Second Malaysia Plnn, that thie Padi and Rice

Marketing Board would extend drying and milling facilities on its own,

i.e., in addition to the two driers already established by it in the Kedai

area. These will serve the Kedaih, iQelan tan, Trengganu and Krian areas to

whiich Llile Board proposes to exteind its trading activities.

86. Rubber Smallholders. These form the largest agricultural group in

Malaysia, and it is essential that the Bank Pertanian should serve

ANNEX 6Pag<- 27

this group if it is to become a force for change in Malaysian agriculture.

In the past, smallholder rubber production has used few purchased inputs and

therefore has created little demand for credit. With the development of new

yield stimulants, however, this situation is changing. The RRI hbs henur n

smallholder program to finance the use of Ethrel, and this appears to be

operating successfully.

87. The Bank Pertanian should take up this opportunity to become in-

volved with rubber smallholders through the provision of credit for the pur-

chase of Ethrel and the concomitant need for fertilizers, extra tapping cups,

etc. This would have the benefit of introducing farmers to the use of inst

tutional credit through a low-risk, short-term program. Once a familiarity

with credit use is established, the Bank Pertanian should then be ablo tG u--

large its program to include other crops and enterprises (feed grains, fruits,

vegetables, poultry), so gradually expanding the size of the s.allholder's

business and diversifying his production. To achieve this, however, will re-

quire aggressive and imaginative action on the part of the Bank Pertanian.

B. Marketing

Introduction

88. Policies in respect of the marketing of agricultural produce of

small holders in Malaysia have to take into account certain new factors

which are increasingly significant. The foremost of these is the projected

increase in padi production. Not only will there be larger quantities than

.ever before to be processed, stored, transported and marketed, but many

subsistence producers will begin to produce for the market. Secondly, the

trend towards diversification might lead to increased production of certain

commodities for which traditional marketing agencies do not exist or are

inadequate fronm the point of view of handling larger output or exploring

new markets. Thirdly, while marketing in bulk, e.g. by a few rubber estates,

may have accounted for a large proportion of the total sales of agricul-

tural produce in Malaysia in earlier years, the importance of smallholders

as producers for a market has now increased, with their growing share of

the total rubber production, the cultivation of a larger variety of crops

and the commercialization of padi farming referred to earlier. Fourthly,

there are instances in which a change in established marketing channels has

been called for as a result of technical factors, e.g. mechanical drying

which has become necessary because of the timetable of double cropped padi.

89. These are among the factors super-imposed on the more general but

basic weaknesses of the marketing system such as the lack of standards and

grades, inadequacy of transport and processing facilities, short weighment

of produce by traders, under-payment for crop delivered, forward sales at

disadvantageous prices in return for credit, etc. One should expect

competition among traders to correct such trends but there are several

instances in which, as marketing studies show, this does not happen either

because there is a paucity of buyers or for other reasons. On the other

ANNEX 6Page 26

lhand, improved marketing efficiency and reduced marketing margins will beimportant even from the point: of view of helping, though to a limited extent,

to ensure that the return to the farmer is retained at a sufficiently remu-

nerative level without his being priced out of the relevant domestic or

foreign markets. Whllat has to be brought about, over the years, is therefore

a many-sided development of agricultural marketing facilities in MIalaysia,

incorporaLing a quantitative expansion no less than a qualitative improvc-

ment ariLd, in some cases, even a change in the organizationi for providilng

such services 1/.

Federal AgV-icultural llarketing Autlhority

90. The Federal AgricuLtural Ilarketing Authiority (FAMA) was establishedin September, 1965 by a special statute. Its main functions were to be(1) the coordination of activities of various Government departments andorganizations in respect of the marketing of agricultural produce, (2) pro-

motion of means for the improvement of existing markets and marketingmethods and (3) collaboration with other organizations in pursuit of theseobjectives. The FAIA Act provided for marketing schemes to be brought into

force for individual commodities generally or in particular areas, for the

registration of traders in such commodities, for the establishment ofmarketing boards to --anage and control the marketing of such produce, for

marketing surveys to be carried out, etc.

91. In pursuance of these objectives and statutory provisions, FM A

has gradually expanded its activities and hopes to cover more areas andre commodities year by year. So far as padi is concerned, a Padi and

Jlce Mfarketing Board was established in 1967 and the padi marketing schemes

aave been introduced in all areas of West Malaysia. All these provide for

licensing of buyers bxit, in two areas, they provide for the Board's parti-

cipation in padi trade as well. It is expected that in the Second Malaysia

Plan the regulatory aspect of the scheme will be extended to Sarawak also

and the Board's trading activities to three more areas. This would alsocover the establishment of rice mills, artificial driers and grading and

storage facilities 2/. Establishment of special marketing boards for pepper,

livestock and fish, the introduction of marketing schemes for these

commodities and also for coffee, coconut, tobacco, maize, citrus and other

fruits and vegetables and the setting up of an agricultural produce corpo-ration to deal with these commodities are also proposed 3/. The other

activities in respect of which FIM1A has made some progress are (1) prepara-

tory field surveys into the marketing of the major crops mentioned earlier,

(2) study of market possibilities for certain crops suchi as maize andtapioca and (3) the collection and dissenmination of market information.

1/ This is also in many instances a necessary condltion for the success ofagricultural credit schemes, especially those connected with the cultiva-

tion of new crops with a view to diversifying Malaysian agriculture.

2/ Since this was written, these functions have been transferred to the

newly-formed rice marketing corporation.

3/ A multi-purpose crop marketing board has since been approved in the Sl-T.

ANNEX 6Page 27

92. While the cropwise position is discussed later, a few generalobservations may be made here. Firstly, the general approach of FANA is tomeet the inadequacy of existing arrangements for marketing any particularcrop not by displacing existing product marketing functionaries but toimprove their efficiency by competi-ng with them and supplementing theirservices, if mere licensing and regulations prove inadequate. The extentof its owIn involvement or thatl of the Board depends on the circumstancesof the crop and the area, anzd the existing availabil Lty of relevant services.Secondly, FAMA has built up a fairly satisfactory staff of economists, botlhfor handling its day-to-day operations an(d for condchltingi, field investiga-tions into existing marketing practices. Thlir(ly, the lirlrvVed experiencegained so far with the Padi and Rice Marketing Board has raised the questionof coordination between the Board antd FANtA whiclh will become important asmorc boards came to be established, eacih with its oxnl autonomous direction,independent staff and allocation of funds; the possibility of thie Board andFANIA adopting, conflicting points of view cannot be ruled ouL. Finally, ittlas to be realized that lf, apart from bringfing about general improvementsin mnarketing efficiency, FAMA is expected to use relative pricc:s as incern-tives or disincentives to achieve any par1ticular7 pattern of crops it isnecessary th1at the policy in regard to diversificaLion slhould be firstsettled and then be commuL-nicated to FAMA by Governmnent. In the absence ofany clear indication of official policy, time role of FANA in this respectcannot be properly assessed.

Producers' Organiizations

'2 .. It has been generally agreed in malaysia that the promotion oforderly marketing of agricultLural produce anid the implementation of official, olicies in this sphere can be facilitated if the cooperation of organiiza-tions of producers themselves can be enlisted for the purpose. Thus it hasbeen envisaged that a role in marketing will be played botlh by cooperativeswhlich have been in tlhe field for many years anid the farmers' associationswihichI have been more recently organized.

94. Rice milling for home consumption on a cooperative basis has beenundertaken by 351 rice milling cooperatives ancd 97 multi-purpose societies.Several of them worked at a loss mainly because the pacli broughit to tlhemfor milling often fell short of even their limited capacity, because therewere too manly mills in the same area (some of them unlicensecd andc illegal)or they were uinsatisfactorily located from the producer's point of view.In sonic areas, cooperatives h1ave been functioning as agents of the Padi ancdRice Marketinig Board and, in tlheb Tanjong Karang area in particular, theywere thie sole agents authorized to buy padi. In some of these cases,however, the cooperative did not run thle agency awarAed to it but leased itouL to an individual or grouip of inidividIuals. There were also instances ofinefficient manageement. Notwithstanding thcsc weaknesses, the generalityof cooperative rice mills appear to have a record of useful and satisfactoryservice to the paddy grower, in the limited function of milling rice forlhome consumption.

ANI !1. I (02"I

95. In tLw.o areas (rij I arla z4ll Tanj o, Kar;ig) , t!he coopcrart iLvt. Picelii1i1 lAnlJfin oris ontered the i-id of m -i Ig r [ CO for th:e inrkkt sc as to .'effective in tiieir role of inarketEiln a i'cinhebrs' p Tdi . 'he:,C tw) miJ.ls aso

suffered filiancial setbacks btcanlse of various. factors such as e taisuf

Cienlcy of telI volume of dr1y 1padi. avai fble br ii ! Li ),, Iow recov:ry rates;

hi,,h i iilling costs, po1o)r mna i a tom:aiinco of ma chiiinery ani(d uins atisfactory mamna,e--

niemnt . Olie of timeso mi- l is. ilC)ow b)e2in; opratd aS LI j(init. Venlt.Lr(e wi tli timendi TlMarket-in2 g Board. In vi, w.- of dili unihinumppvy La LiEr exper dice, 're(1tc C

aLLtt:i.oni is hiow beilyd ,.neii t:o thee am:sessminmm oi vi.nmi6ILy, etc.:. i*i re);;)t

of two cooperaLtive rice mill:; whiclh- ar -(n ot-w bLiei,, propose,l for servi, UI.

96. Cooperativus lhave a Isu played a part in tlhe miarketji,n_ of plne;gie. It:;.

Thle 1i societies operating iii this f:ield resL tLtod to account for o : r a

third of tile tot:al frutiL of sn:iall growers SlOi Lo cannmeries. While tilhe .f-

fectiveness of the cooperatives mlaso beeni resLricCted to some exLtmLIt by tihecrodi t aiid othier ties whic bDind the prodlucer Lo private mniddlemen, somle olrthleir weaknesses are inter-iial to thieir workinrg and represent tIme inadequacyof tiheir managemnceit. Tile present irend , therefore, is towards consoliclaLionl

so that the cooperatives may bc in a positiou to, provide the pro,'ucer withlbetter services in termns of transport, shed.s art fruit collectLion points,

inputs and credit.

97 . Farmers' as s(ci t.io.ms propose In due course to provi(lie marketiigand1 al li.ed f;ad:.Iitie:s sutcls tiiose for grading, pa(2k1 iy , processing,

scora>i,c azniid transport to mholmibers iii pi mrsimaiice of t!he:1 r o1b jectivcy of offeri.n,;

an fInteg,raued service . So far, their rolc Eli ti tis field has consisted maini-ly of u as boyin.,g gmeints (if thle Pad i MTiarketing B oar d.

98. Producers' organizations can undoubtedly assist thie farmers inselliao produce to theiir advaiitageu and tie official agLencies such as FEAlI

in imi,pleinlnl.1 their poli ciis . lowevevr, the ma re f.ct t1hat anU ortganiztiLion

is a cooperative or a farmeLrs' assoc.LAtiol calnlilulo enlsure Llitt sucli venturcs

kwill succe2cedi. in eulach c:asc, therlfore, the technical feasibility of thice

pro)poSed.I a.ctivity a;ad itS ecl)noiumic viabili.ty shlould be carefully examinuo

bulore i'_ iis t..kell uL)p. Amnon0 ti1e releva1nVtL faictors will be: (1) thme volumeof' prodece expecLed to be. hlaimal-k-.; (2) cost:; of marketing and processing;( 3) theli al erniacive or exi.st ng mark -iI5 channls alnd tLie terms on wlhichthey offer Lilml r servi CesS, (4 ) thle prospects in regard to tihe loyalty ofrnieibr-s-, anid (5) ,he quality ot expecLed maia)_efillent. It is with-i referenccto such conisiderations that time instittLionls and activities should becarefully chosenr. T'ihe authorities in chlarge of multi-purpose and other

cooperatives arnd fa,rmers' associations should not, tlherefore, expect alltile iu.stLtutions to undertake inarketinll activities in a routine faslhion bultplan tlhe devulopmernt of thjesf services onl a selective basis with referenccto Lth facts and prospec's in each indivi(luai. case.

99. As thle marketing aspects of rice are covered in sonle detail inAnnex 1, and of Lie export crops (rubber, oil palm and coconut) in Annex 2,clley are not discussed here. Otiler commodities iT whliich marketing problemis

are imtportant are discussed below.

ANNLX 6Pagc 29

Fruits and Vegetables

100. The consumption of fruits and vegetables in Mtalaysia is growing andexpected to increase appreciably in the next few years. For example, totalconsumption is estimated to rise, between 1968 and 1980, from 77,000 tons to120,800 tons in the case of vegetables and fronm 13,800 tons to 21,600 tonsin the case of citrus fruits. These requirenients will bc met partly fromimports and partly from increasinig domestic production. Of the fruits,citrus is important and is grown extensively in Trengganu. nTe citrusgrowers lhave liad to contend not only witlh price fluctuations but also thlelhandicap that, unlile tlie imported fruit wlhichi is orange in color, thedomestic variety is green. This affects consumer preference and hencedepresses the price. There are only a few traders wlho undertalke to collectproduce and transport it to the wholesale markets in big cities. Thisweakens the bargaining position of the local producers and the localassembling agents. In tihe result, the producer is estimatedl to receive onlyabout a third of the price paid by the consumer.

101. Marketing of otlher fruits as well as vegetables is generally ullder-taken under a consignment system, where prices ,-e supposcd to be settledby the wholesalers through auctioning. A margin of 19 percent of the pro-ducer price in the case of banana ancd of 18 percent in the case of leafvegetables is estim. ed to be retained by the wholesaler. Nargins in thecase of other vegetables and fruits also seem to be relatively high. Asthere are no standard grades, the whiolesaler can arbitrarily assess thequality and fix thie price. Furtlher, as the prices are settled by what isknown as the "wlhispering nmethod" between tihe wholesaler and thie retailer,the consignors are not always aware of the actual price earned by the crop.Finally, thie producer hias also tlhe disadvantage of hiaving to deal with avery limited number of wholesalers. FANIA has under consideration a schemefor regulating tlie m;wrketing of fruits an(d vege,tables at the wlholesaler level,by licensing dealers, supervising wuiglhiig, issuing receipts anid labels andauctioning produce.

102. Tradl ional maarketinlg cliannel.- are not ctensive or well organizedin the case of Illost of the fruits anid ve,ctables, and at the same time itis an expandin,, and a sophi;sticated imar!ket wlichl will have to be catered for.As both the productioni and( the demand grow, more active participation ofprivate trade In the marketing of this produce may bc expecte-d. Meanwh le,tlie regulatory sclheme of FANA should help. It may also be expected thatorganizations lilke cooperatives (wllih hlave alreaody played an active part inmarketinig pineapples) anid the farmlers' associations can undlertake thlisactivity and offer competition to thie limited number of private whlolesalers.At a later stage, i.e. as the production becoines l: :g, thlere is scope fordeveloping facilities for cold storage, refrigerated transport, processing(e.g., jam or juice manufacture), e tc. whiiclh will call for better qualitycontrol and more assured arrangements for supply to the important urbanm,1arkets. Mleanwlhile, progress caii be made by concentratiLng on steps forimaprovedi grading, better arrangemnents for assembling and transport, andincreasing the number of wholesalers, botlh institutionial and private.

LiVes LoCk

103. 3arket i ng arranglemen:ts for Liv esLecl, an invi 1 1.VUs ck producLt.es 1I

Malay:,-i a are ntot well dcve lpepcd or- sopl i u ai ULd. AL Lli(: smliw L i ict, .i ii Sl

far as informat l.li is av;ifl.lable, tlie p-uc:;cenlt posli.tiol does not sceeti veryunsaLtisf actory , iLhen juidlged wl I i referc Lice Lo s.as on a I. f lit cti:L Ions inprices, mark eLing margins, eLc. Ilnl 1ilirlmArkIe,Li1n 1 i.dCq(,!iacIy ha_Is hot IbeeLI

thle niajor constraint in tlie aiiiiiial hIi3sianidry sccor, it is clear thiat tlieprograms of development in tilis sector (set out ini Aninex 5) canilot beimiiplemented anld the anticipated increase in the demand for livestuoc!kproducts cannot be nmet unless marketing and processing; facil-ities areex:panded and improved in stel) withi thie productioni schemes. As a generalfactor, it may also be stressed that high) production costs resnlting fromcostly imports of animnal feeds and( from highi mortality of animnrIl.s and birdsare more responsible thlan e-X.cessive inarketing nmargins, for the hig;h prices

paid by thie consumer. The absence of marketing intelligence and thle lackof daLa on tlhe operations of the mechianism are two otlher deficiencies whli.chlneed to be tackled.

104. Increasinig demand in Malaysia for eggs has bee n met in the lastfew years throught increasedl domestic production wihich has also helped toreduce variations in supply and prices. Alongside door--to-door sales by

producers in smal-l areas, there lhas also been developing a more elaboratemarketing systemn consisting of assemblers, wlholesalers and retailers whichhelps commercial producers to reachi thLe consumers.

105. So far as poultry meat indiustry is concerniec, progress will dependpartly on disease control and partly on the extent to wlhich consumer demiandfor the broiler type of chicken in preference to the tradlitional "kampong"fowl can be built up. This switchover is already in progress anld can beaccelerated as Lhe costs are broughit down. Wtholesale dealers in KualaLunipur are in a strateg,.ic position to control the prices paid for birdscollected from thte prodJucers and brought to this major market. A unit inKCuala Lumnpur whiichi undertook the business of frozen birds failed because ofdifficulty in getting an assured sulpply of birds, itself time result of thelack of assured market outlets and the unhiappy experience wllich some producershaiid earlier in regard to tlheir sales to distributors on credit. Processingcan bIc develoiped in certain areas on the basis of freezing facilities whiclhalready exist for fislheries but tiie saleability of thle products and lhence vi-ability of the businiess wi ll very muchi depend on lhow their prices and qualitycompare with those of live birds on thie one hand and imported frozen poultryon the otlher. A marketing organizationi will be necessary and meaningful onlyif it operates in association witih production suitably organized unlder con-trolled conditions witlh a viewr to enstrinig quality and reduced costs. Acentral] marketing organization can help build up a market, initially for livetable birds antd, in due course, for dressed meat, frozen and packed.

106. Accordinig to a livestock survey conduct:ed in Selangor and NegriSembilan, all cattle were so].d by producers witlhout being weighed. Thesame was true for about half of goat rearers. Another handicap from thepoint of view of the producers was the lack of a sufficient number of

ANNE1;': 6Page 31

buyers. Very often, agents buy animuals on tie farm, on behalf of tlredealers and butchiers in the towns. It is understood that indebtedness totire buyers (dealers and butchers) also sometimes affects the producer'sprospects of receiving a fair p)rice. Tihere are about 300 slaughter housesin .lte country, over one half of them owned by private individuals, but theseare mostly small and ill-equipped. Thic one at Kuala Lumirpur is large but old,wlhile new abattoirs lhave bcen built in P'eii;aig and Kota Kinabalu. Of the sixnew slaugihter hIouses now proposed, the miost inmportant is the onc at latu Tigawhlicih will cost about N"7 mnillion and provide s laugliterinig, chilling andprocessing facilities and undertLake somne meat export;. As the marketinj; sys-tem for livestoclk is poorly organized, muchl remains to be done in improvingthe efficiency anid organLization of cattle and meat marketing in terrns of ar-rangeements for collection and transport, sanitary and better quality contro:Lof slauglhtering, processing of meat, etc.

107. Pork and mutton present problenms whiiclh are somewhat similar tothiose of beef. Consumptionl Of pork is restricted to tlle non-Mloslempopulation and denmand is met by domestic prodtuctioni. Possibilities forprocessing are also limited, in view of tire general prefcrence of the localmarket for fresh ineat as compared withi tire frozen varieties and tlle highproduction costs (resulting from prices of imported feed) wllichi affectaccess to export markets. Consunmptioni of muttorn is low, and more thantwo-thirds are suppLited by imports of live sheep. Domestic production ofgoats is very poorly organized, andl supply constraints rather than marketinglimit furtlher expansion.

Tobacco

108. The area under tobacco in llalaysia is likely to expand in tliecoiiing years in view of time increasing demand. 'T'lhouglh somiie areas on whichtobacco was cultivated earlier will now be used for a seconcl crop of padi,it shiould be possible to cultivate tobacco in otlher areas. The domesticcigarette manufacturing industry still imports significant quantities oftobacco, and th-e problem is to increase production of tobacco of sufficientquality to meet time very high standards of the domestic market. Existingmarketing arrangements become relevant in any effort undertaken to bringabout improvement in quality.

109. Marketing arrangements differ from onie part of the country toanotlher. In Kedah and Perlis, curing facilities are provided on lhire bytime Leaf Tobacco D)evelopmnent Corporation to farmers' associations, groupsof tobacco farmers and to individual farmers wlho might operate thie barns,cure the tobacco and tlhen sell it to tlie corporation or store it for saleto otlher buyers. In Perak, tlie farmiiers cure the tobacco themselves ortlhrouglh rented barns andl sell their leaves to local tobacco nmanufacturers.There are still snjlall growers whto sun-cure their lenves buit as it isbecoming difficult to find buiyers for such leaves these growers have to lookfor, and depend upon, those wlho command fa c1[Lties for flue-curing. llowever,the most significant of the existing arran,gemrents is tllat which obtains inKelantan where the Malaysian Tobacco Company provides seed, fertilizers,insecticides, spraying facilities and standard field services to tobacco

ANN NX 6_

farmers anid piircli ases green tobacco fr ii thienm al- 1.f b ily i n sLation:n;. T[ Icost of the supplic s and services which are liitti;l.ly provdile,d oi credit:is recovered from) time value of thme crol) deliver(ed by tLime. 'ilifs com1panlyNwiclih handles 90 percent of the tobacco in Lhe area formulatt's

cultivation planis well in adv;anice so that tlhere is; no ece-ssive produetlomiiIt is also ensured tthat no iid( viIua L s eplp]ier plants more than 1, ,()0 planttsor 1/7 of an acre. UJnder this arran-ement producLtion and marketing areorganized on an order]ly basis, time cretli t adv;anced in k.i mmd is recoveredwithout fai]., and the quialif-y of tlie produce Ls ensured. It is, however,contended that since time company ovns all tile curing facilities and is tilesinile largest buyer the grades of time tobacco leuaves arc assessed arbitrar--ily. tihe absence of com.lpetitionLI Iligi.t also depress the price paid fortobacco. There is also an increasing number of "independent growers" whoare in effect middlemen engaged in purchasing, grading, drying and curingtobacco for supply to thie Malaysian Tobacco Company and the Leaf TobaccoDevelopment Corporation. These dealers also supply inputs and extensionservices to tobacco farmers but are not sometimses strict in ensuring sourldcultural practices. Anothier problem faced in some areas is tLlat tobaccogrowers dio not receive prompt paymimemnt for the produce sold by tlhelf to thedealers.

110. For reasons of quality and price, it semnis unlikely tihat tobaccoproduced in Malaysia will fliid export mnarkets. However, in view of tl-ieexpanding domestic market for cigarettes, it shouldl be possible to build ulptlhis i.ndustry and, as related to it, the local cultivation of tobacco ofimproved quality. Tlhis, however, carn be brought about only if tlCe qualityof Lltc produce is consistently lhiglh alnid an assured supply of suclh tobaccocan be organized. It may be necessary to introduce a tobacco marketing schemefor licensing and regulating time tobacco buyers, which may lhelp to ensurefair gradation of tile produce, proper weighing an(d reasonable prices. However,increased cultivation cani be based on an assured and steadily expandingmarket only if Lobacco cul.tivatiou can be closel.y linked0 u) witli cigarettermaniufacture. From this point of view it may be explored wlicthier, as iniQelantaii, cigarette manufacturers in otlher areas can lhelp time tobaccofarmers withi technical assistance and inputs on credit and undertake tobuy tllc produce at fair prices. 'ilmis will assure tlle- growers of a dependablemarket and assure Llte factories of supply of adequate quantity and quality.

'Lapoca and laizec

111. Tile area undler tapioca is of tile order of 50,000 acres, the bulkof it being in 1'erak. A lar-e part of time acreagc represents illegalcultivation. The processing of thiis crop into chips and flour is widespread,and Perak alone lhas 49 factories engaged in these activities. tMaize, whichmay be conveniently considered along with tapioca, is also increasing in

acreage and production, both as a mixed crop and as a sole crop, mainly inTrengganu, Perak anid Pahang. The animal feed industry provides Lhe mainimeirket for thle domiiestic production of tapioca. The substantial imports ofmalzc are likely to inCrease if the proposed program for developing thle poul-try mneact ilniustry and othier livestock projects gets under way. It is esti-mated that feedgrain requirements will reach 700,000 tons by 1980 -- twicethe currenc level of consumption. Export markets also become relevant in the

ANNEX 6Page 33

case of tapioca, by way of cliips to be used for animal feed ancl by way ofstarchl. Prospects in both these directions are considered fairly favorableif account is taken of the anticipated increase in the needs of the importingcountries and the likely position of the competitive suppliers. This assumesspecial significance in tlhe context of the proposal to develop feed grains asa means of diversifying irrigated Malaysian agriculture on the one hand, and,as a means of ineeting tlle increased demand for suclh grains associated witlexpanding production in the livestock sector.

112. If maize and tapioca are to make progress in Malaysia in the nearfuture, two factors seem crucial. One of these is that the official policyin regard to the promotion of these feed grain crops slhould be clearlyestablished and adopted effectively in practice, in relation to the provi-sion of aids to increased productioni, relative prices, import policy, etc,so tlhat an increased and assured domestic supply canl be built up. Secondly,promotioni of orderly marketing faci ities should be accorded highl priority.'this is important because the productioni of thiese crops in the past used tobe relatively small and the traditional marketing channels are not so wellestablished or adequate for handling substanitially larger quantities ofproduction. Marketing efficien-cy would also becomc relevant from tie pointof view of keeping costs downI to competitive levels. Production is expectedto be spread over a large number of smlall units. Given the importance ofensuring that markeLing and processing are efficient and the fact that tradi-tional marketing chiannels may not be able to cope witlh this task by tlhemselves,it is desirable to encourage producers organizations to uncdertake this func-tion on business lines. IBothi tle farnmers' associations and multi-purposenooperatives arc permitted by their bylaws to undertak;e this activity but

before atiy individual organizatioln takes it Up, the economics of thie unit31iould be carefully studiecd to ensure its viability.

ANNEX 7Page i

MALAYSIA

AGRICULTURAL SECTOR REVIEW

FORESTRY

A. General Overview

1. The Federation of Malaysia is one of the more important timbersurplus areas of the world, and the production and export of forest productsare of major and growing importance in the country's economy. The totalworld trade in logs in 1968 amounted to 50 million m3 valued at US$1,177million. Malaysia alone accounted for 10.5 million m ? or about 21 percentof this volume, valued at US$179 million 1/. Malaysia's log exports werethe second highest in the world, and substantially exceeded the total of theentire African and Latin American regions combined. As to sawn products,Malaysia's exports of 1.2 million m3, valued at US$59 million, representedabout 2 percent of the total world trade of 61.5 million m , valued atUS$3,280 million 1,. Malaysia's sawn products accounted for only about10 percent of its exported wood volume but about 28 percent of its value.

2. Forest land covers some 91,767 square miles, representing about70 percent of the total land area. Of this area some 38,600 square milesare designated as forest reserves, or areas to be permanently managed asforests either for production or for protective purposes. However, thearea which will actually remain as permanent forest has not yet been fullydetermined. It is expected that substantial adjustments will be made as aresult of the more thorough land use capability surveys and the need foragricultural land. Only in West Malaysia have these surveys been completedso that a reasonable prediction of the ultimate area of permanent forest canbe made. In this case, the remaining area of permanent forest is expectedto be about 22,700 sq mi, a decrease of about 30 percent. It is highlyunlikely that the percentage of reduction in forest land area will be anyhigher in Sabah or Sarawak than in West Malaysia, so that a very substantialforest land base will remain, and forestry, including its industrial andcommercial aspects, will continue as a major sector of the Malaysian economy.

3. Colncident with the probability of a decreased forest land base,all indications point to a greatly increased demand for Malaysian timberduring the forthcoming plan period. Export of timber in 1968 reached 7million tons 2/ of logs and 790,000 tons of sawn timber, an increase of more

1/ Yearbook of Forest Products Statistics (FAO), 1969.

2/ The ton as used here is a unit of volume of 50 cubic feet, and has norelation to weight.

ANNEX 7Page 2

than 300 percent for logs and nearly 100 percent for sawn timber export over

the 1961 export volume. Projections prepared for the Second Malaysia Plan 1/

anticipate that the export of logs in 1975 will reach 8.5 million tons and

sawn timber slightly over one million. In addition, both domestLc constimption

and the production and export of plywood and veneer sheets are expectedl to

continue their upward trend.

4. Coinciding with an increasing demand for Malaysian timber, there

is an additional demand on the land base of the forest resource to provide

land for agriculture, especially in West Malaysia. It is, therefore, ne-

cessary to consider existing forest managemnent policies and practices, and

to assess their adequacy and appropriateness in the light of these develop-

ments.

5. In general, there appears to be an underutilization of the re-

source in the sense that only a portion of the possible yield of timber

per acre is being harvested and used. Much wood volume is being left in

the exploitation areas in the form of unmerchantable species or unmarket-

able sized logs. Also, the bulk of the timber being exported is in log

form, as opposed to sawn or other kinds of processed timber, and is thus

not yielding the highest economic returns to the country.

6. It is important, therefore, to determine the potential capacity

of the resource to meet the projected demand, and to bring its current use

into optimum adjustment with its potential. At the moment, planning and

policy formulation are hampered by an inadequacy of information regarding

the resource itself and closely related matters. Steps are underway to

remedy this deficiency but, unfortunately, will not be completed in time

to be reflected in the Second Malaysian Plan. In the meantime, there are

certain desirable steps indicated which can be taken now. These are sum-

marized in Section E. There are important differences in the physical,

economic, and administrative environment relating to forestry in West

Malaysia, Sabah and Sarawak, and a discussion of each area follows a gen-

eral description of the resource base.

B. The Resource Base

7. Fxcept for the swamp forests and the upper montane forests,

Malaysia is covered by the tropical rain forest formation, a very complex

plant association characterized floristically by the multitude of species

which attain tree size, and structurally by several stories in the stand

profile. The total number of different tree species in the Malaysian rain

forest is not yet known, but a minimum estimate of 2,000 would not be un-

reasonable.

1/ Economic Planning Unit as modified by IBRD.

ANNEX 7Page 3

8. Attempts to classify the Malaysian forests into component foresttypes have occupied forest ecologists since 1927, when a preliminary group-ing of forest communities was made by the chief research officer (Fox-worthy). The most recent classification was presented in 1964 1/ andrecognizes the following categories and subcategories:

A. Lowland Evergreen Rain Forest

1. Lowland Dipterocarp Forest.

2. Seasonal Dipterocarp Forest.

3. Heath Dipterocarp Forest.

4. Hill Dipterocarp Forest.

5. Upper Dipterocarp Forest.

B. Lower Montane Forest

C. Montane Forest

D. Swamp and Low-Lying Forest

1. Mangrove Forest.

2. Peat Swamp Forest.

3. Freshwater Swamp Forest.

4. Ripar-an Fringes.

E. Forest on Moisture Deficienit Sites or with Interrupted Drainage

F. Other Miscellaneous Forest

The authors further subdivided these major classes into a number of sub-classes based on characteristic tree associations. Nine were recognized inthe Lower Dipterocarp Forest, six in the Hill Forest, and two in the LowerMontane Forest.

9. The Lowland Evergreen Rain Forest in this classification actuallyincludes all the evergreen rain forest from the plains to the upper hillsand represents the major economic forests of Malaysia; in Sarawak, however,the Peat Swamp Forest has up to now contributed the major part of the com-mercial output of that region. The family Dipterocarpaceae dominates the

1/ Outline of classification - Robbins and Wyatt-Smith.

ANNEX 7Page 4

evergreen rain forest types, as is evidenced by th1e type names. This fam-

ily usually comprises more than half of the total volume over 1.2 inches in

diameter, and 75 percent or more of the commercial output.

10. Within this general classi[ication there are significant differ-

ences among the separate regions of the Federation. The various types slhow

local variations; relative areas of the different types vary; and past

use and current economic pressures have resulted in differences in the de-

velopment potentials.

West Malaysia

11. The total forested area of West Malaysia in 1969 was 32,420 sq

mi 1/. The great bulk of this area is covered by the several Dipterocarp

types listed above, although areas of freshwater swamps and Teaat swamp

forests occur in the coastal areas, as well as some areas of montane forest

in the north central mountain area. The mangrove type is represented on

the west coast, but the mangrove area is not included in the figures quoted

above.

12. No precise estimate of the area of the different types has been

made because of the minor importance of the swamp and mountain types. How-

ever, a Canadian report 2/ estimates the mangrove area as about 560 sq mi

and the swamp forests about 2,000 sq mi.

13. A reliable estimate by elevation classes has been made in con-

nection with the Forest Indtustries Development Project, under auspices of

the UNDP 3/. The elevation classes coincide approximately with the common

classification of the Malaysian Forests. This estimate shows the following:

A. Up to 1,000 feet. This area contains the bulk of the

Lowland Dipterocarp forest, and also the major part

of the potential agricultural land currently under

forest ......... .................................... 21,649 sq mi

B. From 1,000 to 3,000 feet. This area contains mainly

Hill Dipterocarp forests and will probably be re-

tained as productLve forest ........................ 8,373 sq mi

C. Above 3,000 feet. Mostly Montane forest containing

oak species and shrub areas, the commercial value

of which is not yet apparent ....................... 2,398 sq mi

The mangrove forest does not appear in this classification.

1/ Forest Industries Development, Malaysia - FO:SF/MAL. 16; Technical

Report 1, 1970.

2/ Forestry and Forest Classification in Malaysia -- R.G. Ray -- 1969.

3/ Forest Industries Development, Malaysia; FO:SF/MAL -- 16; Technical

Report 1, 1970.

ANNEX 7Page 5

14. This classification provides a very useful indication of theprobable composition and location of what will constitute the permanentforest resource base in West Malaysia after alienation is completed.

15. Based on soil suitability classification there are some 9,720 sqmi now forested that are suitable for conversion to agriculture. Thesewill come mostly from the area below 1,000 feet and presumably fronm theflatter portions of that area. The Forest Industries Study estimates thearea of land with an average slope of 30 percent or greater at about 955 sqmi in the less than 1,000 feet class and 3,809 sq mi in the 1,000 to 3,000feet class. This 30 percent slope criterion is closely approaching themargin of inoperability by current logging practices. Thus, the followingappears to be the situation with respect to the resource base in the future:

(sq mi)

Current forested area 32,420

Area to be converted to agriculture 9,700

Commercially unproductive area 2,400

Permanent productive forest 20,300

Area of doubtful operability 4,760

Remaining fully operable area 15,540

16. An important constraint is that very little is known about theHill Dipterocarp Forest which will constitute the bulk of the future forestresource base. Malaysian experience and interest have been concentratedon the Lowland Dipterocarp type, little of which will remain as productiveforest area. This will, of course, sharply limit the development potentialof the resource base. Experiments aimed at regeneration of acceptablecommercial species on even the steeper lowland sites have proved disappoint-ing. Access difficulties in the hill forests and instability of soil onthe steep slopes will tend to increase logging costs and to restrict theintensity of cutting, for protective reasons. It can be concluded that theproductive potential of the hill forests is less than the lowland forests.

17. It appears to be an inescapable conclusion that, to maintain theexisting wood based industry even at its present level, the resource basewill have to be developed beyond the dimensions that now appear probable.A wider range of land use options should be considered, including the pos-sibility of viable forest production on lowland sites. It would seem de-sirable, therefore, to retain as much lowland forest in forest productionuntil such time as it is actually needed for agriculture or other purposes.This would permit a more orderly adjustment to hill forest exploitation,and give the dependent wood based industry more time to convert to differentspecies from the hill forest. While the land capability survey has deter-mined the upper limit for potential agricultural use, neither the upper

ANNEX 7Page 6

limit of probable use nor the timing of such use has been estimated. Cur-

rently, the gap between actual use and land alienated for agriculture Is

about 2.9 million acres. Before all of this is actually used or needed,

data now being gathered could conceivably change tthe investment picture for

forestry in lowland areas.

Sabah

18. The forest resource base in Sabah is perhaps the richest in terms

of quality and productivity of all the forests of Malaysia. The following

summary shows the forest land situation as at 1968 1/:

Square Miles

Total Land Area 29,390

Dipterocarp Forest (Reserved) 9,280

Dipterocarp Forest (State) 9,470

Mangrove Forest (Reserved) 300

Mangrove Forest (State) 800

Total Production Forest 19,850

Other Reserved Forest 3,080

(Protection Amenity, etc.)

Total Forested 22,930

The balance of Sabah's land area includes 3,000 sq mi of shifting cultiva-

tion, 1,500 sq mi of deforested state land not under any form of productive

use, and 970 sq mi of land classified and alienated for agriculture but not

yet under cultivation.

19. It has been estimat:ed 2/ that about 12,000 sq mi of the Diptero-

carp forest is exploitable under current operating conditions plus about

250 sq mi of fresh-water swamp forest, not included in the official classi-

fication summarized above. IPractically all of the exploitable forest occurs

in the eastern part of the country (tributary to the east coast). The

areas of shifting cultivation and a substantial area of the deforested

state land are all in the western part of the country (tributary to the

west coast).

1/ Annual Report of the Forest Department, 1968.

2/ Informal estimate by Conservator of Forests, Mr. Martin Harvey.

ANNEX 7Page 7

20. The existing resource base is massive enough to produce the cur-rent volume of production on the first cutting. This suggests the situationin Sabah is quite different from that of West Malaysia. In 1968, totalproduction amounted to 3.3 million Hoppus Tons 1/. Looking 50 years ahead,an assumed yield of 20 tons per acre would indicate an annual coupe ofabout 250 sq mi, or 12,500 sq mi of the production forest. It should bepointed out, however, that the assumption of a 20 ton per acre yield is avery uncertain one. Supporting the figure is the fact that in 1968 therewere 54,900 acres of forest reserves logged with a production of 74 millioncubic feet Hoppus 1/, or an average yield per acre of 26 tons. Also, thecurrent level of utilization is very low, reflecting the highly selectivelog market, so that the volume of timber remaining after logging is atleast equal to the volume being removed. With expanded and diversifiedmarkets and expanded local processing, the per acre yield will rise pro-portionately. On the other hand, the current yield is occurring on goodLowland Dipterocarp areas, which should average somewhat better than thetotal national average. A reliable projection of future yields will haveto await the completion of the forest inventory currently in progress, butit does not appear that the forest resource ba-"' ½4 Sabah is now beingover-exploited.

21. The ques' ion of increasing exploitation is the next issue. Ad-mittedly, a number of factors other than the resource situation will enterinto any policy decision on this issue. However, it is felt that the fol-lowing factors should not he overlooked. The dimensions and location ofthe permanent forest resource base will not be fully known until the com-pletion of the land capability survey and the forest inventory. But itis a serious concern that current exploitation is not bringing the highesteconomic returns to the country. Substantial wastage is occurring in theforest through underutilization; the product is leaving the country in itslowest value form; and the selective market further compounds the under-utilization. However, expanded exploitation based on local wood-using in-dustry would substantially decrease the importance of the latter factor.

Sarawak

22. The forests of Sarawak show the same general characteristics andexhibit the same formations that are evident in the forests of West Malay-sia and Sabah. In one important respect, however, they differ from theothers: that is, the size and economic importance of the peat swamp for-ests relative to the other forest types. The initial forest economy ofSarawak was based mainly on the exploitation of the peat swamp forests, andthe bulk of Sarawak's wood based industrial capacity is concentrated inthis forest type. This was almost entirely due to the availability of onespecies, Ramin (Gonostylus bancanus), a light hardwood and still the prin-cipal export timber of Sarawak.

1/ Annual Report, State of Sabah Forest Dept., 1968.

ANNEX 7Rage 8

23. In terms of area covered by the major forest types, the situation

is as follows (in square mi:les) 1/:

Total Land Area 47,588

Mangrove Forest 671

Peat Swamp Forest 5,690

Heath Forest 1,412

Lowland and Hill Dipterocarp 28,646

Total 36,419

The so-called Heath Forest represents areas that have been by-passed in

cultivation as unsuitable because of poor soil conditions and seriously in-

terrupted drainage. The soil is very poor, lacking In nutrients, and acid

in reaction. In shifting cultivation areas, these soils are avoided and

remain as low grade forest. They are capable of produicing relatively

low grade timber and fuelwood, and they are mentioned here principally be-

cause they cover a substantial amount of area in Sarawak.

24. Forest land in 1968 covered 77 percent of the total land area of

Sarawak; shifting cultivation, 18 percent; settled cultivation, 4 percent;

tnused land, 1 percent; and the small balance was occupied by settlements

and associated non-agricultural use. A substantial area of the 650 sq mi

of unused land shows a second growth of timber.

25. Of the total forest area of 36,400 sq mi, some 11,900 sq. mi had

been designated as permanent forest, including 2,500 sq mi of Forest Reserves,

or areas from which no forest produce may be removed except under written

license or permit; 9,300 sq mi of Protected Forest or areas the same as

Forest Reserves except that any inhabitant of Sarawak may remove forest

produce without license for his own domestic use but not for sale or trade;

and 120 sq mi of commuinal forests or areas reserved as a source of supply

for communities where no other source exists. In theory these communal

forests are supposed to be managed by the community, but actually there is

very little, if any, management on these areas.

26. The forest resource base of Sarawak takes on importance from the

broad Malaysian point of view because the agricultural potential of Sarawak

appears to be less than that of West Malaysia and Sabah. Although the

land capability classification of Sarawak has not been completed, it is

likely that the forest resource base will suffer less of a percentile de-

crease than will occur in Sabah or, especially, in West Malaysia. Thus, it

may well prove to be in the total Malaysian national interest to emphasize

forestry development in Sarawak.

1/ Govt. of Sarawak, Annual Report of the Forest Dept., 1968.

ANNEX 7Page 9

27. Exploitation of the resource has increased tremendously in thepast decade. Total production in 1968 1/ was 2.4 million Hoppus Tons ascompared to 760,000 Hoppus Tons in 1961. Of this volume, Sarawak exportedapproximately 1.7 million Hoppus Tons of logs, and 219,500 cubic tons of sawnproducts, a total of over 2 million Hoppus Tons of roundwood. The compara-ble figures for 1961 were 278,500 Hoppus Tons of logs, 137,000 cubic tonsof sawn products, or a total of 553,000 Hoppus Tons of roundwood. In thesefigures, the production of Ramin was 484,800 Hoppus Tons in 1968, and307,000 in 1961.

28. There has obviously been a much more rapid increase in log ex-port over sawn timber export, and the importance of Ramin in the generalexport picture has been declining. The log export market, as for Sabah, isa highly selective buyers market with the same customers, resulting in asimilar waste of the resource. The market for Ramin has been quite different:this wood is highly favored for moulding and interior trim and is exportedin sawn form principally to Europe and the U.S. However, it is probable thatRamin will pass out of the picture completely. Its extremely slow growth,coupled with difficulties of regeneration, prevent the sustaining of a supplyadequate to maintain its place in the market.

29. Despite this substantial production, the evidence does not sug-gest the forest resw.rce base is being over-exploited. About half the cur-rent production is coming from the peat swamp forests, by far the smallerarea of the two major production forest types. The rotation in this typeis 60 years, and evidently satisfactory regeneration is being obtained, soit may be assumed that this type can continue to sustain its current levelof production. Thus only a portion of the much larger hill Dipterocarparea is being exploited.

30. The major constraint to expanded exploitation in the hill Dipter-ocarp type lies in the location of the bulk of this area, with respect toavailable port areas. Logging and transport problems are severe but notinsurmountable. This matter will be discussed in a later section in termsof a possible investment. As in the case of Sabah, expanded exploitationand export should be oriented to the export of processed products ratherthan lower value logs.

C. Resource Administration Policies and Programs

31. All of the forest resources in the Federation of Malaysia arepublicly owned and controlled. The controlling authority, however, residesin the individual states, rather than in the national Government. This hasresulted in important differences in forest development among the threesegments of the Federation, since the East Malaysian states have been able

1/ Annual Report, Forestry Dept., Sarawak, 1968.

ANNEX 7Page 1 0

to achieve more coordination of forest management than has West Malaysia

with its 11] separate states.

32. Policies of the 13 states have some general primary objectives in

common which may be summarized by a qtuotation from the forest policy oF

Sabah:

A. To reserve permanently for the benefit: of the present and

future inhabitants of the country land sufficient:

(i) For the maintenance of the climate and physical con-

di,tion of the country, the safeguarding of water sulp-

plies and the prevention of damage to rivers and

agricultural land by flooding and erosion;

(ii) For the supply in perpetuity at reasonable rates of

all forms of f'orest produce required by the people

for agricultural, domestic, and industrial purposes.

B. To manage the Forest Estate with the object of obtaining

the highest revenue compatible with sustained yield,

insofar as this is consistent with the two primary objects

set out above."

33. In carrying out these general objectives, each state has estab-

lished categories of forest land, systems of concessions and licenses, and

development programs. However, the criteria used in the establishment of

forest reserves, and the exploitation policy adopted in carrying out the

second objective mentioned above, varies among the different states. The

administrative mechanism alsco varies among West Malaysia, Sabah and Sara-

wak. Administration, policy, and programs are discussed below for each of

the three major regions of the Federation.

West Malaysia

34. The structure of forest administration in West Malaysia is some-

what unusual. A Federal Department of Forestry, under the Minister of Ag-

riculture 1/, performs the function of a national (West Malaysian) agency

for overall coordination and research. It provides advisory and adminis-

trative services to the State Governments, conducts forest research, and

provides facilities for training of forest guards and timber graders. This

Federal department provides professional and technical staff to the State

and District Forest organization. However, the State Foresters are directly

responsible to the Chief Ministers of their state. The Chief Ministers

have the authority to reject advice given by the Federal Department of For-

estry should they deem this necessary. Thus, local interests rather than

1/ Prior to 1970, this department was located in the Ministry of Lands

and Mines.

ANNEX 7Page 11

national interests prevail. Some states are interested primarily in maxi-mizing short-term revenue returns to the detriment of long-run nationalforest management.

35. Two broad classes of forest land are recognized: reserved for-ests and state land forests. The reserved forest or forest reserves repre-sent land committed to permanent status as forest either for production orprotection. On both forest reserves and state land forests, licenses toexploit are issued by the State, but only on the forest reserves are theactual operations closely supervised by the State Forester and an attemptmade at rational silvicultural management. The State Forester is an em-ployee of the Federal Forest Department, but responsible to the Chief Min-ister of the State.

36. The pattern of the existing forest estate reflects this lack ofreal coordination. The forest reserves, comprising some 43 percent of thetotal forested area, were established on a state-by-state basis and variedconsiderably. States such as Selangor and Perak, which have a larger popula-tion and better developed agriculture, were evidently more aware of theneed to preserve some forests. Reserves were esLablished without priorknowledge of subsequent agricultural development, but on general principles,most of the reserves in the lowland areas have been or will be alienatedfor agriculture. Siriiilarly, land alienation for agriculture has been car-ried on at a rate faster than can be justified by actual use. Up to 1969,a total of 9.75 million acres 1/ has been alienated for agriculture. Thetotal area of crops is estimated at 6.8 million acres 2/ in 1968, leavingain indicated surplus of 2.94 million acres of unused alienated forest land.State land forests, comprising 49 percent of the total forested area, arecurrently being exploited on a state-by-state basis without proper planningor consideration of the long-term consequences to the stability of the exist-ing wood based industry or to the economy as a whole. Unlike the forestreserves, state land forests are almost completely unmanaged from the stand-point of their continuation as producing areas, and since some of thesewill become part of the permanent forest estate, their rehabilitation willbe very difficult and expensive.

37. Exploitation of the West Malaysian forests is controlled by theindividual states through licenses. There are three types:

A. Long-Term Agreements. This guarantees the logger or millowner the right to exploit a given area over a number ofyears as short as three years or as long as 20 years, theaverage falling between five and 10 years. The area ac-tually cut each year, however, is controlled by a separatelicense issued annually. The Agreement Area can either bein forest reserves or state land forests, and can be givenboth to independent loggers and to mill owners.

1/ Forest Industries Development, Technical Report 1, 1970.

2/ Annual Bulletin of Statistics, Malaysia, 1969.

ANNEX 7Page 12

B. Permits. These are annual permits for logging in forest

reserves. They cain be allocated withi or without tenders

at the discretion of the States' Executive Councils.

C. Licenses. These are similar to permits except that they

are issued for logging in state land forests.

The essential distinction between permits and licenses is that permits re-

late to forest reserves where the operations are closely supervised with

the objective of regeneration and maximum removals. Logging under license

in state land is unsupervised and results in harmful high grading.

38. Government revenue is obtained from forest exploitation in the

form of royalties on production and license fees. These are collected by

the individual states, and vary from one state to another. T.Le major reve-

nue item is the royalty paid on the harvesting of logs. These royalty fees

are determined on an ad hoc basis. Timber is classified into several

groups based on its assumed relative value and royalty rates are assessed

per cubic foot according to the assumed value scale. Rates are changed

from time to time. Mill licensing varies from M$ 50 to M$ 100 per mill plus an

additional M$ 50 for each sawbench. The tax on logs exported is standard,

however, and amounts to 10 percent FOB value of the logs.

39. Logs are scaled (measured) for royalty purposes as they leave the

exploitation area: the volume of each truck-load is calculated, the vari-

ous royalty rates figured, and a removal slip issued. Because of the vari-

ety of species with varying royalty rates, the process tends to increase

logging costs by substantially lengthening transportation time. In addi-

tion, on forest reserves the operator is not released from responsibility

until the logged area has been checked for compliance with utilization

requirements and cleared. T'his also tends to handicap operational effi-

ciency. A suggested alternative to these procedures is discussed in Section

E of this annex.

40. Fortunately, there does appear to be a growing awareness in West

Malaysia of the need for coordinated resource planning and development

within the guidelines of national strategy. As a result of the emergence

of master planning at the national level during the last few years, and

the evolution of integrated resource planning projects (exemplified by the

Jengka, South East Johore, and Pahang-Tengara projects), State Governments

are now recognizing their interdependence with respect to resource flows and

industry, and the desirability of coordinating resource development within

the framework of national strategy. Some adjustments, however, are needed

in the administrative structure, policy interpretations, and operational

procedures.

41. There has been a rapid escalation of forest harvesting within

the past five years. This has placed a severe strain on the limited per-

sonnel of the Forest Department, already handicapped by a shortage of ex-

perienced professionals at the middle management level. As a result, the

Department is forced to devote the bulk of its time to administrative work,

ANNEX 7Page 13

leaving very little time for development activities. Nevertheless, thereare important activities in progress in the developmental area, and theseappear to be well oriented to national needs.

42. Of major importance is the Forest Industries Development Projectbeing carried on with FAO/UNDP assistance. Some idea of the scope and po-tential value of this project may be gained from the following quoted sum-mary of its terms of reference 1/:

"The Forest Industries Development Project is charged withthe responsibility to compile a master development plan for forestindustries in Malaysia, supplemented by forest development plansfor West Malaysia and Sarawak.

It will undertake forest inventories, forest and forestproducts marketing studies, assess forest management and utili-zation practices and requirements, evaluate economic possibilitiesof specific industrial proposals and assist the Government ofMalaysia in appraising and, if necessary, modifying forest poli-cies, legislation, administration, management and research pro-grams."

The project became perational on August 26, 1968, and is scheduled toterminate in August, 1973. It is being carried out efficiently and is wellon schedule.

43. A second program also initiated under the First Malaysian Plan,with FAO/UNDP assistance, is now being proposed by the Government for ex-pansion. This program was started in November 1967 and identified as "PilotPlantations of Industrial Species". The original project involves study ofthe industrial potential of plantations of fast-growing species. The scopeof this project would be broadened to include more comprehensive researchinto afforestation and regeneration problems generally. The original proj-ect was to have been completed in 1972, and the expanded project is plannedto continue until 1975. Although the project has not as yet reached con-clusive results, its potential importance is very high. Results to datehave not ruled out the possibility of intensive forest management based onafforestation with species offering short rotations and high yields. Thiscould change the economics of investment for forestry on land suitable foragriculture. In addition, little is currently known regarding the entirequestion of regeneration of the hill forest, and this will be the majorforest type of the permanent forest estate of West Malaysia following ali-enation.

44. Research in forestry and forest products is carried on at theForest Research Institute located near Kepong, about 10 miles northwest ofKuala Lumpuir. The physical facilities are excellent, and the Institute has

I/ Forest Industries Development Malaysia Technical Report 1. FO:SF/MAL16, 1970.

ANNEX 7P.age 14

also been given an adequate budget. lJnfortunately, this Institute is un-

able to function to its full capacity because of a shortage of professlonalstaff and trained supporting, staff. The Second Malaysian Plan aims toremedy this deficiency, but It is not expected that the Tnstic e will be.

fully staffed until 1973.

45. The Second Malaysian Plan also proposes to inaugurate a programof Production-Oriented Research with the objectives of getting more of the

wood resources into productive use, to encourage local processing of forest

products, and to increase the efficiency of existing wood based industries.All of these objectives are, of course, very desirable. Closely associat-with this proposed propram is a "Forest Road Planning and Developme,nt"project, designed to develop forest road engineering principles and erac-

tices appropriate to Malaysian conditions, and the application of t18esc

data to the establishment ola a pernanent road network in the permanent fo-r-

est estate.

46. A final proposal -in the Second Plan is for the establishment ofa Forestry College, primari:Ly oriented to producing subprofessional per-sonne]. A three-year course is contemplated. Admittcedly, the greatest

current lack is in the subprofessional grade. tlowever, the shortage of

professionals is also severe. At present, foreign training is relied on

completely for professional personnel, and this will not be adequate to

satisfy Malaysia's fast-growing need. The plan for the proposed school

also underestimates the total need for subprofessional personnel. The pro-

posal envisions an out-turn of 25 per year through 1974, 40 per year through

1976, and 45 per year thereafter. This will result in only 155 being avail-

able by 1977 and 325 by 1981. Considering the massive and growing work

load in forest administration, which requires continuous on-the-ground pro-

fessional or subprofessional attention in W4est Mtalaysia alone at the present

time, the 325 planned for 1981 could be beneficially used now.

47. The need can he quantified in a general way. There are currently

192 agreement areas covering sliglhtly over 2 miLllion acres. In forest re-

serves there are 43C) annual permits operating on 267,000 acres. If -- as

most certainly should be done -- the state land exploitation areas receivethe same supervision as those on forest reserves, this would add an addi-

tional 1,062 license areas involving 1.6 million acres. Even now, the For-

est Departmnenc staff is finding considerable difficulty in meeting current

administrative work load requlirements, resulting in the procedural problems

mentioned earlier. In addition to the day-to-day administrative needs,

there is also a severe short:age of trained personnel for developmental ac-

tivities, especially for research and gufding the transition to an adjusted

resource base. Finally, an equal shortage of trained staff exists in East

Malaysia, which should be supplied by the proposed school. In sum, it is

felt that a school with a capacity three times the planned caDacity would

not be overly large to supply Malaysia's current and future needs.

48. Some of the projects with which IBRD is associated involve some

forestry aspects. This is particularly true of the Jengka project, whichis primarily oriented to the forest resource. In addition to the value of

ANNEX 7Page 15

this project in advancing the badly needed concept of integrating the re-source with its dependent industry, it is also addressing itself to a vari-ety of problems which have national implications. Among these are the in-adequate market mechanism, the underutilization of timber, low forest pro-ductivity, regeneration problems, and to some extent institutional problemsin forest exploitation. The solution to these problems in the Jengka Tri-angle could provide a basis for their solution on a national scale.

Sabah

49. The structure of the Sahah Forest Department, as well as its pro-cedures, has not changed appreciably as a result of Sabah becoming a partof the Federation of Malaysia in 1959. Under the Minister of Agriculture,the Forest Department is headed by a Conservator of Forests, assisted bya senior staff, currently numbering 13. The Department has a total strengthof about 1,000, of which about 55 may be considered professional and 370as subprofessional. In common with West Malaysia and Sarawak, a shortageof technically trained personnel is evident and will become increasinglycritical as Sahah's forestry operations increase in scope and complexity.

50. The Department still operates under the Forest Ordinance andRules of 1954. In 1969, this was modified somewhat by a new Forest Enact-ment. The modific. ion, however, consisted primarily of a more precisedefinition of forest offenses in order to strengthen the Department's regu-latory operations. It did not materially change the substance of the 1954Ordinance.

51. The general forest policy objectives of Sabah were quoted earlier(para 32). In carrying out the objective dealing with the establishmentof a permanent forest estate, the Government has (to the end of 1968) "ga-zetted" slightly mor-- than half of the total forest area as forest reserves.As in West Malaysia, forest reserves denote the area committed for perma-nent forest use. Exploitation in these areas is supervised by the ForestDepartment with the objective of sustained yield. Nonreserved or state landforests do not receive an equal level of management. Since land capabilityclassification has not been completed, the reservation process was unableto make use of these data. The possibility of some adjustment in the re-served forest therefore exists. It is unlikely that these adjustmentswill affect the reserved forests to the extent that is occurring in W4estMalaysia, however. The reserved forests of Sabah are located mostly inthe eastern part of the country, where the need for agricultural land willbe minimal for some time to come. To the extent possible, an attempt wasmade to consider agricultural potential in the reservation. By and large,the remaining unreserved forested lands include the greater potential foragricultural development than do the reserves so far established.

52. Exploitation of Sabah's forests is controlled by licenses, ofwhich there are three types. The Concession Agreement is a long-term agree-ment in excess of 10 years and may go as long as 99 years and normallycovers a large area. Concession Agreements are given in forest reservesand operate under the provision of forest working plans based on a sustained

ANNEX 7Pagre 16

yield operation. Currently, 12 long-tenn ConCes.sion Agreements are activein Sabah.

53. The Special License is given both in forest reserves and in sLaLeland forests. It is given for a period longer than one year but not morethan 10. In other respects it is similar to the Concession Agreement.Sometimes a Special License is given as a sort; of trial period with the ex-pectation that it will be converted to a Concession Agreement at its ex-piration. In 1968, there were four Special Licenses active in forest re-serves and nine on state land forests.

54. The Short-Term License is an annual license given for cutting onstate land forests and primarily for cutting on1 alienated land. Little Gon-trol is maintained over the Short-Term Ilicenses from the stan(dpoin. of for-est management. Hlowever, the bulk of Sahah's production, about 75 percentcomes from longer term permits, through controlled concessions and speciallicenses. In 1968, production from Short-Term License cutting dropped 12percent from 1967.

55. As in other parts of the Federation, Sabah derives its main for-est revenue from the collection of royalties on production. This royaltyis assessed per cubic foot and ranges from 14 cents to 50 cents (Malaysian)depending on the class of timber and whether round, converted, or round forprocessing. Sabah has listed its tree species into five classes. All otherspecies whicn are cut but not specifically named are lumped in a sixth classwith its own royalty rates. These rates are changed from time to time. In1968, different rate schedules were effective at the beginning of each quar-ter. Royalties from forest production (excluding birds' nests) in Sabahamounted to M$ 62 million in 1968.

56. In 1970, forest exploitation was connectecl with the provision offunds for the Sabah Foundation, a Government-sponsored social welfare en-tity. Every citizen in Sabah will be granted one share in the Foundation.Under the plan, some 3,000 square miles of land in forest reserves will beoperaited for the benefit of the Foundation. This land will be taken fromareas either not covered under Concession Agreement or on which ConcessionAgreements will shortly expire. The area will be divided into 100 units,each subdivided into 10 compartments of 30 sq mi. Logging will be carriedon every year in some portion of all the 100 units, with tenders invitedfrom contractors for this purpose. Revenue will go entirely to the SabahFoutndation. It is understood that tenders have already been invited forsome portions of the area that is to be included in this scheme. Furtherspecific details, however, are not available.

57. The most important developmental program currently being carriedon (with Canadian assistance, partly as grant aid and partly as a develop-ment loan) aims at an evaluation of Sabah's forest resource, It is beingcarried out in three stages: (1) a complete aerial survey of Sabahts for-ested areas and associated rural land; (2) a forest inventory; and (3)based on the information obtained in the first two stages, an economic eval-uation of the forest resources of Sabah. The first two stages are sched-uled for completion by the end of 1971 and it i-s expected that it will re-quire an additional year to complete the third phase. This project is

ANNEX 7Page 17

somewhat similar to the Forest Industries Development project covering WestMalaysia and Sarawak, but perhaps not quite so comprehensive.

58. Other major developmental programs are awaiting the completion ofthe timber inventory at which time it is hoped to accelerate the preparationof sustained yield working plans, and other matters requiring more preciseinformation than is now available.

Sarawak

59. The forests of Sarawak, all of which are under Government owner-ship and control, are administered by the Forest Department, an entity ofthe Ministry of Agriculture. The Department is headed by a Conservator ofForests, who is currently assisted by a senior staff of 26, and some 355other personnel, of whom about 33 may be considered at an approximate pro-fessional level and about 200 at the subprofessional level (Sarawak doesnot include the laborers in its manpower statistics). The Department ispartly decentralized, maintaining resident staff at Sibu, Bintula, andMiri, as well as Kuching.

60. With respect to policy matters, Sarawak also operates under thegeneral guidelines of the 1954 "Forest Policy of Government". The twomajor objectives -- concerning the permanent reservation of forest land andthe sustained yield management of the producing forest areas -- were ap-proved by the Governor in Council and are still in effect. In pursuingthese general objectives, however, Sarawak has developed its own implement-g policy and procedure which varies somewhat from those of the other Malay-

sLan States. In regard to forest reservation, Sarawak gives equal consid--ration to the protective function of forests. This has resulted in thereservation of substantial areas of shifting cultivation. It is reasonedthat a demarcated boundary and protected status would facilitate controlover this harmful practice.

61. Thus, in Sarawak, three categories of permanent forest land arerecognized:

A. Forest Reserves. No exploitation is permitted except byformal license or permit. At the end of 1968 this amountedto 2,500 sq mi.

B. Protected Forest. This is a new category, with the samestatus as forest reserves except that wood may be takenfor domestic use by the local inhabitants. This categoryincludes the shifting cultivation areas. At the end of1968, 9,300 sq mi had been so designated.

C. Communal Forest. This is forest established for the per-manent use of communities who have no other source of wood.This land is supposed to be managed by the communities,but actually very little management is practiced. At theend of 1968 there were 120 sq mi in this category.

ANNEX 7Page 18

62. The reservation of forest land up to no'l has covered primarily

the more readily accessible areas of the country, covering about a third of

the forested area. There is still a vas;t area in both the Third and Fourth

Divisions, in the eastern part of the country, in which substantial areas

of potential permanent forest area undoubtedly occur. Thus, the reserva-

tion process will continue for some time. Land capability classification,

which has not been completed, will be helpfuLl in Indicating areas where the

extension of permanent forest areas would be desirable. It is not likely

to drastically change the forestry reservations already made.

63. Another innovation in Sarawak is the introduction of regional

planning in its exploitation policy. Management plans in Sarawak show

three varieties:

A. Forest Working Plans. These are the conventional working

plans guiding the exploitation of permanent forests on a

sustained yield basis.

B. Felling Plans. These guiide the exploitation of alienated

or nonpermanent forest land. They are the same as Working

Plans except they do not have to be concerned with sustained

yield.

C. Regional Management Plans. These cover broad hoinogenous

areas, or natural economic units, and serve as a coordinat-

ing framework for more detailed plans.

The first regional management plan was approved in 1960: five such plans

have been approved, covering most of the peat swamp forest areas. Some

2,300 sq mi are covered by working plans and 3,550 sq mi by felling plans

(end of 1968). All licenses In Sarawak's permanent forest areas are in the

long-ternm category, 10 years or more, and contain renewability clauses.

For the most part, existing lIcensed operations remain in the peat swamp

forest areas. No substantial areas of hill forest have been opened to

exploitation. Possibly, reflecting the effect of regional management plan-

ning, the pattern of exploitation licensing in Sarawak shows a high level

of rationality. Currently the issuing of new licenses has been suspended

temporarily pending the completion of the resource survey.

64. Government revenues are derived from royalties on production,

plus an additional premium where an area has beerl allotted on tenders.

Royalties are assessed the same as in Sabah, i.e., they are based on sev-

eral value classes of trees and whether the material is round or converted.

There is in addition a M$25 per ton export duty on Ramin logs. For 1968,

total revenue from all of these sources amounted to slightly over M$22 inil-

lion 1/.

1/ Annual Report for 1968, Sarawak Forestry Department.

ANNEX 7Page 19

65. Three programs now in progress are given high priority. One isthe Timber Research and Technical Training Center, started in 1966 andmaking impressive progress with Canadian Colombo Plan assistance. Thiscenter, which has excellent facilities and equipment, is located in theoutskirts of Kuching. Training is being given in the applied aspects ofmodern timber processing technology and research in timber testing and re-lated matters is well planned and organized.

66. A parallel project for research in silviculture and forest man-agement, also started during the First Malaysian Plan, is being carried onwithout foreign assistance. Initial personnel shortages resulted in arather slow start for this program, but it has recently picked up momentum.The growing need for this program is obvious, especially with respect tothe hill forests.

67. The third program provides for the continued participation ofSarawak in the Forest Industries Development Project (described in the dis-cussion concerning West Malaysia). As it concerns a reliable forest inven-tory and an overall forest development plan, it is of the utmost importance.A somewhat similar project is underway in Sabah. The results of both couldwell be coordinated into a total Pan-Malaysian Forest Development Plan.Liaison between the two projects is being maintained. Ultimate coordinationof the Plans should be of incalculable value to the entire Federation.

D. Wood Based Industries

68. The summary in Table 1 gives a general picture of the wood basedindustrial situation in the Federation of Malaysia. It is extremely diffi-cult to convert available data from the three different regions to a uniformbasis, however, because of the variety of wood volume measurements usedand variations in local measurement practices. Appendix 1 of this Annex,supplied by the Forest Industries Development Project, gives a good analysisof volume measurements as used in Malaysia. The main point of Table 1 isthe much higher degree of local processing being carried on in West Malay-sia than in either Sabah or Sarawak. Unfortunately, it is also West Malay-sia where drastic adjustments In the resource base are going on and the es-tablished wood based industries are or will be seriously affected. Althoughthe average recovery rate of West Malaysian sawmills appears to be higherthan those of Sabah or Sarawak, a more detailed study would have to be madeto confirm this impression.

ANNEX 7Page 20

Table 1: INDUSTRIAL. INTAKE OF LOGS AND OlJTTIJRN, 1968

Log Intakeas a Percent

Log of TotalNumber Outturn Intake Timber Production

-- ( '000 tons3)_West Malaysia Li

Sawmills 363 1,419 2,272Veneer and Plywood 15 85 191Other /2 90 n.a. 57

Total 468 1,504 2,520 80

Sabah /3

Sawmills 143 49 129Veneer and Plywood 3 11 25Other n.a. n.a. n.a.

Total 146 60 154 5

Sarawak I4

Sawmills 117 395 790Veneer and Plywood 1 11 24Other 3 n.a. n.a.

Total 121 406 814 27

/1 Forest Industries Development, Technical Report 1, 1970.

/2 Includes shingle plants, window and door mills, etc.

/3 Annual Report. State of Sabah Forest Dept., 1968.

/4 Annual Report. Govt. of Sarawak. Forest Dept., 1968.

West Malaysia

69. Prior to World War II there were only some 15 small sawmills inWest Malaysia. At the present time, in addition to the 363 sawmills and 15plywood mills (Table 1), there are numerous wood working and furnitureshops, and also such remanufacturing plants as molding mills, match factor-ies, and prefabricated building factories. In 1967, the value of the grossoutput of this sector amounted to M$175 million, making it the third large¢tforeign exchange earner, and providing 8 percent of the total manufacturingoutput of West Malaysia 1/. Production capacity has continued to expandsince 1967.

1/ Forest Industries Development Project; Technical ReporTt 1,, k1O97.

ANNEX 7Page 21

70. This rapid rise in industrial capacity since World War II coin-cided with a strong foreign demand for Malaysian timber. It also coincidedwith large-scale clearing of land for agriculture, and national pressure tomaximize export earnings. The question of the capacity of the forest re-source to sustain the wood based industrial sector -- at even its currentlevel of production -- has become a real policy issue.

71. Total production of timber in West Malaysia in 1968 was 3.6 mil-lion cubic tons, of which some 2.5 million cubic tons was absorbed by thewood based industries. However, the industry, especially the sawmills, isnot currently operating at full capacity. Total capacity of existing woodbased industry (1968) has been calculated (in terms of log intake) at over4.2 million cubic tons, a figure which substantially exceeded the totalproduction of timber in West Malaysia 1/.

72. Considering the potential shrinkage of the resource base to pro-vide land for agriculture, the question of the capacity of the remainingpermanent forest to maintain the industry becomes relevant. This questionis under careful study by the Forest Industries Development Project. Verytentative projections can be summarized as follows in cubic tons:

Possible annual outturn from permanent forests 5,516,100

Probable annual outturn first five years 4,272,300

Existing industry capacity (1969) 5,299,500

In the face of this capacity situation, the current practice of exportingnearly one-third of West Malaysia's total production in the form of logs --despite the 10 percent FOB value export tax -- becomes a pertinent issue.Nearly all of the West Malaysian log export volume goes to Singapore, and itappears that Singapore's industry is prepared to pay premium cash priceswhich West Malaysian industry is evidently not willing to match. The ForestIndustries report 2/ lists three reasons which contribute to Singapore'sgreater competitiveness:

A. Government incentives through low-interest loans andsubsidized industrial estate facilities, together witha strong internal market for export reject grades.

B. Excellent harbor facilities and Singapore's position onthe international trade routes (resulting in lower exportcosts).

C. The existence of organized log brokerage, which allowspurchases of mixe(d loads of logs with redistribution asrequired.

1/ Forest Industries Development Project; Technical Report 1, 1970.2/ Op. cit.

ANNEX 7Pajge 22

73. The W4est Malaysian sawmiill, industry is cliaracterized by a large

number of small mills. Mills of over 7,000 tons annual capacity amounit toabout 12 percent of the total niumiiber of mills but contribute 37 percent of the

production. At the other end of the scale, smnal]. mills under 2,000 tons

amount to about 40 percent of mill ntumbers but contribute only 13 percent ot

production. Also, there -is a heavy concentration of capacity in the western

states, many of which are fnow timber deficient. The industry In these areas

is becoming increasingly dependent on resource inputs from the eastern timber

surplus states; these surpltus states, however, are licensing mills to exploit

the same timber stupplies. The rieed for national. coordination or control is

very real.

74. In general, it can be said that additional capacity in West Malay-

sia in undesirable. Instead, attention should be directed to restructuring

the industry with respect to the resource base, its efficiency, and the mar-

keting mechanism for logs.

Sabalb

75. In comparison with Sabah's annual timber production, its wood

based industrial sector is minimal. Less than 5 percert of the State's total

production is receiving even primary processing locally. There are some 143

sawmills, spread fairly evenly among all of the forest districts of the

country; these are characterized by small size, generally inadequate equip-

ment, and an average recovery rate that is considerably lower than it should

be. Only 19 of the mills have band break-down saws; 10 have no break-down

saw at all; and an amazing 132 have no powered resaws 1/. The volume of

sawn timber was roughly the same in 1968 as in 1967. At the present time,

Australia represents the only market for Sabah's sawn products. There are

three plywood plants in Sabah, two of which prodtuce only veneer for export

while the thircd produces both plywood and veneer. Secondary wood-using

industries are minimal.

76. It is somewhat difficult to understand why wood based industry

has not developed in Sabah in greater dimensions or more rapidly. It is

possible that the very buoyant market for logs, coupled with a low level of

wood processing technology and undeveloped markets, have been the major con-

straints. It does not appear that capital has been a restraint. The con-

sensus in Sabah seems to be that private sector capital would be ample, but

is reluctant to enter the field because of the greater attraction of logs

which offer good profits with a lower capital investment.

77. In any event, the greatest need of beneficial forestry development

in Sabah is a massive expansion of wood based in(lustries coupled with diver-

sification. In this connection, it is understood that a policy of insisting

on processing facilities as a condition for obtaining a special license or

concession agreement is to be enforced.

1/ Annual Report, Forest Department; State of Sabah, 1961.

ANNEX 7Page 23

Sarawak

78. Local processing of forest products, mostly by sawmills, has showna steady advance in Sarawak over the past two decades, coinciding with theemergence and popularity of Ramin. Currently there are 117 sawmills, oneplywood and veneer plant, and several other wood-working industries, suchas molding and dowel plants, kilns, and shingle plants. These mills aregenerally located along the coast, with the heaviest concentration in theKuching and Sibu areas and a smaller concentration in the Miri area. Thisreflects the emphasis on development of the peat swamp forests.

79. The general quality of these mills varies from some very poorsmall mills to several very good larger ones. The efficiency and equipmentare steadily improving, partly as a result of continued encouragement andincentives by Government. An FAO project (1961-1964) was aimed specificallyat improving the sawmill industry. Preference has been given to establishedmills in granting licenses and permits, and the privilege of license renewalhas been used as a lever to induce mill modernization. Exploitation policyhas been integrated in the sense of connecting existing and potential pro-cessing capacity. And, most important of all, the establishment of a timberresearch and technical training center has helped to improve the local levelof wood-processing technology. These measures, together with enlightenedprivate initiative, are evidently bringing results. Some 39 of the millsare now using band head-saws, and others are planning to convert.

80. Considerable capacity for a greatly expanded wood based industryexists in Sarawak, oriented mostly to the hill forest area in the easternpart of the country, as this area is opened up for exploitation. This areaalso presents some serious problems. Two attempts to inaugurate exploita-tion in this area have been unsuccessful, although it is believed thatthey could have succeeded with more careful planning and preparation. Atthe present time, the private sector is reluctant to initiate operations inthis area, and an initial public investment to make a start towards realiz-ing the undoubted potential is indicated. Heavy investment in infrastruc-ture will be needed. With the completion of the timber inventory now inprogress in the hill forest area, a better idea of the dimension of the po-tential will be available.

E. Development Strategy

West Malaysia

81. The immediate need is for a more precise recognition of forestry'srole in the West Malaysian economy. As a renewable resource, forests havethe potential. for making a sustained major contribution to the economy. Assuch, there would seem to be adequate justification for controlling andmanaging the forests in the perspective of national rather than local in-terests so that their capital value can be maintained and their economicpotential realized. There is equal justification for looking at wood based

ANNEX 7Page 24

industries from the national point of view as a permanent part of the WestMalaysian industrial pattern. But questions of strategy will remain.What sort of processing and what level would be bfest? Would it be pre-

ferable to continue liquidating the resource anid rely on importecl rawmaterial to maintain the indlustry?

82. The Government is aware that a considerably enlarged body ofinformation is needed to supply the best answers to these questions. How-

ever, the Forest Industries Development Project will not be completed foranother two years, during which time both forest liquidation and continuedexpansion of industrial capacity could conceivably render infeasible alter-natives which are currently available. Some sort of interim policy isessential. It would seem that this should be one of greater conservatism --both with respect to the rate of forest liquidation and the establishmentof new industrial, capacity.

83. With regard to these policy determinations in a national perspec-tive, national planning is not new to West Malaysia and effective institu-tions exist that are capable of carrying out both the planning and implemen-tation process. W4ith respect to forestry, these institutions would includethe Economic Planning Unit of the Prime Minister's Office, The Department ofForestry of the Ministry of Agriculture, and the Federal Industrial Develop-ment Authority. However, it must be recognized that the states mustparticipate or at least concuLr in both the planning process and actionprogram if national policies are to be effective. With their firm constitu-tional rights and traditionally indepen.lent action, the states could seriouslyhandicap national programs.

84. There is evidence of a growing recognition by the states, andparticularly by the states experiencing timber deficiencies, of inter-dependences in the matter of forest resources and the need for planning thelong-term management of this resource. That is, the goal of national plan-ning should be to enlist the participation of the states, so that they can,without relinquishing their rights, manage the forestry resource within the

framework of agreed national strategy. However, the matter of obtainingfull state agreement and compliance with the specific operation of nationalstrategy as it affects any particular state may prove extremely difficultbecause of the revenue factor. Fluctuations in annual production andconsequent fluctuations in revenue in the individual states may be necessa-ryin the national interest but certainly would not be favored by the statesaffected. Any feasible procedure therefore would have to be predicated onthe several states continuing to receive annual revenue in a manner that isboth steady and predictable.

85. One possible alternative that might be given consideration wouldbe based on the annual sharing of the total national timber revenue by thestates in proportion to the forest area of each state. Under this arrange-ment, national planning and strategy would be developed by a committeecomposed of representatives of the Economic Planning Unit, the Forestry Depart-ment and the Federal Industrial Development Authority. Detailed implemen-tation plans for the forest estate would be the responsibility of the

ANNFX 7Page 25

Forestry Department and for industry of the Federal Industrial DevelopmentAuthority. The several states would continue their operational authoritybut agree to conform to the national plans. They would contribute theirindividual forest estates to a common national estate in return for ashare of the revenue proportionate to their investment of forest area.Table 2 shows how this would have worked out in 1968.

Table 2: ACTUAL VERSUS PROFORMA POOLED REVENUE (1968 DATA) /1

% of Actual 1968 Revenue Pooled Share RevenueForest $ M Million $ M Million

State Area Gross Net Gross Net

Johore 8.5 5.130 + 3.480 3.620 2.800Kedah 6.2 2.560 + 1.810 2.640 2.040Kelantan 11.6 2.110 + 1.730 4.940 3.820Malacca .2 .088 - .960 .090 .060N. Sembilan 3.8 3.300 2 .500 1.620 1.250Pahang 38.9 19.760 + 17.430 16.559 12.800Penang .1 .059 + .110 .040 .030Perak 13.2 5.250 - 3.420 5.619 4.340Perlis .4 .050 - .006 .1.70 .130Selangor 2.9 1.470 + .310 1.240 .950Trengganu 14.2 2.810 + 2.317 6.049 4.670

100.0 42.587 + 32.900 42.587 32.900

/1 For explanation, see text.

86. This arrangement of course would probably not be popular withthose timber surplus states who wouldl in effect be partially subsidizingthe timber deficient states. flowever, it would have the major advantage ofpermitting the application of national strategy without depriving any stateof an annual. and predictable revenue. Further, it would facilitate forestdevelopment with a resultant increase in total revenue, so that in the longrun the individtual states would gain increased revenues. And finally, itwould tend to be a disincentive to the current prnctice of overexploitationby the individual states since they wotuld gain l:ttt]e by doing so.

87. Other methods of calculating the sharing basis might be considered.Volume and quality of the timber could be conisidlered in place of or in a(ldi-tion to area. A moderate severance bontus cotuld be pai.d to those states wherethe annual coupe is carried on to partial]ly minimize the subsidy effect bythe timber surpluis states.

88. The following major elements should also be included in a moreconservative inter fm pollcy:

ANNEX 7Page 26

(a) Give forest reserve status to all of the state land forests.

This would make possible a better level of management, result

in greater economic: returns and eliminate the wasteful typeof exploitation now current in these areas. Even on land

scheduled for conversion to agriculture, it would provide amore orderly and beneficial liquidation.

(b) Suspend further liquidation of forests on alienated land

until the actual xieed for such land arises, as indicatedby firm land settlement schemes. Considerable areas are

being wastefully liquidated under the guise of conversionto agriculture, but: in reality only for their current

timber value.

(c) Restrict exploitation licences and permits to the clirrent

level until the present study of resource supply, market

demand and industrial production is completed and avail-

able.

(d) Declare a moratorium on the issuance of new wood-based

industrial licences until the information from the

resources study is available, unless the licence is for

relocation or consolidation purposes.

(e) Refrain from promoting any enterprise that would increase

current intake capacity, unless it would be a replacement

of existing intake capacity. 1/

89. In addition to these interim measures, there are other positive

steps which would improve the general economic environment as it pertains

to forest resource development and use, and which would facilitate the

application of long-term pol:Lcies. For instance, instead of looking to

increased industrial capacity, West Malaysia could devote more effort to

restructuring the established capacity, through possible relocation,

modernization of plant and equipment, consolidation, or reorganization to

provide the maximum efficient structure and pattern. Further, the more

complete use of the resource could be encouraged through the greater use of

currently noncommercial species, smaller log diameters, and lower grades,

through intensified research, market development, and especially greater

integration of logging with processing, as is being attempted on the Jengka

Project.

90. The practice of using semistatic arbitrarily calculated royalty

rates is not in the best interest of either the Government, the operators

nor the wood based industries. As currently calculated and used, they may

well be a handicap to full utilization of the resource, and the optimum

development of industry. Royalty rates on timber production are for the

1/ This does not apply to already planned resource-industry integrated

operatlons such as Jengka.

ANNEX 7Page 27

purpose of insuring that the Government receives its fair share of the valueof its product and also that the purchaser also receives a fair return forhis investment of money, time, risk and entrepreneurship. Thus, they shouldbe based on a calculation of costs, returns, profits, magnitude of invest-ment, and importance of the risk factor to arrive at a figure which repre-sents the realistic value of the timber as it stands in the forest. Whenptoperly determined, and equitably applied they can provide incentives bothfor optimum utilization of the resource and for operational efficiency.Considerable data with respect to costs, returns and profits are alreadyavailable in Malaysia, and more will be available when the current studyof forest resources and industry is completed. Thus a major revision ofroyalty policies and practices should be considered.

91. With respect to the problem of procedural handicaps involved inscaling the logs and making the final inspections, there are some possiblealternative systems that might be given consideration. The major point inthese alternatives is to provide greater opportunity for contact andcooperation between the Government representatives and the operator in theoperating area. To that end the suggested alternatives provide for theforest officer's duties to be carried on in the logging area rather than ata point outside. One such alternative would be based on using tree measure-ment in advance of cutting rather than log scaling subsequent to cutting.For this purpose merchantable volume tables based on tree diameters orgirth at the accepted breast high point could be compiled. In fact, exist-ing total volume tables could be adjusted for this purpose, and averagedefect factors applicable to different species or groups of species andsites determined. The forest officer would then measure and mark the treesto be cut in advance of cutting, maintaining a simple tally record bydiameters and species groups as he went. Calculations would be done laterin the office.

92. This procedure would have the following advantages.

(a) The operator would be able to schedule his loading andtransport with the most efficient timing and routing.

(b) The forest officer could schedule hlis own time to bestadvantage. Knowing the rate of felling for any particularoperation, he could schedule periodic visits of any durationhe chose simply by marking enough in advance to cover theanticipated felling for the planned period.

(c) Calculations would be simplified as compared to log scalingand could be done by clerical personnel on a mass basis ata substantial reduction in time and cost.

(d) The forest officer could combine his inspection oflogged area with advance measurement of new area,thus keeping the release of logged area on a currentbasis and saving travel time for himself.

AN NEX 7Page 28

93. One disadvantage of this system is that it would require moretrained men to identify the trees for cutting than does the presentpractice, and these may not be available (or at least not in the short-run). Accelerated training could obliterate this disadvantage in a fairlyshort time, however. A second and possibly grave disadvantage would bethat it may not be possible to determine a defect factor for Mtalaysiantimber that could be used in this way.

94. Another alternative would be to scale felled timber in the woods,immediately after cutting rather than at a distant checking station. Thiswould retain most of the advantages of the tree measurement system mentionedabove and largely eliminate the possibly prohibitive disadvantage of thedefect factor.

95. A third variation would be to scale logs at the landing, or atpoint between felling and loading on trucks. This would have an addedadvantage at the presence of a forest officer when tree-length logs arebucked into shorter logs.

Sabah

96. Because immediate basic policy decisions by Sabah are notimperative to avoid serious economic consequences, the state has time tomake use of the information being gathered by the current resource studyin resolving the major issues. Nevertheless, there is the known fact thatthe forest resource is not being exploited so as to bring the highest econo-mic returns to the state: only a portion of the total wood volume per acreis being harvested and a very high percentage of this volume is being ex-ported in the low-value form of logs. With its awareness of this fact, theGovernment has adopted a policy of encouraging the local processing offorest products. At the same time, ft is under strong pressure to increaseexport earnings and continue to take advantage of the buoyant log marketto the full extent possible, despite the loss to the economy of the valueadded in processing and of the social values involved. The profit gap infavor of logs is a main deterrent, and there is some evidence that thecurrent profit gap between logs and processing is increasing. In addition,a lack of developed markets for sawn timber -- as contrasted to the assuredmarket for logs -- increases the risk factor.

97. At the present time the major incentive used by the Governmentto stimulate local processing is the requirement for the establishment ofprocessing as a prerequisite for licence continuation. It is felt thatthe matter of royalty assessments might also be given consideration aspossibly helpful in this area. A realistic assessment of royalty basedon a thorough analysis of costs, returns, and profit of industry would tendto minimize the risk factor and, at the very least would identify thetleme-ots of the profft gap ss between logs and sawn. timber. This would

In turn provlide an informed basis for additional incentives.

ANNEX 7Page 29

98. The current study being carried on with Canadian participationprovides an excellent vehicle for the necessary analyses, and considerationshould be given for including their aspect in the study's terms of referenceso that the future revenue system will be rationally aligned to industrialactivity and market price.

99. More agressive marketIng, including both market research andespecially market promotion and development, will be necessary to expandSabah's wood based industry. Since the marketing problem is also shared bythe other areas of the Federation, consideration might be given to a Pan-Malaysian approach, permitting the possible use of Malaysian diplomaticapparatus as well as the trade associations of the private sector (Note:the strategy with respect to the expansion of production other than sawn orotherwise processed timber was discussed in Section B).

Sarawak

100. The major issues which have emerged in Sarawak's forest develop-ment are: (a) the conversion of the existing wood based industrial capacityto use of species other than Ramin; (b) the expansion of industrial capacityto increase the proportion of sawn product exports; and (c) the developmentof the large area of hill forest through rational exploitation on a sustainedyield basis.

101. Sarawak also needs, of course, a greatly enlarged body of inform-ation as a basis for resolving these issues. This is not regarded as anissue in itself, however, because progress in developing this informationis well advanced under the Forest Industries Development Project.

102. A major fact to recognize is that Ramin will be of decliningimportance in the future. It is very slow growing, requiring 150 years ormore to mature, and is extremely difficult to regenerate. Once the harvest-ing of the initial peat swamp forests has been completed, Rsmin will ceaseto have any economic importance. Most of the better and more accessibleRamin areas have now been logged, and it is estimated that a decline in Raminproduction will be apparent within the next few years. Some Ramin logs arebeing imported from Indonesia for processing in Sarawak, but this is ashort-range matter as Indonesia also is implementing a firm policy of localprocessing.

103. It thus becomes a matter of the existing Ramin based industrychanging over to the use of other species. Favorable factors exist fordoing so. The peat swamp forests are productive and logging costs in theseareas are relatively low. The difficulties of growth and regneration whichadversely affect Ramin do not apply to a wide variety of other species.Several of these show promise, notably Alan (Shorea albida), which is veryextensive in the peat swamp forests. It is already commercially acceptableas logs, and some of it is already being processed locally as veneer andplywood for the U.S. market. Sufficient volume of other desirable swampspecies exists to supply the existing industrial capacity and permit ex-pansion. The conversion of the established industry to species other than

ANNEX 7Page 30

Ramin thus would not entail relocation of either plants or exploitationareas.

104. The indicated Government strategy would be to identify and supplyincentives which would stimulate private industry to diversify production,increase utilization efficiency and to develop and promote marketsaggressively. It would also be desirable to raise the status of stateland forests to that of forest reserves so as to permit the applicationof the better level of silvicultural management and control that is practieWon the reserved areas. The same strategy of incentives would also apply tothe problem of expanding local processing generally. The revision of royaltyrates and the need for market development to that end have already beenmentioned. These strategy measures are needed in addition to the Govern-ment's already positive attitude toward industry, as evidenced by its policyof coordinating exploitation licences with industrial capacity and itssponsorship of the Technical Training and Research Program.

105. The issue of the hill forests is probably even more important tothe economic development of Sarawak than the fulture of the swamp forests.These cover the eastern part of the country. Because of very poor communi-cations, lack of settlement, and the past low demand for hill forest spec4es,little thought has been given in the past to their exploitation. Now, how=ever, with the high demand for Sarawak timber, it is recognized that theirrational development could make a tremendous contribution to the economy.Dry-land or hill forest species are already forming a substantial part ofSarawak's log export volume so they are commercially acceptable. The pre-sent production of hill forest species is not coming from the large areas inthe eastern part of the Third and Fourth Divisions, but rather from the dr.y=land areas contiguous to the current exploitation areas. Nevertheless, theexport of these hill forest species does indicate that the resources in thelarger, unexploited areas are vast and their value potential high. Whileeconomic indications must await the completion of the resource survey, theoutlines of a possible infrastructure and processing network are alreadyunder study (discusse(d in Section F).

106. The Forest Industries Development Project will be completed in1.971. This will be followed by a forest development plan, which will inclqd4all of Sarawak. Simultaneously, preliminary investigations to determinefeasibility and methods of exploitation are being conducted. Meanwhile, EthGovernment's policy of caution is well conceived to avoid premature explott=ation or commitments which might handicap regional development plans. Ithas suspended the issuance of new licences in all of Sarawak until informat__resulting from the resource survey will be available. Established operations,however, are not being restricted.

ANNEX 7Page 31

F. The Sarawak Hill Forest Project

107. Preliminary indications are good that the large hill forests inthe eastern part of Sarawak can be opened for development. Although theForest Industries Development Project will not be completed until 1972,sufficient information has now been gathered to permit some broad con-clusions both as to technical feasibility and general method of approach.Investigations have shown that access can be developed as well as egressfor the products, and that logging can be carried on at a reasonable totalcost. Economic feasibility will, of course, depend in large measure onthe volume of the output, but it will also be greatly influenced by the waythe infrastructure is planned and installed, the overall road pattern, thelocation of mills and logging areas, and the arrangement of transportationfacilities. This in turn necessitates planning within a regional frame-work. The possibility of leaving development to the private sector doesnot appear feasible because of the heavy investment for the initial accesswhich would serve large portions of the area and other operations. Nosingle enterprise would be attracted to this arrangement. A piecemealapproach through concessions would greatly handicap the achievement ofboth the optimum degree of regional integration and diversification ofproducts. Thus it appears that a public investment in both the initialinfrastrucutural framework and the initial industry is indicated. Highforeign exchange costs would be involved.

108. Several over-all alternative plans are being considered. Theirdifferences, however, lie mostly in specific road and facility locationsrather than in central concept or approach. All of them are based on usinga combination of land and water transportation, provision for regionalcoverage, integrated industry and scope for eventual private sector involve-ment. For purposes of illustrating the planning and indicating the financialdimensions involved, the major elements of one general scheme can be out-lined. This scheme proposes extensive use of the Rajang River.

109. The Rajang River rises in the mountains between the Third andFourth Divisions and flows westward about 195 miles, emptying into theChina Sea below Sibu at Tanjong Mani. The river is navigable for the firstapproximately 95 miles above the mouth at Tanjong Mani. At this point, itis joined by the Baleh River from the southwest, and above the junctionthere is a rapid involving about 10 miles of unnavigable water. Abovethe rapid there is an additional 90 miles of navigable river. The planproposes supplementing the navigable portions of the river with a road net-work covering about 208 miles, interconnecting the following points: (a)the town of Kepit, located just below the rapids; (b) the town of Belaga,located near the head of the upper navigable portion of the river; (c) anunnamed point just above the rapids; and (d) a junction with the Sibu-Bintula highway, currently under construction, at a point either at theBalangiar River crossing or the Mukah River crossing.

ANNEX 7Page 32

110. The plan proposes to establish a production center near Kepit,

consisting of a modern sawmill of about 200,000 FBM per day capacity plus a

veneer and plywood plant, dry kilns, and a planning mill. The manufactured

products would be transported by barges to Tanjong Mani where a holding

area would be established in the river delta. Initially about 30 acres

would be developed with provision for expansion to about 80 acres. This

would be equipped with large covered holding sheds, cranes, and bulk

handling equipment.

111. Supplementary to the main production center at Kepit, three addi-.

tional mills are proposed with tentative locations at Sibu, Bintulu, and

Belaga. These would also be modern and capable of product diversification.

but smaller than the mill near Kepit, about 60,000-80,000 FBMWper day.

Several small semiportable satellite mills are envisioned for the initial

breakdown of logs where appropriate.

112. To provide transportation between the main production center at

Kepit and the shipping point at Tanjong Mani, tugs and steel barges are

planned. Initially there would be one large seagoing tug with a minimum -fi

1,000 HP plus three steel barges with lengths of 120 - 150 ft and widths of

50 - 75 ft.

113. The rationale for suggesting this particular general layout can

be summed up as follows. The main production center is located near Kepit.

which is the optimum point for the delivery of logs from a large part of

the area. Logs can be brought to it both by water and land from the uppes

Rajang Valley, and the Baleh Valley as well as from adjacent subwatersheds%

and logging units. The mill at Sibu would handle the raw material from the,

lower Rajang area to avoid expensive backhaul to Kepit and then returning

the product to the shipping point. The same applies to the mill at Bintullu

which would handle adjacent tributary areas. The mill at Belaga would pro,-.

cess the large volume of those logs from the upper Rajang which could not

be delivered by water to Kepit because they do not float. Species which

float could be delivered cheaply by water to a point above the rapids,

and then by road to Kepit.

114. The indicated problem of the large volume of hollow trees could

be partially alleviated by the semiportable mills which would break them

down into cants and deliver in that form to the mills for more refined

processing.

115. The holding area is planned for Tanjong Mani rather than Sibu,

to permit loading on larger vessels that would be possible at Sibu. Themaximum permissible sized vessel which can reach Sibu port is about 5,000tons.

116. With respect to the investment required, a tentative very roughestimate is set forth in TabLe 3. Of the total US$40.55 million costs for

labor, local supplies and other local costs would be about US$10 million.

ANNEX 7Page 33

117. Finally, it should be mentioned that the road and water

transport complex would make possible the development of agricultural

land in the region. This possibility is considered in the transportation

planning but is not counted on to add substantially to the economic benefits

of the project. At this point it is believed that the timber resources

alone must provide adequate justification.

Table 3: INITIAL DEVELOPMENT COST(US$ '000)

Holding Area - Tanjong Mani 10,000

Production Center - Kepit 10,000

Subsidiary Mill (3) 3,000

Semiportable Mills 300

Seagoing Tug 250

Steel Barges 500

Logging Equipment 1,500

Roads 15,000

TOTAL 40,550

ANNEX 7Appendix 1Page 1

MALAYSIA

AGRICULTURAL SECTOR REVIEW

LOG MEASUREMENT IN MALAYSIA -

1. Various methods of log measurement are in use in West Malaysia,

Sarawak, and Sabah. A comparison of the various measures is given in table

form at the end of this Appendix. A problem is that volume comparisons

between systems and true measure cannot be given until "true" has been

determined.

West Malaysia

2. The standard Forestry Department unit of log measure, used in all

states, is the cubic foot. Royalty rates are per cubic foot.

3. Log diameters are taken to the nearest inch by averaging two

diameters taken perpendicular to one another at the small end of the log,

under bark. Lengths are measured to the nearest foot. Fractions of a foot

less than 6 in are neglected and 6 in and over is counted as a complete

foot.

4. Log volumes are obtained from a table published by the Department

which gives volumes for logs from 6 in to 5 ft in diameter and from 6 to

30 ft in length, to the nearest cubic foot in "cubic feet true measure." 2/

5. For logs shorter than 6 ft a table is used which shows how to

calculate the volume for each foot of length. For logs over 30 ft in

length the volume is determined by averaging both end diameters of the log.

As for shorter log lengths the average diameter of each end is first taken.

The department stipulates that a log over 30 ft in length shall be taken as

two logs of equal diameter (the average of the two ends), one being 25 ft in

length and the other the remainder. These volumes may be taken directly

from the table supplied. No mention is made of logs over 50 ft in length.

At present not many logs are over 30 ft in length.

6. The official measure, often called "True Malay Measure", is not

in fact the true measure of the volume of a log. The Forestry Department

generally assumes or states that the measure is approximately 15 percent

1/ Based on material prepared by Mr. Leo Letourneau of the Forest Industries

Development Prolect and used with the permission of Mr. Kenneth Sargeant,

Project Director.

2/ True not defined.

ANNEX 7Appendix 1Page 2

lower than true volume (not defined), basing this assumption on experience

in the field.

7. The Forestry Department also uses the ton 1/ as a unit of measure

especially in forest outturn statistics and mill input figures. The Land

Capability Classification uses "tons" in the classification of forest land.

One ton of logs is 50 cu ft and is arrived at by dividing the cubic content

of the log by 50. Care must be taken, when using the ton as a unit of

measure of a log, that the type of scale or rule which was used is as-

certained.

8. The trade in West Malaysia usually works on the Hoppus Quarter

Girth System of measure and calculation or minor variations of this. Logs are

usually bought or sold in the Hloppus ton scale.

9. In the Quarter Girth System, log lengths are usually measured to

the nearest lower foot and the girth or circumference of the log is taken

at the midpoint of the log, tinder bark to the nearest lower inch. The

system of measurement would give a fair representation of volume if the

normal formula for cylinders was used. The quarter girth formula (or

Hoppus measure) was originally intended to give the volume of a log which

had been squared (four sides). The formula gives a volume which is 21.5 per-

cent lower than the volume calculated by the Standard Volume formula using

the measured center circumference.

10. The formula, from which the system derives its name, is:

(G) x Length

(4) = Volume (Hoppus)144

Where: Length is in feet, G is girth in inches and volume is

in cubic feet.

Various tables have been published from which volumes can be obtained.

Girth is usually in feet and inches. The Forestry Department has printed

"Quarter Girth Volume Tables" on the reverse side of their Log Volume

Tables.

11. Although this formula gives the answer in cubic feet, the trade

(leal in tons, with one ton being 50 cu ft, therefore, the answer derived

is divided by 50. Logs are bought and sold on ton measure which is some-

times referred to as the Hoppus Ton and also sometimes the sawmill ton.

12. Variations in the application of this measurement are to be found::

for example, one operator cortverts the girth measure to diameter in inches.

1i/ The ton-volume measure has no relationship to weight.

ANNEX 7Appendix 1Page 3

then deducts one inch for bark (since they measure over bark). He has madea table which converts his diameters directly to tons. In West Malaysia,where logs are often trucked directly from felling point to mill, logs arenot always debarked before scaling.

13. Another important variation, used over large areas of the country,is to apply the one quarter girth formula to a diameter measurement of the smallend of the log. It is probable that this gives a volume of between 25 per-cent and 30 percent lower than the true volume, particularly on the short logsbeing produced today.

14. No doubt other forms of measure are used in the trade, but thesehave not been determined as yet nor are they likely very common. SupplyaiHd demand probably bring about various forms of taking measurements.

Sarawak

15. The official rule in Sarawak is the Hoppus Quarter Girth Rule.Log girths are measured to the nearest lower inch. Lengths are taken tothe nearest lower foot. Royalties and premiums are assessed in dollars perton, one ton being 50 cu ft (the Hoppus log volume is divided by 50).

16. The trade in Sarawak also uses the quarter girth system fortransactions amongst themselves (owner to contractor, etc.). However, inthe export of logs to Japan the Japanese insist on another form of the samerule.

17. This rule has been referred to as the DeKoku System or Rule. Inthis method two inches are subtracted from the girth measurement which was takenfor purposes of royalty assessment. Since logs vary in size, the volumededuction to be applied is not constant. In the type of logs beingexported from the hill forests it would appear that DeKoku volumes arelower than the quarter girth volumes by from about 3 to 6 percent. It is notknown why the Japanese buyers want to use the system.

18. No doubt other log measures are used in Sarawak but they are notcommon.

Sabah

19. The official system of log measurement is the Hoppus quarter girthmeasure. Royalty rates are set per cubic foot (Hoppus) of log. Calculationof rates using FOB figures is also done in cubic feet (Hoppus). ForestryDepartment statistics are kept in cubic feet (Hoppus). In measuring girth,fractions of an inch less than one-half are dropped.

20. The internal trade, for purposes of contract payment and buyingand selling, deal in the cubic foot Hoppus measure.

ANNEX 7Appendix 1Page 4

21. The log export trade is conducted in cubic foot Hoppus measure,

but the DeKoku system is also in use for the Japanese market. When theDeKoku system is used, the Forestry Department compels the exporter to

submit both figures (export figure and amount deducted) and make volumesadjustments since royalties on export logs are higher (about double) than

for those which are processed locally.

Summary

22. It is important to assess the differences between the various

scaling systems as known, to assist in the preparation of statistics and

to increase the knowledge of the forest industry. It will become increas-

ingly more important to know the correct volume produced in the form of

logs when more complete utilization of the log becomes a fact, as is now

beginning to happen with the introduction of chipping plants.

23. In West Malaysia a study may be required to determine the

relationship between the volumes derived from the various systems in use

and true volume, and it may be possible to determine this from the data

collected during the present inventories being conducted by the FIDP.

24. In Sarawak, the official system of taking measurement could give

a reasonable estimate of the total volume of a log if the correct formula

were used. This rule at least has a uniform factor which can be applied

to arrive at the volume of a log using a midlength circumference measure-

ment.

25. The Japanese system (DeKoku) in Sarawak probably plays havoc

with statistics on species on which there is no export tax. In Sabah the

exporter is obliged to give both figures (his export and the amount he has

deducted) to the Forestry Department who make adjustment for royalty assess-

ment; therefore, the statistics should be prepared from adjusted figures.

26. When an analysis of statistics or comparisons, whether country-

wide or for individual production units, is made, care must be taken to

ensure that the units of measure used in the comparisons are the same.

This applies whether using cubic feet or tons. It could be that one mill

is analyzed using tons based on the True Malay scale and another mill is

analyzed based on Hoppus tons.

27. Comparisons of outturns with other countries must also be watched.

Many countries use total volume (cubic feet or meters) 1/ of the log for

an input figure, while in Malaysia both rules used by the Departments are

lower than total volume.

1/ As measured either by averaging diameters or areas of both ends of a

log.

ANNEX 8Page 1

MALAYSIA

AGRICULTURAL SECTOR REVIEW

LAND DEVELOPMENT

A. Resource Base

1. The Federation of Malaysia, comprising the 11 states of WestMalaysia and Sabah and Sarawak in East Malaysia, is only thinly populated.In West Malaysia, the total population of 9.5 million (estimated for 1970)is heavily concentrated along the coastal lowlands, especially along thewest coast, while much of the mountainous inland region is sparsely inhab-ited and largely undeveloped. This situation is even more pronounced inEast Malaysia wtth the very small population located mostly in the coastalregions.

Tp" le 1: AREA AND POPULATION OF MALAYSIA

Total Area Population Density(sq. miles) (thousands) (persons sq. mile)

West Malaysia 50,700 8,035.5 159East Malaysia: Sabah 29,400 518.1 18

Sarawak 48,300 902.8 19

Total 128,400 9,456.4 74

2. Of the total land area in West Malaysia of 32.4 million acres,about 7.1 million were in agricultural use in 1970. Tree crops (princi-pally rubber, oil palm and coconut) comprise about 5.5 million acres of thisagricultural area. A further 7.2 million acres are being exploited as com-mercial forest, while a little under 1 million acres are held as forestreserve. About 330,000 acres are in urban or mining use, and the remaining17 million acres are unused. In East Malaysia, only a very small propor-tion of the land is in agricultural use (about 3 percent), and this, too, ispredominantly in rubber and other tree crops.

3. The Natural Resource Capability Section of the Economic PlanningUnit has, over the past five years, prepared a Land Capability Classifica-tion of West Malaysia. This has utilized land use, soil, geological,forest and water resource surveys to arrive at estimates of potential landuse. Land has been divided into five classes -- mining, good agricultural,moderate agricultural, productive forest and other. Present and potentialland use in West Malaysia, estimated on the basis of this survey, is pre-sented in Table 2.

ANNEX 8Page 2

Table 2: PRESENT AND POTENTIAL LAND USE, WEST MALAYSIA(millions of acres)

Present PotentialArea Area

Agriculture:

annual crops 1.6 3.4

perennial crops 5.5 12.5

Sub-total 7.1 15.9

Forestry:

productive forest 7.2 10.2

protective forest 1.0 4.0

Sub-total 8.2 14.2

Mining: 0.1 0.4

Other (including urban): 17.0 2.1

Total 32.6 32.6

Source: EPU, Kuala Lumpur.

4. Clearly, there is a very considerable area of potential agricul-

tural land in West Malaysia that is not yet in production. Most of this is

to be found inland, especially in Pahang and Johore, and is Toderately

sloping land that is best suited to tree crops. There is also, however, a

significant quantity of land in valleys or on undulating terrain that would

be suitable for annual crops. To the additional 1.8 million acres classi-

fied above as potential arable land could be added a further 1.5 million

acres of deep (more than three feet) peats which would be suitable for an-

nual crops If appropriate drainage and husbandry techniques could be devel-

oped (these have not been included as potential agricultural land in the

above classification). West Malaysia therefore has sufficient resources to

triple the area of land under arable crops and more than double the area

of perennial crops.

5. In addition to outlining the site of West Malaysia's agricultural

resource base, the Land Capability Survey also reveals existing misuse of

land. It is estimated that at present about 1 million acres of agricul-

tural land would, for reasons of soil, slope or drainage, be more productive

under forest; on the other hand, about 2.7 million acres of land currently

exploited as commercial forest would be suitable for agricultural use.

Similarly, of total land alienated for agriculture there were, in 1970,

an estimated 3.1 million acres not in agricultural use, while it is thought

that several hundred thousand acres of agricultural land are in areas not

alienated for this purpose.

ANNEX 8Page 3

6. Much less information exists on the natural resource base ofSabah and Sarawak. However, because of the small population relative toland area and the problems of labor shortages in existing productive activ-

ities, precise information on land use potential is less important thanin West Malaysia. Nevertheless, the concentration of population in certainregions does lead to misuse of resources, especially in Sarawak where theproblem is exacerbated by the system of customary rights which restrictsland use to a certain proportion of the population. Also of importance in

Sarawak is the large area of peat soils (estimated at 5 million acres),unused at present, which would greatly ease the regional land shortage if

husbandry techniques could be developed.

B. Past Development

7. The initiative for land development in Malaysia has traditionallycome from the private estate sector, much of which is foreign-owned. Be-

fore the rubber boom began at the turn of the century, agricultural produc-tion in Malaysia was limited very largely to rice and other food crops grownat or near a subsistence level. Coffee provided the only major exportcrop. Following the introduction of rubber from South America and the rapidgrowth in demand for this industrial raw material, foreign companies, most-

ly British, financed a very rapid growth in the area of estate rubber,which was accompanied by a similar but slower expansion of smallholderacreage. The rate of planting slowed considerably in the 1930's, and thewar followed by the emergency prevented the estate sector ever regainingits early momentum, although expansion of smallholder acreage continued.In the 1950's and 1960's, estates emphasized replanting of existing areas

with new, high-yielding clones rather than developing new land, and the

fragmentation of estates into units of less than 100 acres (which then be-came classified as smallholdings) resulted in a fall in the total estateacreage. In the mid-1960's, a considerable area of oil palm was planted byestates, but this largely replaced old rubber and did not cause a signifi-

cant increase in overall estate acreage.

Table 3: AVERAGE ANNUAL RATES OF NEWPLANTING OFRUBBER AND OIL PALM IN WEST MALAYSIA

('000 acres)

RubberEstates Smallholding Total Oil Palm Total

1905-1930 75 48 124 2 126

1931-1938 23 13 36 3 39

1939-1946 -18 33 15 0 15

1947-1956 8 14 22 4 26

1957-1964 -19 88 69 17 86

1965-1970 -55 55 0 78 78

Source: Gates, W. B., et al, EPU, Kuala Lumpur, 1967.

ANNEX 8Page 4

8. The slowing-down of private investment in land development is a

function of several factors. Despite the political stability of the late1950's and the 1960's, foreign companies have not, in general, been enthus-

iastic about increasing their financial commitment in Malaysian planta-tions; the withdrawal of Singapore from the Federation in 1965 also reducedthe flow of local capital. The secular decline in rubber prices since

the Korean War and the increasing share of synthetics in the rubber markethave depressed investment in rubber estates. Acquisition of land in Malay-sia has become more difficult as the states have tightened their control ofalienation practices. In recent years, the greater profitability of oilpalm has inhibited investment in rubber but has not encouraged new large-scale land development by private estates. The disturbances of May 1969

have further depressed the investment climate, both for foreign companies

and for Chinese Malaysians.

9. To some extent, the lack of private-sector expansion has been com-

pensated by increasing public sector participation over the past decade.Both state and federal agencies have been initiating land development and

settlement schemes, at first in rubber and recently very largely in oilpalm. The most effective of these has been the Federal Land DevelopmentAuthority (FLDA) which has opened more than 300,000 acres since 1957. It

is estimated that between 1961 and 1968, public sector agencies opened up

more than 520,000 acres in West Malaysia, at an average rate of about

65,000 acres annually.

Table 4: PUBLIC SECTOR LAND DEVELOPMENT IN WEST MALAYSIA, 1961-1968('000 acres)

Rubber Oil Palm Total

FLDA 113.3 90.7 204.0RI(R)B 68.1 - 68.1

States -- fringe 119.0 - 119.0

-- block (subsidized) 8.2 44.8 53.0

-- block (unsubsidized)i 65.0 - 65.0

Total 373.6 135.5 509.1

Source: RRI and Department of Statistics, Kuala Lumpur.

10. In the past two years, FLDA has raised its rate of land develop-

ment considerably (38,000 acres in 1969 and 52,000 acres in 1970), and the

emphasis has been very strongLy on oil palm (nearly 80 percent of the planted

area in these two years). On state schemes too, very little planting of

rubber has taken place in the last couple of years, whereas large blocks of

oil palm have been planted on youth settlement schemes, joint ventures and

commercially-orientated state farms. Although FLDA is now increasing the

proportion of rubber on its schemes, the states appear to be maintaining the

emphasis on oil palm.

ANNEX 8Page 5

C. Land Rights and Alienation

11. The formal system of land rights is based on the assumption that

the State (federal and state) owns all land rights. The State gives these

rights to individuals in several forms ranging from a temporary occupation

license to a title with full rights in perpetuity.

12. Most of the land administration has been directed to the handling

of long-term leaseholds using the Torrens system. This system was designed

by Sir Robert Torrens, an Trish immigrant to Australia, and it was estab-

lished first in Southern Australia in 1858. Each tract of land is surveyed

and clearly marked, and a title is made out and formally registered. Any

person who has a claim to this land has his name put on the title in the

registry. No other claim is honored, and the State guarantees the title

to be correct as recorded. If there are any claims, the State will protect

against them. This differs from the deed, which is a recorded contract be-

tween two persons granting one the other 1' right to a piece of land. The

rights thus acquired may or may not be valid since a person may have granted

some of his rights to another person before he enters the deed contract.

If the exact extent of the land rights in the deed have to be proved in

court, it is the individual's responsibility. The State, when it uses the

Torrens system, obviously is more careful about procedures for recording

titles.

13. In some cases the State does not consider occupancy illegal if

the occupant is in the process of applying for title. A temporary occupa-

tion license or an approved application may be acceptable. In Johore "pro-

visional titles" are being recorded. These have been surveyed by private

surveyors and are considered usable titles even though the land has not

been officially surveyed nor the official title registered.

14. The assumption that the State owns all the land and grants cer-

tain rights to it has led to placing in the title restraints on what the

land may be used for or for how long a period the title is valid. Accord-

ing to the federal constitution and land code, titles can be granted for

agricultural, industrial or urban uses. In addition, rights to agricultural

land may be and often are granted for specific uses. For instance, rights

to padi land often stipulate that the land can only be used for padi. As

an incentive to develop padi land the title often does not require a prem-

ium and may have a rent as low as M$ 1.00 per acre per year. Titles to

land used for rubber and, recently, oil palm, generally restrict the owner

to one specific crop. Time limitations may also be placed on a grant of

rights. The issue of limitations on titles has not yet arisen in the case

of titles granted to individuals in connection with government land devel-

opment schemes.

15. To get an agricultural land title in his name, an individual must

pay a premium, which in most states is M$ 25 per acre, and a rent each

year which varies according to quality of soil and by state. The range is

usually M$ 6-M$ 12, and often the rent is reduced while the crop is matur-

ing. FLDA typically pays rent of M$ 1.50 per acre until the rubber or oil

ANNEX 8Page 6

palm starts to produce. Land rents can only be changed once every 15

years, but an additional change has recently been authorized and has re-

sulted in rent increases in some states.

16. Malaysia has no land tax. Local governments receive their in-

come in the form of land premiums, annual quit rents, licenses and other

use permits. They also levy some excise taxes.

17. If a landowner with imitations on his deed wishes to change the

use or extend the time, he must reapply for a new title. When he does, he

may be required to pay the premium again and pay an increase in the amount

of annual rent.

18. This formal system of Land rights has been working against -- and

has often been modified to accommodate -- Malay customary law, which is

similar to that of Burma, ThaiLand, and Sumatra. This customary law, suit-

able in a subsistence economy where the physical job of reclaiming land

was difficult and where land was plentiful, was based simply on the idea

that he who cleared the jungle or prepared padi land and used it had all

the ownership rights. In some cases these customary rights have been for-

malized (the Constitution has done this in the case of Negri Sembilan,

Mfalacca, and Trengganu). Customary rights are considered rights in perpe-

tuity, and the holders pay no Land premiums or rents.

19. The state, and the d:Lstrict officer within the state, are respon-

sible for issuing all use licenses, permits and land titles and for their

registration, and land is therefore considered to be primarily a state

matter. Individual states often differ as to the methods used in performing

these land responsibilities. The pattern is for each state to have a

governing officer (a political appointee or the Sultan), an executive of-

ficer (a State Secretary) who is a civil servant, and departments corres-

ponding substantively to the federal ministries. In most cases, the Com-

missioner of Lands records all titles and collects premiums and rents.

20. Each state is divided into districts, with a district land offi-

cer for one or more districts. Sabah has four residencies with a district

officer in each. Sarawak has five divisions. The district officer is res-

ponsible for the accuracy, recording and implementation of such land mat-

ters as land transfers, land acquisitions, unappropriated state land,

mortgages, foreclosures, wills, collection, inheritance and transfers of

use. The district officer is also authorized to grant title to any unap-

propriated rural land in less than 10-acre lots; and he determines the

amount of premium and the amount of rent on these lots and keeps the records

on them.

21. Urban and industrial lots and rural land grants of larger than

10 acres are sent with the district officer's recommendation to the State

Commissioner of Lands. The Coimmissioner of Lands may grant title, fix

premiums and rents for rural lots between 10 and 50 acres, and record

them. Tracts over 50 acres must be approved by the State Council.

ANtiEX 8Page 7

22. If the federal government is satisfied that land not alienated(unreserved state land) is needed for a federal purpose, it may, afterconsultation with a state, require that the land be transferred to thefederal government or any authority the federial government directs (Const:i-tution, Part VI, Art. 83). Although thLiS provisinn is seldom used, thecourt has upheld its constittutionality. In 1970, the National OperationsCouncil established the NJuda Authority with powers over land matters; liow-ever, until Parliament can affirm its existence, the Autlhority has remainedcautious i.n exercising this power. The federal government Is also respon-sihle for making the official survey for all land titles. A title cannotbe finally registered until this survey is comp]ete; hence, until registered,no one has incontestable state-supported legal rights to the land.

23. A National Land Council also exists "to formuliate from time totime in consultation with the federal government, the state government andthe National FInance Council, a nationl] pollcy for the promotion and con-trol of the utilization of land througilouit: the Federation for mining, agri-culture, forestry and anv other purposte, andl for tie administration of anylaws relating therreto; and federal and state governments shal.l follow tie.policy so formulatcd" (Constittution, lart VT.. Art:. 91). I'here are 22 menm-bers on the National Land Council, one From each st:ante and l]. from thefederal government. Sarawak and Salbah are observers, but neither is avoting member, nor are tlhey bound by actloans of the Co'uncl.l. 'he NatlonalLand Council is responsible for the formulation of genernl guilelines toland use, and it is in tl-he process of adopttng the recently compl.eted "LandUse Capability ITap" as its basic guideline.

24. Land can be alienated for a number of productivve uses -- atricul-ture, mini.ng, etc. -- or be gazettoa for ¶ere2t. grnziing otl gamne reserves.En addition, land cani te reta.incd for certain tltirIe growi- , Suc! as MAlaiavs

in 11's t Malaytysfa anrd indirgenoiis p)eoples in East flal;,sila. 'J'he ar ea unrIerdi.ffcr ent c.atCrories' is L..aown 4tLth some acicurcrny in J)est M:J1a-jsi a, andthis in forination, along wiLth estin .attes for East Malaysi a , -is givcll in. Tablc

ANNr'; 8

T'ailLe 5: LAND CATECORTES IN MALAYSTA(millions of acres)

Land Area Percent

1!est Malavsia

State land 8,.0 24.8Allenated for nr-Jculture 9. 29.7

Al.ienated fur nitinjy 0. 1.2

Mtalay reserve 4.3 13.3Crazing, reserve 0.1 0.2Aborigine reserve 0.1 0 . 2Forcest reserve 8.2 25.2

Came reserve 1.5 4.6Other purposes 0.3 0 0.8

Total 32.5 100.0

Sabah

Titled alienation 1.0 5.3

Non-titled alienation 0.5 2.7

Forest reserve 8.1 43.1

State forest 6.6 35.1

IJnalienated deforested land 1.0 5.3iJnalienated shifting cultivation 1.6 8.5

Total 18.8 100.0

Sarawak

Mixed zoneTitled -- native 0.1 0.3

non-native 0.6 2.0

Customary tenure 1.6 5.2

Unusecd 0.5 1.7Sub-total 2.8 9.2

Native landl'itles 0.2 0.6

Customary tenure 1.1 3.6Sub-total 1.3 4.2

Native customary land 7.0 23.0Reserved land 1.6 5.2

Interior state land 17.8 58.4

Total 30.5 100.0

Source: EPU, Governments of Sabah and Sarawak.

ANNEX 8Page 9

25. Mining certificates, titles, or leases usually are for seven to30 years. Prospecting permits are usually granted for one or two years on200 to 1,000 acres. These prospecting permits give preferential treatmentfor later mining titles, but the results of prospecting must be filed withthe government. One year after mining stops the land reverts to the state.Land alienated for purposes other than agriculture and mining include townland, urban and industrial land areas. These titles are usually given tothe private sector for 30 to 99 years.

26. Aborigine Reserves are small areas in the interior reserved forindigenous groups. These federal areas are reserved after they have beensurveyed and some attempts are being made to increase these reserves.Grazing reserves are very small tracts of land in Malay areas set aside forbuffalo grazing. They are usually areas of very low productivity and arethe responsibility of the Veterinary Department. Malay Reserves are unali-enated land where ownership and use are restricted to Malays. These areasmust be titled to Malays and can only be transferred to other Malays. Astate may increase its Malay reserve by two-thirds vote of its legislativebody. It must, however, have available an equal amount of non-Malay land.A state may also decrease its Malay reserve. Some of the alienated land isalso restricted to Malays.

D. Land Tenure

27. Tenancy in Malaysia is very largely restricted to padi land.Farmers of other crops either have acquired title to their land through thealienation procedures described above or use their land under customarytenure rights. Padi lands are located mostly in the coastal regions, witha concentration in the states of Kedah, Perak, Penang, Perlis, Selangor andKelantan. Most padi farms are small (less than five acres) and family in-cotes are generally low. The proportion of land farmed by tenants rangesfrom less than one-third of the total padi area in Selangor to about two-thirds in parts of Malacca.

28. The Malaysian government has taken many measures in recent yearsto improve the socio-economic position of padi farmers. As well as invest-ment In irrigation and other infrastructure, research on rice varietiesand a support price program, these measures have included legislation toregulate tenancy agreements in padi areas. The first attempt was made withthe passing of the Padi Cultivators (Control of Rent and Security of Tenure)Ordinance in 1955. However, only one state gazetted the ordinance andonly one area made any attempt at enforcement. After several studies sug-gested changes in the legislation, the 1955 Ordinance was repealed and anew Padi Cultivators (Control of Rent and Security of Tenure) Act was passedby Parliament in 1967.

29. The 1967 legislation stated it to be government policy and theobjective of the padi rent law to encourage written leases of at leastthree years and to limit the amount of rent paid by tenants. This actlimits the rent charged by a landlord to 140 gantangs per acre for Class I

ANNEX 8Page 10

land, 115 gantangs per acre for Class II land, and 70 gantangs per acre for

Class III land. Land that is classified for double-cropping may be charged

one-third more rent. A written lease is required for a minimum of three

years, with the tenant having the option to renew before the end of the

lease. A special registrar is designated in each district to record written

leases either by landlord or tenant. Federal and state enforcement authori-

ties, procedures for resolving conflicts should they arise, and penalties

for non-compliance are prescribed in the Act. The states must gazette the

law and set up the state enforcement machinery, appoint registrars and

appeal procedures, before the Federal Statute is in effect. To date, the

states of Kedah, Perlis, Pahang, Perak, Penang, Selangor, and Kelantan have

adopted the ordinance, and the states of Malacca and Trengganu have it under.

consideration.

30. Regardless of how desirable the policy is, however, there are a

number of features that make these goals difficult to accomplish by federal.

law alone:

(a) The federal law prescribes the maximum rents to be chargedfor Class I, II, and III land. When the state gazettes theAct, it must also classify its land and, on the basis of

existing knowledge, this classification will inevitably be

very general. Ideally, land classification should be onthe basis of a soils map or other map of productive capability,

taking account of local knowledge. Clearly, however, such

information does not always exist and the resultant classi-fication will be somewhat arbitrary.

(b) More information shou:Ld be collected about the landlords.In many cases, the owner on a title registry is not consid-

ered the owner locally. Many of the tenants are related toor friends of the landlord, and the lease is a form of family

or community assistance. Some of the landlords, if facedwith rent restraints, would operate their land rather than

rent it, thus depriving the tenant of his status.

(c) One of the objectives is to shift tenancies from a share-cropping basis to one of fixed rental, so ensuring that thetenant receives maximum benefit from double-cropping andretains an incentive to raise production. In areas where

the water supply is not assured, however, sharecroppingbetter distributes the risk of crop failure or low yields.

As assured water supply and improved varieties lead togreater productivity in double-cropped padi areas, it willincreasingly be the farmer on single-cropped land who willneed assistance.

31. In general, however, the present law will, if effectively en-

forced, result in a considerable improvement in the tenancy situation in

padi areas. Present administration of the padi rent law is concentrating

on an educational and informatlon program. to let the landlords and tenants

know the policy of the government incorporated into the law, and voluntary

ANNEX 8Page 1 1

recording of leases is encouraged. Perhaps as important is the recognitionof the limited information available about ownership, and the consequenteffort to identify and list those who are considered to be the landlordsin the communities.

E. Future Land Development

Role of Public Sector

32. As discussed above, the initiative for land development haspassed, over the last decade, from the private estate sector to the publicsector. This shift was accelerated by the Land Group Settlement Areas Act,passed by Parliament in 1960, which makes it possible for the federal gov-ernment to undertake directly large development schemes. Under this law,a federal authority may be formed to plan and manage directly a developmentscheme. Such an authority may negotiate with the state government on thelocation of the site, its layout, the premium and rent to be charged forthe land, the cost of land surveys, and other fees or costs.

33. The authority can proceed with development, maintaining alloxwnership records and titles until the settler has paid his loan in full.When the loan is repaid, the developed land is returned to the state and atitle to a specific tract is reissued to the settler. In the case of FLDA,the premium is usually M$ 25 per acre and rent during development is M$ 1.50per acre until harvest, when it advances to M$ 6.00 per acre. The Authoritycan thus acquire title and pay initial land transfer costs, including surveycosts, and build them into the settler's loan. The settler does not have tostart repaying the loan (including land alienation costs) until the cropcomes into production, while the state receives income at the time of ali-enation. The 1960 Act has also made it possible to prevent subdivision.Transfers can be made only to an individual person (no joint ownership).Thus, on these schemes, Moslem inheritance law requiring equal shares toall heirs is eliminated. Even religious dues, usually 10 percent of thegross product, are changed to M$ 1.00 per person per year.

34. In the Second Malaysia Plan, currently under preparation, theMalaysian government is placing considerable emphasis on increasing therate of land development, both to raise agricultural output and to createemployment opportunities. In the draft proposals, currently under discus-sion, it is planned to develop 750,000 acres 1/ over the five-year period,of which 600,000 acres would involve public sector participation. Thelargest butden would rest with FLDA, which would be expected to develop50,000 acres annually, while the RI(R)B, in addition to its rubber replant-ing program, would be asked to open 30,000 acres of new land annually.

1/ Since this was written, the target has been raised to one millionacres over the five years.

ANNEX 8Page 12

Table 6: PROPOSED FIVE-YFAR LAND DEVFLOPMENT TARGETS (1971-75)

Acres Federal Cost Total Cost(thousands) (M$ per acre) (M$ millions)

Federal Schemes:

FLDA 250.0 2,000 500.0

FELCRA (Fringe Alienation) 40.0 600 24.0

RI(R)B (Cooperative Block NewPlanting) 150.0 750 112.5

Sub-total 440.0 - 636.5

State Schemes:

Youth schemes /1 75.0 600 45.0

Low-cost settlement /1 37.5 1,200 45.0

Public sector estates /1 37.5 1,200 45.0

Sub-total 150.0 - 135.0

Private Sector Participation:

Joint venture estates 50.0Private estates 112.5 _

Sub-total 162.5

Total 752.5 - 771.5

/1 Federally subsidized schemes.

Source: EPU, Kuala Lumpur.

35. The proposed rate of land development is approximately twice that

of the past five years, requiring the public sector to open new land at

about 120,000 acres per year, compared to the recent rate of about 65,000

acres per year. Stated in such terms, the proposed program appears over-

ambitious. It should be remembered, however, that between 1905 and 1930

new land was developed in West Malaysia at an average rate of more than

125,000 acres annually. When it is considered that at that time the popu-

lation was only one-third of its present size and the transportation network

and other infrastructure was much more poorly developed, the target of

150,000 acres per year does not seem unrealistic.

36. There are, however, three major constraints that must be removed

before this target can be achieved -- the shortage of managerial and tech-

nical personnel, the lack of land clearing capacity and the inadequate

institutional structure. The shortage of skilled manpower is apparent in

the unwillingness of the FLDA to expand its rate of development beyond

50,000 acres per year. Similarly, it is thought that inadequate Tnanagement

is leading tq excessive bark consumption on some FLDA rubber schemes -- a

ANNEX 8Page 13

fault that will lead to lowered production and reduced settler incomes.

With rubber replanting on private estates largely completed, however, the

managerial and technical capacity of the private sector is clearly not

being fully utilized. Although the estates do not seem willing to undertake

newplanting of rubber on their own account, they should be prepared to make

trained personnel available to the public agencies on a contract basis.

The rate of land development by FLDA could be increased and the supervision

of existing schemes would be improved if this surplus capacity in the

private sector were to be utilized.

37. The second constraint is the lag in construction of infrastructure

on settlement schemes and the likely lack of capacity to clear and plant

land at a faster rate in the future. With respect to infrastructure, prob-

lems have arisen through the inability of other government departments to

meet their commitments on schedule. This weakness is now recognized, and

steps have been taken to remove this bottleneck on future schemes. Com-

plaints are commonly made concerning the shortage of contractors to carry

out the clearing and planting of settlement schemes. Although this ap-

pears unfounded at the present time, when settlement is lagging behind

land development on most schemes, the manner in which FLDA employs contrac-

tors suggests that such a shortage may develop in future if the rate of

land development is expanded. Although a number of relatively efficient

contractors are operating, the tight conditions and slow payment of FLDA

combine with a very uneven supply of work to create narrow profit margins.

If these margins were widened and contractors were encouraged to mechanize

their activities to a certain extent, then the rate of clearing and plant-

ing could be increased without difficulty.

38. The third constraint -- inadequate institutional structure --

applies not only to FLDA but also to the other agencies in the proposed

land development plan. The states are expected to develop 30,000 acres an-

nually over the next five years through youth schemes, low-cost settlement

projects and estates, but few states possess institutions capable of devel-

oping land on a continuing basis. Similarly, although both FELCRA and the

RI(R)B are operational, neither has yet developed the capacity to open new

land at the required annual rates of 8,000 and 30,000 acres respectively.

There is, nevertheless, clearly a need to establish a land development

system that is less centralized and less costly than the FLDA. Early ef-

forts along these lines, through fringe schemes, were generally unsuccess-

ful -- development was slow and trees were poorly managed and maintained.

It is probable, however, that most of these faults could be avoided in

future schemes without going to the organizational extreme of FLDA-type

settlements. If the land development targets proposed for 1971-75 are to

be achieved, government action will clearly be necessary to encourage less-

centralized land settlement through the establishment of a suitable organi-

zation and the provision of funds and personnel. It is probable that,

with careful planning and closely controlled credit and extension programs,

new land could be successfully developed by providing the necessary infra-

structure and allowing settlers to establish and maintain their own crops.

Without development along these lines, it is most unlikely that new land

can be opened at the desired rate with the result that production and em-

ployment creation will fall short of targets.

ANNEX 8Page 14

Federal Land Development Authority (FLDA)

39. FLDA was established within the Mlinistry of National and RuralDevelopment in 1956. In the 15 schemes operated before 1960, the Authorityexercised management control primarily through its function as an approvingloan agent, although it did experiment with one direct management scheme.As a result of the 1960 legislation giving FLDA more control over landownership, and because the FLDA administration with tighter planning andmanagement of the schemes seemed more efficient, all the schemes since 1960have been directly managed by the Authority.

Table 7: OPERATIONS OF FLDA, 1957-1970

Area Developed (acres) FamlliesYear Rubber Oil Palm Total Settled

1957-59 4,091 - 4,091 7911960 10,509 - 10,509 1,9811961 14,471 926 15,397 7151962 24,673 1,749 26,422 8811963 17,343 6,839 24,182 2,0431964 22,398 8,317 30,715 1,1501965 8,475 9,578 18,053 1,2941966 14,442 14,032 24,474 1,4651967 9,144 18,235 27,379 1,6701968 2,344 31,044 33,388 3,7911969 1,928 36,321 38,249 2,6191970 18,007 33,554 51,561 3,800

Total 147,825 160,595 308,470 22,200

Source: FLDA, Kuala Lumpur, 1970.

40. FLDA schemes are large, generally covering several thousand acres8.Rights to the land are negotiated with the relevant state government, and attimes premium and rent charges are waived until the land comes into produc-tion. Cleaning, planting and early maintenance are performed under contractt,and settlers are brought in once the basic infrastructure has been com-pleted, generally in the fourth year. Settlers are chosen on the basis ofseveral criteria, including age, experience, physical health, marital statusiand amount of land previously owned. They are employed on their own hold-ing or in other jobs and are guaranteed a minimum subsistence allowance.This and other development costs are charged to the settler's loan account..Repayment begins once the crop (oil palm or rubber) comes into production,and is deducted from the value of produce, which must be sold through theAuthority. The total loan which the settler must repay, including interest.at 6-1/4 percent, is generally in the range of M$ 12,000-20,000.

41. The physical achievements of FLDA are considerable. To date,22:,000 families have been settled and more than 300,000 acres of land have

ANNEX 8Page 15

been opened. The level of management has been relatively high, althoughstandards have probably dropped slightly as a result of the increased rateof development in the past few years. Rather more problems have been en-countered, however, with respect to the social aspects of the schemes.Settlers have little or no involvement in project administration, and, atleast in the early stages of settlement, have few alternative employmentopportunities. They have no clear understanding of their financial posi-tions and settlers on rubber schemes have, in recent months, had difficultyin meeting loan repayments. This has led to an increase in sales of latexor rubber outside the scheme so as to avoid deductions. Recent prices haveput oil palm growers in a much stronger financial position than rubbersmallholders, but no clear solution has yet emerged on how to manage thecentral palm oil factories once the land is distributed to the settlers.

42. Aware of these problems, FLDA established in late 1968 a SettlerDevelopment Division to handle the grievances of settlers. While this Divi-sion is not expected to resolve all the social structure issues, it hasstationed a settlement officer in each of the schemes and Scheme DevelopmentCommittees have been formed to involve the settlers in some of the manage-ment and administration decisions. Even though the status of Settler De-velopment Division's personnel is not yet as high as that of some of theolder technical personnel, the efforts by FLDA to involve the settlers inthe management of the schemes should be encouraged.

43. With world rubber prices expected to remain low in the future,the financial difficulties of rubber settlers on FLDA schemes will continueunless changes are made in the structure or timing of settlement patterns.There are three such changes that would go a great way towards alleviatingsuch difficulties in the future. The first would be to increase the sizeof holding on rubber schemes. With new tapping and collecting techniques,one family can manage a larger area of rubber than the 10 acres now allottedby FLDA. For smallholders to earn reasonable incomes, a minimum of 14-15acres per holding should be provided on future settlement schemes. Thesecond change would be through more intensive care of rubber after plantingin order to advance the age at which trees come into bearing from thepresent seven years to the six or five years that is being achieved onprivate estates. A reduction of this order in the unproductive life of thetree would lower considerably the debt incurred by each settler and raisecorrespondingly the net income. The third improvement that FLDA could makeis in the general cost efficiency of its operations. Despite its consid-erable success in opening up land, FLDA schemes have been very costly interms of area developed. While some high costs are inevitable, there isconsiderable room for improvement in this respect. FLDA is currently em-ploying a consultant to study the cost efficiency of its operations, andit is to be hoped that his recommendations will be followed.

44. FLDA settlement programs are also facing difficulties in twoother respects. Firstly, settlement is lagging behind land clearing andplanting, largely because the development of infrastructure, which is inthe hands of other government departments, is behind schedule. This applies

ANNEX 8Page 16

particularly to the provision, of access roads, water supplies, schools andclinics and, to a lesser extent, to land drainage facilities. A specialroad construction unit has now been established for FLDA schemes in Pahang,and it is to be hoped that this will prevent future bottlenecks. Thesecond problem is the decreasing availability of land for FLDA-type schemes,which is leading to encroachment into Forest Reserves with consequent con-flicts of interest regarding timber extraction. It is essential that amore workable arrangement is established between FLDA and the several stategovernments, especially Pahang and Johore, if public land development is toincrease.

Other Land Development Agencies

44. The Federal Land Consolidation and Rehabilitation Authority(FELCRA) was authorized by law in 1966 and began functioning in 1967 withinthe Ministry of Lands and Mines. In the October 1970 reorganization, itwas transferred to the Ministry of National and Rural Development. Itsfunction is to: (a) take over and operate some of the state land schemeswhich are not doing well; (b) consolidate small holdings primarily in thepadi area; and (c) develop new land schemes. The Authority is attemptingto take over at least one project in each state. As of October 1970, ithad six projects in Johore, four in Negri Sembilan, three in Pahang, one inTrengganu, two in Perak, two in Kedah, and one in Perlis. The states sug-gest schemes and FELCRA makes an evaluation of their redevelopment poten-tial. Settlers on redevelopmnent projects pay all but administrative costs.However, many projects have been turned down as too expensive to redevelop.Similarly, no consolidation has been done to date, because of political dif-ficulties and high costs. It is hoped, however, to develop a program pat-terned substantially along FLDA lines but in smaller blocks, of around2,000 acres each.

45. The Rubber Industry (Replanting) Board (RI(R)B) has largely beenengaged in the past with financing the replanting of smallholder rubber.The Board has succeeded in replanting about 1 million acres over the pasttwo decades, and is hoping to replant the remaining 600,000 acres of seed-ling rubber over the Second Mlalaysia Plan period. It is realized, however,that the remaining old rubber is mostly on very small holdings, on whichthe farmner is unable to forego the loss of income that replanting would in-volve. To overcome this, the Board has proposed block planting of new rub-ber, of which smallholders would be given a share to provide extra income.Although the RI(R)B is now somewhat less enthusiastic about this plan thanearlier, it has been included in the land development proposals of theSecond Malaysia Plan.

46. Although block plantings of this nature may not be the best meansof accelerating smallholder replanting, some similar development is neces-sary to improve the position of the very small rubber growers. New produc-tion techniques will allow rubber to remain profitable despite future lowprices, but the minimum economic size of holding will increase in the pro-cess. It is essential, therefore, that a program is established to raise

ANNEX 8Page 17

the size of smallholdings through consolidating existing holdings and set-

tling displaced farmers on new land. W4hether such a program is implementedby the RI(R)B, FELCRA or a new agency is immaterial, providing the con-straints of capital and personnel can be overcome.

47. The number of state land development schemes increased over the

past decade. These take various forms -- fringe settlement schemes, blockplantings, youth schemes, etc. They are partly financed by loans and

grants from the federal government and generally involve fairly small areas,

often less than 1,000 acres, although some oil palm schemes are rather

larger. State schemes are expected to continue at an average rate of

30,000 acres annually over the next five years, of which the majority willbe located in Pahang, Johore and Trangganu. In the past few years, youth

schemes in particular have been popular, and six are now underway in West

Malaysia. On these, unmarried village youths are employed to clear andplant land and then receive a share in the scheme after five years. These

have been successful to date, under rigid, centralized control, but it is

not known how they will be administered after five years. There is also one

example of a state-owned oil palm scheme on which young people are employedas laborers. Tlhey are to remain as laborers and1 not become shareholders,and the farm will be administered as a profit-making operation. Moreschemes of this type are anticipated over the next five years, either

entirely with publi. capital or in the form of joint ventures with the

private sector.

48. The state of Sabah has a land development board and program muchJike FLDA, but with some important differences. On its schemes, the set-

tler receives his land free after it has been developed. If a settler does

not live on the land nor harvest the crop, hired labor is employed to do

it, but even these owners may still receive a share of any profits that

remain after cost. Plans are now being made to reduce this opportunityfor absentee profit and to give the new owner greater incentive to do hisown work. Sabah has 18 such schemes in operation, but not much of the landhas been cleared. The second five-year plan calls for only two more

schemes -- one of cocoa and one of oil palm. Five 18-ton mills are plannedand two bulking stations -- one is nearly completed. The state is having

difficulty finding settlers, however, and settlement schemes are likely to

be considerably curtailed in the future.

49. Sarawak has seven development schemes totaling 12,000 acres, all

in rubber, and its five-year program projects four oil palm and two rubber

schemes totaling 24,000 acres and one oil palm factory. On these schemes,

settlers are given the land, a house and water, and at the end of seven

years a M$ 25 premium and M$ 3 per year rent are required. Sarawak also

has a youth scheme which employs young single men 18-25 years old with

agricultural training who, after two years, earn shares in the project.

IWhen the rubber is in production, the person owning shares can work for

M$ 4 per day and leave the dividends in to pay off the corporation loan.

It is estimated that the individual will in about seven years have built upan equity equivalent in value to 10 acres of developed land. However,

ANNEX 8Page 18

just what kind of corporation, cooperative or individual tract ownershipwill be desired when the individual has substantial shares is not yetknown.

F. Conclusions and Recommendations

50. Present government policy is directed at increasing the rate ofland development in order to expand agricultural production, increase ex-port earnings and create employment opportunities. Because of reduced private investment, the bulk of future land development will have to comethrough the public sector. lWhile the proposed rate of development of150,000 acres annually is not inconsistent with the physical resourc base.,it will require considerable expansion of the managerial and trchnic.lskills now available to the public sector. This should be possible, how-ever, through use of private sector personnel on a contract basis. It willalso be necessary, if the target acreage is to be achieved, to establishnew, less-centralized systems of land development and to streamline theoperational structure of FLDA.

51. Although future expansion will come largely througlh governmentprograms, private development should be encouraged wherever possible. Tothis end, acquisition of title must be made easier and future costs must berelatively secure. Time limitations in titles should be removed and res-trictions on land use should be made more flexible. For holdings between10 and 100 acres, permanent transferable titles should be granted for agri-cultural use with no crop or time restraints, and one official land registryshould be maintained in each state. The district officer should continueto make the decisions on land allocations under 10 acres since he iscloser to the people in the village, but he should have rather strong guide-lines, and they should be developed jointly by federal and state governmentsin conjunction with local community committees.

52. Customary land titles are a problem in many states and particular-ly in Sabah and Sarawak. The practice of reserving large areas of land forMalays -- thus preventing ownership by persons of other nationalities -- ap-pears to be a major limitation to all rural development. Careful reappraisalshould be made of this racial restraint on land ownership in order to seewhether it is really necessary and, if not, how it can be changed. It isalso desirable that owners of customary land titles should not be exemptfrom premium and rent payments, in order that they should contribute to thefinancing of local government services.

53. The federal government's concern with the low income of the smalltenant padi producers seems to be valid. However, it is doubtful whethertenancy is the principal or even a major constraint any longer to improve-ment of this situation, and it seems unlikely that the padi rent controllaw could be administered much more effectively than it is now. At present,federal law prescribes uniform maximum rents for three classes of land forthe entire country, irrespective of variations in lease contracts and otherlocal differences. To implement a program of improvement in the rice areas,

ANNEX 8Page 19

local people should participate in the formulation and administration of

policy; to do this, local rice administrative boards should be establishedwith membership representing the federal and state governments and the

local communities. These boards should, with some guidelines, establishland classes and the maximum rent for each class and type of lease. In

addition, the separate lease registry required by the federal law seemsunnecessary, and it could better be handled by the land registry. As padiproduction reaches and exceeds domestic consumption, there will be a need

to shift some land from padi into other forms of land use. In many cases,however, land titles and tenancy agreements prescribe that the land shouldbe used only for padi. It is important that these constraints be removed

so that land use may become more flexible in response to the future changesexpected in the cost structure of padi.

54. Public land development schemes in 11alaysia have been effectivein clearing land and establishing crops, but the development of viable set-tler conmunities on the schemes has been much less successful. It ishoped, however, that the establishment of a Settler Development Divisionwill be effective in developing settler participation in community affairs.Since it is the largest new land developer, it is important that FLDAshould remain open to new ideas and maintain flexibility in its programs.

It might, for example, experiment with bringing settlers in earlier and

allowing them to build houses and some infrastructure (schools, water sys-tems, community bu 7'Lngs, etc.). In addition, FLDA should acquire an

option on land adjacent to the scheme to allow for future community growth.

55. It is important that the financial position of settlers should:? improved, especially on rubber schemes. The most effective way to

achieve this would be by enlarging the size of holdings on future schemesto about 14-15 acres per family, to take measures to bring trees into pro-

duction earlier and to reduce the operating costs of FLDA schemes overall.Other changes would also alleviate some of the present problems. Thepresent loan repayment system should be reviewed. The interest chargedsettlers by FLDA does not reflect the interest-free period allowed bygovernment or government interest charges to FLDA. A flexible system should

be developec? reflecting rubber prices, estimated production, and a returnto government commensurate with the goal of providing the settler with

adequate income.

56. Because of its major importance to the whole Malaysian agricul-

tural development program, the structure and operation of FLDA should be

subject to critical review and its objectives should be carefully defined.In two particular respects, FLDA's activities should give the MalaysianGovernment cause for concern at the present time. The first of these isthe very high cost of FLDA's operations. These are transferred directly tothe settlers and have to be repaid over a number of years. The failure of

the government to submit FLDA to strict financial control has undoubtedlyled to the growth of slow, inefficient operations within the Authority.In view of the expected decline in world prices for both rubber and palm

oil, it is essential that the cost efficiency of FLDA's operations be im-

proved. A consultant is currently engaged in a review of this aspect of

ANNEX 8Page 20

the Authority, but little will be achieved unless his recommendations arebacked by much more rigorous control of the financial efficiency of FLDAthan in the past.

57. The second aspect in which FLDA has been unsatisfactory is in thescale of its activities. Although FLDA has been quantitatively more suc-cessful than other attempts at land settlement, Its record of settling22,000 families and opening 300,000 acres of land in its 14 years of opera-tions is inadequate with respect to the resources and needs of the nation.As noted above (paras 7-10), in the first three decades of the century,land was opened up much more rapidly than in recent years, and there ap-pears to be no particular reason why these past rates of developmuent shouldnot be resumed. In response to government pressures, FLDA significantlyraised its rate of land development during the First Malaysia Plan, fromabout 25,000 acres to 50,000 acres annually. Similarly, there is no reasonto believe that 50,000 acres represents either a maximum or a., optimum rateof development, and further pressure should be applied to FLDA to expandits activities to a level consonant with the needs of the country. Clearly,this expansion is not feasible with the present structure of FLDA; it is thestructure that should be reviewed, however, not the targets for expansion.

58. In order to meet its responsibilities under the Second MalaysiaPlan, the FLDA must recruit and train the personnel necessary for increasedmanagement needs. Present recruiting and pay practices are tied to generalGovernment rules and regulations. The FLDA should review alternate solutionsto present practices, recognize the difference between the ordinary dutiesof present institutions and those of expanding organizations, and developplans and practices that wil:L allow the hiring and retaining of technicalpersonnel necessary to its needs. The most efficient and effective methodsmust be used by FLDA if it is to meet expanding goals and objectives.

59. The present loan repayment system and other funds collected byFLDA develops resources that are not presently necessary to meet financialobligations. These resources could be used to finance a portion of FLDA'scapital requirements and to produce additional funds to meet future obliga-tions. Thus, the Government could release development monies for otherprojects, i.e., allocate resources set aside for FLDA use to alternate needs.

60. Administration of ongoing projects takes up an increasing pro-portion of FLDA staff time, and serious consideration should be given totransferring this responsibility to other government agencies workingthrough settlers' associations. In particular, a decision should be maderegarding the form of management of schemes, especially oil palm schemes,once the trees come into production -- eitlher as a cooperative, as a cor-poration or as individual holdings. Sufficient experience exists for adecision to be made on this issue, and there is little to be gained fromfurther delay. With respect: to associated infrastructure construction,positive action is called for on the part of the government to ensure thatthis does not delay land development. Finally, if t;.e government shouldadopt a more imaginative view towards raising the administrative capacityof FLDA through contracting work to the private sector, then FLDA should bewell-placed to make a major contribution to future agricultural developmentin Malaysia.

ANNEX 9

MALAYSIA

AGRICULTUIRL SECTOR REVIEW

STATISTICAL ANNEX

TABLE OF CONTENTS

SECTION I AREA,POPULATION AND EMPLOYMENT

Table 1.1 Malaysia, Land UseTable 1.2 Population as at 31st December, 1968.Table 1.3 Population and Labour Force - W. MalaysiaTable 1.4 Estimated Population Labour Force, Employment and

Unemployment - W. Malaysia 1962-1975.Table 1.5 Distribution by Race of Rural and Urban Population,

Labour Force and Unemployment -West Malaysia, 1967/68.Table 1.6 Pattern of Employment Change by Major Sector - W.

Malaysia, 1957/67Table 1.7 West Malaysia - Agricultural Employment by Race and

Major Crop 1957-1967Table 1.8 Percent Distribution and Change in Agricultural

Employment - West Malaysia 1957-1967Table 1.9 Estimated Changes in Output, Employment and Productivity

by Major Sector - West Malaysia, 1962-1975.

SECTION II AGRICULTURAL PRODUCTION, AREA AND YIELDS

Table 2.1 West Malaysia - Gross Domestic Product by IndustrialOrigin, 1961 and 1965-69

Table 2.2 West Malaysia - Agricultural Production, 1960 - July 1970Table 2.3 West Malaysia - U.S. Department of Agriculture, Estimates

of Production by Commodity, Value and Indices of TotalAgricultural and Food Production, Average 1957-59, Annual1959-68

Table 2.4 Production of Main CropsTable 2.5 Estimated Area of Main CropsTable 2.6 Rubber Estates and Smallholdings: Number and Planted

AcreagesTable 2.7 Rubber: Actual and Projected Consumption and Production,

1955/57 - 1975Table 2.8 Rubber; Actual and Projected Area, Yield and Production

from Estates and Smallholdings in W. Malaysia, 1955-1980Table 2.9 Rubber: Replanting and Newplanting in W. Malaysia

1955-1969Table 2.10 Rubber: World Production of Natural Rubber, 19614-1968Table 2.11 Oil Palm: Actual and Projected Area and Production

1963-1975Table 2.12 W. Malaysia, Rice: Area, Production and Imports 1962-1Q69Table 2.13 Coconut: Area, Production and Exports, 1964-68Table 2.14 Livestock Population - MalaysiaTable 2.15 Known Livestock SlaughterTable 2.16 Estimated Meat Supply 1968

TAKBLE OF CONTEN4TS (Cont'd)

Table 2.17 Area unider ForestTable 2.18 Past and F'uture Anticipated Produc-tion of' Forest

ProDdulcts - West MalaysiaTable 2.19 Past and Future Anticipated Production of F'orest;

Product.s - SabahTable 2.20 Past and Future Anticipated Production of' Forest

Products - Sarawak

SECTION III CONSUMPTION

Table 3.1 Malaysia: Projection of Demand for Major FoodCommodities (1968-1980)

Table 3.2 Ma:laysia: Percentage Increase in Total Demandf'or F'ood Products

Table 3.3 Growth in Demand for Food Products

Appendix Notes on Projections of Domestic Demand for FoodProducts

SECTION IV FOREIGN TRADE

Table 4.1 Exports of Major Commodities (Malaysia) 1965-1969Table h.2 Malaysia: Gross Imports by Commodity SectionTable 4.3 W. Malaysia: Imports and Exports of Live Animals

Mainly for FoodTable 4.4 Relative Percentage of Milk Products ImportedTable 4.5 World Production, Exports and Imports of Palm Oil

SECTION V PRICES

Table 5.1 W. Malaysia: Retail Price Indices 1961--June 1970Table 5.2 Rubber, Oil Palm and Coconut Oil Prices

SECTION VI MISCELLANEOUS

Table 6.1a FLDA Land Development Program 1966-75A: First Malaysia Plan, 1966-70

Table 6.1b FLDA Land Development Program 1966-75B: Second Malaysia Plan 1971-75

March 19, 1971

ANNEX 9

Sh,GTION :[: AiFRA, POPULATIONI & J 'ifiWYMJENT[

ANNEX 9MALAYSIA Table 1.1

AGRICULTURAL SECTOR SURVEY

MALAYSIA: ESTIMATED LAND USE, 1969(t'000 acres)

West Malaysia Sabah Sarawak 'rotal

Rubber l,2L8 _&/ 263 461 4,972Rice 1,003 105 349 1,L57Coconut 517 b/ 130 99 746oil palm 550 c/ 79 c/ - 629Pineapple - n.a. n.a. n.a.Tapioca 43 n.a. n.a. n.a.Vegetables 18 n.a. n.a. n.a.Sweet potato 11 n.a. n.a. n.a.Coffee 13 n.a. n.a. n.a.Pepper 2 n.a. 7 b/ n.a.Maize 9 n.a. n.a.- n.a.Tea 8 n.a. n.a. n.a.Tobacco 7 n.a. n.a. n.a.Sugarcane 7 ri.a. n.a. n.a.Cocoa 5 8 n.a. n.a.Other food crops 18 n.a. n.a. n.a.Other fruits 116 n.a. n.a. n.a.Other spices 39 n.a. n.a. n.a.

Total 6 658 664 950 8 208. }~2~ ~ _ __ _ _ _ _ _ _ 0

,,.a. - not available

a/ Based on Dept. o; Statistics dRta; howevor, on the basis of the Land Use Survey,EPIJ estirrmtes the total cultivated acreage in West. Malaysia to be about 7.1million acres

b/ 1968 (le ta

Missilorl .3 timates

3ourcze s I)eps.] tIrent, of Stat:i.stics, KlIalII L,uITIP Ar;Dopartnent of Apriculture, Ko : 'inabala;De.'artrrwn't oL Agricult-ure, Kuching;M9ils3ionot*. ti.nta ts

M t 1, 1I'9)(]

MALAYSIA

AGRICULTURAL SECTOR SURVEY

POPULATION AS AT 3ISTDECEMBER, 198

H ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~l4o. of Persons.

Mat\alays Ic) -1- ~ Chinese Indians and Pakistanis Others AIL PacHsState -a iLes Fecales To t 3 a ps Females oftat Mates Fsoa[les Ttal M ltes Femnlos 7staL 4a les Females Tata

Sabah (a) (d5 ,d) (A) 7C,91,7 64,763 35,710 (d) (d) i ( 256,351 230,539 '36,770 5z7,328 295,152 622,480Saramak (a) 84,919 85,789 (e)170,698 I16l,306 148,304 309,610 ed !Zi7,194 226,7Q7 1.~,530 c 03,309 6J,30 - 933,609West Mataysia (b) 2,237,848 2,250,265 4,488,113 1,653,232 1,583,499 3,236,731 531,777 450,610 9i2,387 i2I,I6i 10,638 3l; ,799 4,54L,018 4.355,017 8,899,030Johere 338,837 336,603 675,450 282,283 262,437 544,720 55,85 44,800 100,638 ?2,9S6 | ,731 31,697 699,924 65?,581 1,352,505Kedah 327,430 327,849 655,279 100,311 93,299 193,610 48,839 62,088 C 0,927 14,755 9,374 2, I29 49l,335 t72,610 963,945KeOaItan 319,315 325,143 644,458 20,210 18,627 38,837 4,8724 3,455 8,329 6,573 5,285 11,85E 350,97Z 352,510 703,482Ma Lacca 104,139 112,477 216,616 86,298 3:,903 )68,ZO1 18,621 16,056 34,677 4,651 3,99- F ,60a Z13,709 214,435 Q28,14LNegri Sembi lan IL2,'56 113, 66 225,724 1Q9,136 I02,756 211,892 42,849 37,367 3 B0,2 6 8,203 L,747 I 2,52 o 7?,7L6 258,036 53C,782Paharg 128,3041 126,341 254,652 80,416 72,038 152,L54 17,814 15,054 32,868 3,706 1,795 5,505 | 30,340 215,239 645,479Penang .111,62? 114,l64 225,706 221,901 27!,353 443,254 52,20Q 4.7,716 92,923 10,246 6,618 16,864 395,976 382,771 733,747Perak 343.350 344,054 687,404 373,619 366,286 739,905 132,601 |11,566 "2L,157 | 7,m67 8,930 26,397 867,039 83,,836 1,701,873Perlis 46,677 47,268 93,945 11,345 I0,L76 21,8ZI 1,291 912 2,203 2,174 1,724 3,898 61,487 60,380 121,867Se8aigor 225,379 218,496 443,875 355,206 343,.r66 698,492 153,692 132,915 286,607 29,636 18,927 40,561 763,911 715,624 1,477,5 5Trewgariu 180,237 184,767 365,004 12,507 !1,38 23,545 3,151 1 681 I ,363 796 | 04 1,290 196.68l 197,990 394,671

MalaySIa U) (f) (f) 1,885,485 1,796,566 3,682,051 i ) f) j W 604,654 5:27,3L 1 131,370 I 5,344,655 5, 1 17,464 0,455, 19

(a) Estimated Population at tid-1968 + Iigration 5urplue, Excess of Cirths over Oeaths.

(b) Estimated PoPulation at Rid-1968 + Lteess of Births over Deaths + Change of Identity Cards. (i)

(c) Inlcudes wrigioes and Indonesian6 Living in West Malaysia.

(d) IncLuded under others.

(e) Excliues Inodonesians. (

(fJ) Nt avai lable.

bte: (i) Change of Identity Cards is estimated from the nJmber of persons lhs 6ave 5urrundercd ',ese ialaysi6 Identity Cards for Singapore Idosi Carisand vice versa.

Source; Malaysia, Annual Bulletin of Statistics, 1969.

MALAYSIA

AGRICULTURAL SECTR SUR=NW

POPULATION AIMD LABOR FORCa - WVT MAL&YSIA

1957-1975

0 1957 P1u962 1967 197C 19,_5'0 ~~~~ji~~~-I~~~i ~Popula- Laborrpua Wr Popula- Lauor kPopul Itr ko-Pula- L,;Abor

10 tion Force tiorn Force tion Force tion Eorce tic n orccP Ptesns 15-'19 612 3I1 673 327 922 438 1,038 482 1,226 <iA

20-24 521 358 619 426 665 464 811 565 1,032 71925-49 1,715 1,203 1,952 1,345 2,222 1,5149 2,393 1,677 2,822 1,90SLo.-04 503 333 697438 773 470 821 4884 877 L9

15- 3,939 r __ _ ___ _f1,-.4 otl _43 -R - -- - - -',

wa1e v15-1? 307 184 345 199 469 272 529 298 622 33720-24 258 239 307 284 341 315 424 381 525 48325-49 886 363 970 931 1,091 1,059 1,179 1,1413 1,1403 1,35950-64 292 260 395 333 425 348 4I- 351 l7 344

XS-6k Total ___ ?u =,__ ~ 7 E123

Fe1ae 15-19 305 127 327 128 452 166 509 184 604 20920-24 264 I19 312 142 324 149 396 184 156 23025-4? 829 340 982 b14 1,131 490 1,215 534 1,L420 6279D-64 210 73 302 105 348 122 383 133 430 151

15-4 Total _ H9- 7 T

Socze: EsU Uxtimates, Goveriment of malaysia, Novesber 1970

"NHEX 9Table 14

MALAYSIA

AflRICULTURAL SECTOR 9MRV

ESTIMATED POPULATION, IABOR PORCEt _eILOME AND UNEMPLOYMENT - WEST MALAYSIA

1962 - 1975

1962 1967 1970 1975

Population

15-64 3,938 4s,583 5,C64 5,957

Labor Force

15-6L4 2,536 2,921 3,208 3,746

Total Eriployoaent 246o0 2M55 3,123 3,673

15-64 2,5:6 2,727 2,995 3,545

Unemployment 15-64 153 194 213 201

% 6.o 6.6 6.6 5.4

Source: Calculated from preliminary estimate3 of EPU

March 19, 1971

MALAYSIA

AGRICULTURA L SICTOR. SURVEY

DISTRIBUTION BY RACE OF .RURAL AND URBAN POPULATION,

LABOR FOECE AND UNEMPLOYNENT - WEST MALAYSIA, 1967/68

(per cent)

Population Labor Force Unemployment Per cent urbanUrban Rural Total Urban Rural Total Urban Rural Total Population Labor Unemplcyment

Force

M&lays 28 6 5f 26 60 50 30 52 h 18 16 33

Chinese 57 25 36 60 25 36 51 25 37 52 52 64

Indians 13 12 12 13 13 13 17 22 20 35 32 391

Total 10 100 100 100 100 100 100 100 100 32 31 46

Total includes "other races"

Source: Malaysia Socio-Economic Sample 3Arvey of Hcuseholds, 1967/68

CD X-,

\-r,

MALAYSIA

AGRICULTURAL SECTOR SJRVEY

PAIERI4 OF EMPLOYMENT CHAN5E BY MAJOR SECTOR - 1lST MLIAXSIA

1957 - 1967

Percent of Total Dmloynent Percent ChanFe in B'-lo-mer.t Percent of Epnlcyer.t Chan we

1957 1962 1967 1957-1962 1962-1967 1957-1967 1957-1962 1962-1967 1957-19'7

Forestry 0.9 0.9 1.3 1 21.1 60.11 94.2 1.3 3.5 2.5

Fishinlg 2.9 2.41 2.4 -5.4 17.6 11.2 -1.1 5.1 1.C

Agriculture 53.1 50.2 46.4 8.1 7.5 15.9 29.8 22.7 25.8

Mfintng 2.8 2.3 2.14 -6.5 22.5 11-5 -1.3 3.2 1.2

Manufacturing 7.4 7.8 9.1 19.8 36.2 63.1 10.2 17.6 1L4.3

Construction 3.2 3.4 3.3 21.1 15.6 40.0 4.6 3.3 3.9

Elec., Water,Sa2mtation 0.5 0.6 o.6 18.3 25.0 147.8 0.7 0.9 0.8

o<erce 9.1 13.4 13.8 69.1 19.7 102.4 43.11 16.5 28.3

Transport u. 3.6 3.7 3.8 15.5 19.6 38.1 4.5 4.2

ard Deirensz 7.8 5.8 6.7 -114.2 33.0 134.1 -7.7 12.0 3.3

Bctatiai zndCmnity Services 3.6 4.2 4.5 35.1 23.7 67.1 8.6 6.2 7.3

Othier Services 5.2 5.1s -5-. 21.1 21-if X,7-' , 7 _ 7 9

TOTAL 100.0 100.0 100.0 i4.5 1.6.' 32.8 | Y?.O 10(X1X O0

ZSeTl: Ecc2omic Planning Uidt, Goverrmcnt of Malaysi 2

MALAYSIlA

AGRICULTURAL SECTOR SURVEY

WEST MALAYSIA - AGRICULTURAL EMPLOYKENT BY RACE AND MAJO CROP

1957 - 1967

1 9 5 7 1 9 6 2 1 9 6 7

Mlay Chinese Indian Others Total Malay Chinese Indian Others Total Malay Chinese Indian Others Total

Rubber 257.6 192.5 143.4 2.6 596.1 323.2 206.5 146.5 3.5 679.7 381.5 208.2 131.2 5.0 725.9Estates 50.1 76.6 136.1 1.3 264.1 64.1 79.2 131.6 0.8 275.7 53.5 67.1 101.1 0.4 222.1Sgllboldi 207.5 115.9 7.3 1.3 332.0 259.1 127.3 14.9 2.7 404.0 328.0 141.1 30.1 4.6 503.8

oil Palm 2.2 3.3 7.1 0.2 12.8 3.5 3.1 9.1 0.1 15.8 11.9 7.1 16.7 0.1 35.8Esrates 2.2 3.3 7.1 0.2 12.8 3.5 3.1 9.1 0.1 15.8 6.1 3.9 15.7 0.1 25.8

llboldings - - - - - - - - - - 5.8 3.2 1.0 - 10.0

Coconuts 26.6 2.5 7.7 0.1 36.9 25.2 2.5 6.3 - 34.0 23.0 2.3 5.2 - 30.5Escatas 0.8 0.2 7.1 0.1 8.2 0.5 0.2 5.0 - 5.7 0.3 0.1 3.4 - 3.8allholda 25.8 2.3 0.6 - 28.7 24.7 2.3 1.3 - 28.3 22.7 2.2 1.8 - 26.7

inTa 0.7 0.7 2.3 0.1 3.8 0.5 0.6 2.7 0.1 3.9 0.5 0.4 3.3 0.1 4.3Sie or -- iny rice 381.6 9.5 0.5 6.7 398.3 354.2 8.6 0.6 10.0 373.4 346.9 10.2 0.6 12.1 369.8

Otia aicultre 29.2 60.8 3.5 0.7 94.2 51.4 70.5 4.6 1.4 127.9 70.7 80.3 4.7 2.2 157.9a listock

l1Mh 697.9 269.3 164.5 10.4 1,142.1 758.0 291.8 169.8 15.1 1,234.7 834.5 308.5 161.7 19.5 1,324.2of ichc

Estate 53.1 80.1 150.3 1.6 285.1 68.1 82.5 145.7 0.9 297.2 59.9 71.1 120.2 0.5 251.7

Source: Ec d Planning Unit, November 2, 1970.

-t1¢

MALAYSIA

AGRICULTURAL SECTOR SJRVKY

PE- ;EC DISTRIBUrION AND CHANGE IN AGRICULTURAL E4IPOD;iENT - WTZE MALAYSIA

H' 1957 - 1967

Percent Agricultural Employment Percent Changec in 2rrc-r-nt

1957 1962 1967 1957-1962 1962-1967 1557-!967

Rubber, Palm Oil & Cocormts 56.5 59.1 59.8 13.0 8.6 22.7

Ot which: Estates (25-0) (24.1) (19.0) 4.2 -15.3 -11.7

Saallholdings (31.5) (35.0) (40.8) 19.8 25.0 49.7

Rice or Mainly Rice 34.9 30.2 27.9 -6.3 -1.0 -7.2

Othar Agriculture & Live stock 8.6 1C.7 12.2 I.L 23.i 6

Agri,mlture Total 100.0 100.0 100.0 8.. 7.2 16.9

Source: Econonic Planning Unit. Government of Malaysia

MAIAYSI.A

AGRICU1TURAL SECTOR SURVIr

EST1EST TED CHARGES IN OUTPUT, EMPLOYMENT AND PRODUCTIVITY BY MAJOR SECTOR - WEST MALAYSIA

1962-1975

(Annual Percent Change)

1962-1967 1967-1910 1970-1975 1967-1970 E EmploymentOutput Dmployment Productivity output Employment- Productivity Output Employment Productivit Employment 1970

Agricalture

Forestry,Fishing 4.3 1.7 2.6 9.7 3.2 6.5 8.0 1.8 6.2 9.9 1,570

Mining 2.9 4.1 -1.1 -0.8 -3.3 2.5 -1.6 -. 1 - 9.6 62

amofacturing 11.8 6.4 5.1 9.6 4.6 5.0 9.3 4.7 4.6 14.4 299

Construction 7.1 2.9 4.0 5.5 1.5 4.0 6.6 3.0 3.6 4.6 100

Elec, -ater, Etc. 11.4 4.6 6.5 6.8 1.8 5.0 9.1 4.8 4.3 5.5 18

Trn ort

Commicati.o 4.9 3.7 1.2 2.6 1.1 1.5 5.4 2.9 2.5 3.3 112

Com erce 3.3 3.7 -0.5 4.4 3.4 1.0 5.1 4.5 0.6 10.6 437

Pulic A ,.

& Befease 5.0 5.8 -0.8 3.4 3.4 0.0 5.9 5.9 0.0 10.6 211

Services 6.4 4.1 2.2 4.7 2.7 2.0 5.8 5.8 0.0 8.3 314

Total 5.2 3.0 2.2 6.1 3.0 3.1 6.6 3.3 3.3 9.4

1/ Calculated as the difference between rate of output increase and assumed increases in productivity.

2/ Calculated as the difference between assumed rates of output and employment increase.

Source: 1962-1967 and 1970-1975 are tentative estimates of EPU. 1967-1970 employment is devised by applying assumed productivity changes to EPU 2estimates of real GDP at factor cost.

ANNEX 9

SECTION II: AGRICULTURAL PRODUCTION, AREA & YIELDS

MALAYSIA ANNEX 9

AGRICULTURAL SECTOR SURVEY Table 2.1

WEST MALAYSIA - GROSS DOMESTIC PRODUCT BY INDUSTRIAL ORIGIN1961 and 1965-69

(M$ million: current factor cost)

1961 1965 1966 1967 1968; 1969

1. Agriculture, 2 21 82Forestry, Fishery 197078(1.1) Agric.& Livestock 603 720 756 767(1.2) Rubber planting 1055 1010 1015 890 903 1291(1.3) Forestry ! logging 78 91 103 112 145 160(1.4) Fishing 106 135 163 210 225 204

2. Mining and Quarrying 381 598 551 523 507 534

3. Manufacturing 428 701 a 828 920 1029(3.1, Food,beverage,tobacco 26 I61 236m 233(3.2) Wood products 26 57 57 61 65 68(3.3) Rubber processing 136 126 132 111 121 182(3.4) Others 193 397 412 442 504 546

4. Construction 191 315 320 330 352 366

5. Electricity, waterand Sanitary Services 78 131 152 166 181 192

Transportation, Storage,Communications 190 249 249 259 268 276

7. Wholesale and Retail Trade 839 1065 1117 1140 1206 1251

8. Banking, Insuranceand Real Estate 76 110 124 135 148 161

9. Ownership of Dwellings 255 298 303 315 324 336

10. Public Administrationand Defense 336 493 537 561 576 608

11. Services 652 928 1007 1086 1125 1240

12. GDP at factor cost 5268 64. 7180 7322 7685 8475

(Annual rate of growth,%) (4.9) (2.0) (5-0) (10.3)

1/ Preliminary estimates.Source: "National Accounts of West Malaysia, 1960-66" (Department of Statistics)

and additional data supplied by the Department for 1967 - 1969.

March 19, 1971

MALAYSIA

AGRICULTURAL SECTOR SURVEY

WIest Malaysia - Agnicultural Production, 1960-July 1970

1960 1965 1966 1967 1968 1969 1969 1970_ _ _0_ _ (Jan- July) (Jar.- July)

3Ice oroduction .000 tons 478 677 667 659 780 867 n.a. n.a.Net inports '000 tons 357 257 207 286 238 221 n.a. n.a.

-habbe- '000 tons 685 8)9 900 923 1,035 1,192 639 651

paim oil 000 toINS 90 146 183 213 261 321 180 202

Palm kernels '000 tons 24 34 43 48 59 74 41 43

Pine:ipples- Fresh 'CCO tons 151 254 254 275 278 302 157 160- Canned l00 tons n.a. 55 57 62 63 67 35 36- Juice '000 tons n.a. 1.05 1.16 1.27 1.00 1.34 o.56 0.90

Sawn timer '000-tons of50 cu. ft. 727 946 1004 1219 1418 )1h54 712 733

Plywood and vezeer milion sq. ft. 4.6 59.9 116.7 123.1 224.8 324.3 n.a. n.a.

Sa;r lags '000 tons of56 cu. ft. 1589 2278 2692 2965 3587 3773 n.a. n.a.

- Forest reserwes - do - (600) (955) (921) (1157) (1295) (n.a.) (n.a.) (n.a.)- O-t2ers - do - (989) (1323) (1771) (1808) (2292) (n.a.) (n.a.) (n.a.)

FVsh landed '000 tons 139 198 236 301 339 297 127- 124-

1/ .'or January-May period.

.,ur-e: Monthly Statistical Bulletin, West Malaysia.

MALAYSIA

AGRICULTURAL SECTOR SURVEY

U.S. DEPARTMENT OF AGRICULTURE ESTIMATES OF

PBIDJCTI[ON BY COIXDllllTY, VALUE AMN INDICES OF TOTAL AGICULT!IRAL AND FOOD PRODUCTION, AVER" 1957-59, ANNUAL 1959-68

-.1Commodity Price Average Prelim.

Waight 1957-59 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968U-- - -- -- ----- -- 0T metric tons- - - - - - - - - - - - - - - - _

Rice, Paddy 95 651 606 783 855 811 869 778 932 932 940 1,100

9eetpotatoes 45 91 108 113 117 127 115 128 130 121 106 10

Tobacco 530 2 2 2 2 2 3 3 3 3 3 4Bananas 30 293 327 345 356 341 339 331a 335 345 355 370

Pinapples 40 173 182 195 229 224 295 315 337 381 388 398

Coffee 360 3 4 3 4 4 6 7 7 8 8- ~ 9

Tea 600 2 2 3 3 3 3 3 3 3 3 3

Rubber 6I0 675 707 T17 746 761 800 837 884 914 948 1,052

Paln oil 210 68 73 92 95 108 126 122 148 186 216 265

Copra 200 123 127 176 165 136 140 116 126 138 152 160

Palnkernels 130 18 20 24 25 28 30 30 35 44 49 60

Mlk 70 15 16 15 20 19 19 18 18 19 18 17

1ggs 600 21 22 23 25 28 35 42 44 45 46 47

ggFegates of Productim - - - - - - - - - - - - - - - US$ milLion at eonatant prices- - - - - - - - - - - - - - - - - - - -

Crops 558.2 579.0 618.1 644.3 646.6 685.7 696.4 750.5 783.1 815.4 912.3

Liveatock 13.5 14.3 14.9 16.4 18.1 22.3 26.5 27.7 28.3 28.9 29.4

Total Agriculture 571.7 593.3 633.0 660.7 664.7 708.0 722.9 778.2 811.4 844.3 941.7

Total food 136.3 137.2 170.2 179.1 173.5 190.5 181.4 206.6 220.2 231.4 261.4

Indices of Productim (1957-59 100)

Crops 100 104 111 115 116 123 125 134 140 146 163

Total Agriculture 100 104 iln 16 116 124 126 136 142 148 165 z >

Total food 100 101 125 131 127 140 133 152 162 170 192 c

Per Capita Agriculture 100 101 104 106 102 106 105 110 ill 112 121 PO

Per Capita Food 100 98 ll8 119 12 19 111 123 127 129 141

Index of Population

1958 Population - 6 ,499,000 99.9 103.1 106.3 109.8 113.5 117.1 120.2 123.7 127.7 132.0 136.1

SDurce: USDA.

MALAY-SIA

AGRICULTURAL SECTOR SURVEY

PRODUCTION OF MAIN CROPS

Rubber Palm Oil Wet and Dry Pepper Copra Pineapple TeaPadi (Fresh)

State Year 1,000 Million Lbs.

Tons Tons Gantangs of green berries Tons Tons 1,OC Lbs.

SABAH 1964 (c) 22,804 (c) 862 29,520 (c) 16,10C

1965 (e) 23,848 (c) 1,695 33,440 (e) 14,513

1966 (e) 23,710 (c) 3,284 28,888 (c) 16,073

1967 (c) 23,702 (l) 8.756 29;388 (e) 11.854

1968 (c) 24,500 (c) 17,758 35,920 (e) 14,623

1969 (c) 29,394 (c) 25,524 39,744 (c) 12,813

SARAWA 1964 43,247 40,549 94 9,460

1965 (c) 40,034 44,594 130 9,916

1966 (c) 33,589 47,403 (b) 12,316

1967 (c) 28,444 38,o43 (b) 11,596

1968 (c) 23,793 50,929 (b) 13,028

1969 (e) 38,729 63,826 (b) (b)

WEST NAI&YSIA 1964 791,234 120,106 (a) 363,8C7 ) 29,670 (c) 208,169 6,853

1965 838,573 146,333 (e) 416,592 ) 30,721 254,294 7,38t

1966 900,278 183,394 (e) 410,144 ) 27,684 254,088 7,597

1967 923,340 213,402 (e) 405,349 ) (a) 27,379 275,284 6,823

1968 (e) 1,034,707 (e) 260,687 (e) 479,698 ) (e) 28,041 255,326 (e) 7,645

1969 (d) 1,190,096 320,755 533,109 ) (d) 22,876 (d) 2, 5,733 (d) 7.620

(a) Not available.(b) Not yet available.

(c) Export figures only. No production data available.

(d) Subject to revision. CD

(e) Revised. J-

Source: Malaysia, Annual Bulletin of Statistics 1969.

MAALAYSIA

AGRICULTURAL SFCTOR smtVY

ESrIMATED AREA OF MAINI CROPS('000 acres)

OtherState Year Rubber(a) Oil Palm Coconut(a) Padi(b) Crops TOTAL

qABAH 1964 243 18 102 861965 (e) 250 24 108 921966 (e) 255 40 105 871967 (e) 259 (e) 61 114 96 c (c)1968 (e) 261 (e) 74 120 1011969 261 94 130 105

S&B&W&K 1964 308 65 28o1965 311 73 2901966 305 * (d) 2751967 303 (d) 277 (c) (c)1968 307 Cd) 3231969 (d) (d) 349

MM9 NAIA3ISI 1964 4,304 (f) 206 508 (e) 991 (e) 3140 6,349196% 4,328 (f) 240 507 (e) 1,040 Ce 34P 6,4571966 4,342 (f) 304 506 (e) 1,053 (e) 33P 6,5431967 (e) 4,298 (f) 402 (e)504 (e) 1,087 (e) 351 6,64?1968 4,258 (f) 498 517 (e) 1,183 (e) .50 6,8061969 (d) (d) (d) 1,241 (d) (d)

(a) Estimated area of both estates and smallholdings.(b) Both met and dry padi.(c) Not available.(d) Not yet available(e) Revised.(f) Includes oil palm acreage in Estates, FLDA, Rubber Industry (Replanting, Boaz,d (Fund B)

Schemes for smallholders and State Government Schemes. 1-M* No oil palm acreage. IISource: Malaysia, Annual Bulletin of Statistics 1969. X \

na

MALAYS IAANNEX 9

AGUICULTURAL SECTOR 1l aie 2,6

R1,BGE1 EUT;ATES AND SMALLHOIDIN5: JJMBER AND PLANTED ACREAGFS

I -- - _ ~~~~~~~~~Estatos

As at Sma l lho Ldi ngs; TOTAL PLAtNTED

Stato 31st Oec. - Number Plantod Planted Acreage ACRAGE A

('000 acres) ('000 acres) ('000 acrcs)

SABAH (b) 1964 (a) 82.5 161.0 243.5

1965 112 (e) 82.0 168.0 (p) 250.0

1966 113 (a) 82.1 173.3 (b) - 5

1967 130 (a) 82j 176.9 (e) 259.0

1968 124 82.3 1'8.8 261.1

1969 (c) 82.3 179.1 26i,.4

SARAWAK 1964 1l 8.1 300.0 (d) 308.1

1965 10 7.8 302.7 310.5

1966 14 8.4 296.5 304.9

1967 15 7.7 295.1 302.8

1968 16 7.9 298.9 306.8

1969 (c) (c) (c) (c)

WEST MALAYSIA 1964 2,103 1,893.2 2,411.0 4,304.2

1965 2,094 1,859.0 2,469.0 4,328.0

1966 2,105 1,813.3 2,529.0 4,342.3

1967 2,104 1,746.4 (e) 2,552.0 (e) 4,298.4

1968 2,106 1,675.8 2,582.0 4,257.8

1969 (c) (c) (c) (c)

(a) Not avail able.

(b) Estimate6 by Rubber kInd Board, Sabah except for 1966 data which wore obtained through

a Survey conducted bl tho Departmon of Statistics, Sabah.

(c) Not yet avai lab la.

(d) Incomplete; excludes smalhli-ldlngs.

(e) Revised.

Source Malaysia Annual Biletiry oft &t,tjttcp 1969.

u. ^ I 1Q71-

MALAYSIA

AGRICULTURAL SECToR-sGRVKY -

HDBBR: ACDUAL AND PROJEEI CONSUMPtION AND PROIUCTION. 1955/57 - 1975

Average Annual Growth RateProjected 1955/57-1968 1968-1975

1955-57 1961-63 1964 1965 1966 1967 1968 1975 % %

moreptica - tbmsamnds of loug team2/

1brld ecledia Soviet bloc, 2,85 3,831 4,543 4,805 5,191 5,160 5,920 8,670- 6.2 5.6

porta to Soviat bloc 236 563 482 547 595 572 700 740 9.7 0.8

Total 3,090 4,394 5,125 5,352 5.786 5.732 6,620 9.4&10 6.6 5-2

Pro.b,,ion - tbmsands of l1 toum

hNalma ruhbb

0luiasi 69, 820 857 903 953 975 1,083 1,800 3.8 7.6

Rest of wwld 1.211 1,278 1.345 1.640 1.416 1.468 1.508 1.950 1.8 3.7

Total 1.905 2,098 2,202 2,311 2.374 2.443 2.591 3,750 2.6 7.5

Sspotbtic ubr 1,186 2,217 2,802 3,012 3,330 3,413 3,950 5,660 10.5 5.3

Cba Stocks - 1 + 79 + 121 + 29 + 82 + 124 * 79 - -

VALl a3,C90 4,391, 5.125 5,352 5,786 5.732 6,620 9,410 6.6 5.2

procketic - %

Natwal rubbw 62 47 13 43 41 L3 39 40

Syntheticrubber 38 53 57 57 59 57 61 60

.0 .W -- . _ , -- 1 )00

i/ 1M countries and Mainlnmd China2/ Based on OECD projectionE of industria'. outl'Ut

B/ Based on recent replanting

Source: IRSG and IBRD projections.

MALAYSIA

AGRICULTURAL SECTOR SURVEY

HUBBBR: ACTUAL AND PRDJECT8D AREA,I TIn AND PRODUCTION FROM

H ESTATES AND SIhLLHOLDI1GS IN W. MALAYSIA. 1955-1980

Estates Sa 1holdinjs Total

Acreage Yield Production Acreage Yield Production Acreage Yield ProductionTotal Mature Tbtal Mature Total Nature

(thonsand acres) (lbs per (thousand (thousand acres) (lbs per (thouasnd (thousand acres) (lbs per (thousand

mnt.ure tons ) mature tons ) nature tons)acre) acre) acre)

Actual

1955 2,015 1,676 490 352 1,783 1,655 386 285 3,798 3,331 428 637

1960 1,935 1,405 676 413 2,099 1,563 390 272 4,034 2,968 517 685

1965 1,859 1,345 850 491 2,525 1,481 526 348 4,384 2,826 665 839

1966 1,813 1,343 898 514 2,571 1,551 557 386 4,384 2,894 697 900

1967 1,746 1,3347 921 526 2,604 1,612 581 397 4,350 2,959 699 923

1968 1,676 1,348 986 563 2,615 1,715 649 472 4,291 3,063 757 1,035

1969 1,623 1,356 1,045 603 2,625 1,832 718 587 4,248 3,188 836 1,190

l/

Projected

1970 1,575 1,362 1,099 638 2,677 1,939 733 635 4,252 3,301 864 1,273

1975 1,437 1,371 1,278 751 2,937 2,224 941 934 4,374 3,595 1,050 1,685

1980 1,137 1,406 1,326 800 3,197 2,443 1,129 1,231 4,634 3,849 1,182 2,031

Growth Rates

1955-1969 - 1.6 - 1.6 5.5 3.9 2.8 0.7 4.5 5.3 0.7 - 0.4 4.9 4.5

1965-1969 - 3.4 - 5.1 5.1 0.7 5.1 8.0 13.8 - 1.0 2.9 5.7 9.0

1969-1975 - 2.1 0.2 3.4 3.7 1.8 3.2 4.6 8.0 0.3 1.9 3.8 5.9

1975-1980 - 0.4 o.6 1.2 1.5 1.7 3.5 5.5 1.0 1.1 2.3 3.8

1/ Projections by RRI assuming annual rates of newplanting and replanting of 0 and 10,000acres for estates and 60,000 and 45,000 acres for snallholdings between 1970 and 1980.

Source: RRI, Kuala Lumpur, 1970.

MALAYSIA

X AGRICULTURAL SETOR SRTKr

]EMBt: RIPLAITIG AND EWPLANTIU IN W. MALAISIA. 1955-196~D (thousands of acres)

total Pebbe AreNwe . l lantang low nlantingotates ~l 1dings Total EttldLEstates .1allholdings Total

FLMX Others Total

1955-1959 1,991 1,873 3,86b 69 49 118 lb 2 21 23 37

1960 1,935 2,099 4,034 75 69 14i 22 11 55 66 88

1961 1,937 2,202 4 ,139 70 57 127 18 lb 82 96 114

1962 1,927 2,322 4,249 63 69 132 10 25 M4 109 119

1963 1,919 2,l5 4,334 59 83 142 9 17 68 85 94

1964 1,893 2,487 4,380 59 79 138 6 22 39 61 67

1965 1,859 2,525 4,384 53 91 14b 5 8 25 33 38

1966 1,813 2,571 1,38b 50 b9 99 3 L4 13 27 30

1967 1,746 2,604 h,350 28 75 103 2 9 17 19 21

1968 1,676 2,615 4,291 13 39 52 1 2 12 lb 15

1969 1,623 2,625 4,248 12 36 48 - 10 5 15 15

1955-1969 1,886 2,255 4,141 56 59 115 10 9 3b 43 53

1960-196& 1,922 2,305 b,227 66 71 137 13 17 66 83 96

1965-1969 1,7 103 2,588 4,331 31 58 89 2 8 lb 22 24

Source: RRI, [lsIa Lapur, 1970Departrent of Statistics, [uala Lumpur, 1969

MALAYSIA

o AGRICUL1URAL SECTOR SUVR

H RIBBER: WORMD PRODUCTICI Ci NATUJR&L RIUBBER, 1964-68_Q (thousands of tons )

AnrnualProporticm of Growth inWorld Total Prodaction

19614 1965 1966 1967 1968 19614 1965 19614 - 681964 1965 1966 1967 1968 ~~~~------------ percenT -------------

World Total 2,201.5 2,311.0 2,373.5 2,443.0 2,590.5 4.1

NAlq'sia 856.9 902.5 957.5 974.8 1,082.9 38.9 141.8 6.o

Indmea&a 638.5 705.7 704.14 750.0 740.0 29.0 28.5 3.7

Thai1md 218.2 213.1 203.9 210.9 2514.8 9.9 9.8 3.9

CeYqM 109.8 116.4 128.9 1140.9 146.4 4.9 5.6 7.5

VIetna 73.3 60.0 48.1 40.0 29.2 3.3 1.1 -20.6

Cambo5a 145.1 48.1 50.5 52.8 50.5 2.0 1.9 2.9

India 143.5 48.6 52.4 61.5 67.8 1.9 2.6 11.7

Rest of world 2114.1 216.8 227.9 211.9 219.0 9.7 8.4 0.5

Source: Department of Statistics, Kuala lItmpur

YAlAY3-A

AGR1CL1,2V.5A SESDfi SIUR7

o0. PlJ: ACTUAL AUD lZJCTD ARax *D FlMODMlONS. 1963-1975

A_t_ Mtimt9d et.d 8 (A a lth bt

.1963 1964 1965 1966 1967 I968 1969 197 197 1972 1973 1974 1975 1963-1970 17-1975 1963-lS7S

W. 1 186 205 239 306 40 497 550 613 686 757 817 869 917 19.4 7.5 11.2

21_ 7 1i 24 48 54 75 79 84 91 103 113 121 124 42.T 8.0 27.0

So..-k - . _ _ _ _ 2 8 12 16 2D 22 - 21.9 -

T*W baywl 193 223 263 392 456 572 629 729 785 872 946 1.a01 1.063 2D.8 7.9

_28md &_ (t h -c_)

IL Ub d. -1 tt. n_ 32 21 48 64 61 11 35 31 22 18 13 10

-_UL n4 15 1D 14 19 31 36 36 32 29 25 X 5 25

- tb 1 3 2 15 4 6 22 20 20 17 14 X3

o. 1.8 34 64 96 96 53 93 83 T1 60 52 48

11h-h 6 24 6 21 4 5 7 12 10 8 3

bao.k . - -_ _ _ _ 2 6 b 4 4 2

"L.1 n_I"oi 59 40 88 1Cq U? 57 100 96 87 74 64 53

W. l1. 122 12 0 136 183 213 261 321 403 497 610 737 892 1,063 18.3 20.9 15.3

_ . - 1 2 3 9 i8 26 33 69 10!4 132 162 193 - 29.4 1

an-" _- - - - - - - - 1 14 10

?tal awi. 12a 121 1a8 186 222 279 3b7 436 566 71h 87M 1,058 1,266 118.9 22.2 2n.5

S ld U tLm 10.3 12.3 3b .9 19.5 01.7 - .- n.. i. n..

IL P.7w. 3D 20 31 1.3 48 59 73 81 S 9 1i22 17 178 13 15.2 21.0 17.6

_ - - - 1 2 3 4 7 14 21 26 32 39 - 29.2 -

- - -- - - - - - -1 2 _ _

To.l.1a .. 0 3D 38 44 50 62 77 s 113 143 173 Ml 254. 16.6 22.2 19.5

S a -id pwt 3.6 3.9 5.1 .- n in.. n.. a..

TitnAl 9.1l1 115 I 111 1.81 J6 281 351 426 556 704 860 1,048 1,256 20.6 22.6 22.1

S.f oId pwr 2.1 22.1 26.0 29.3 38.2 8115 .- 0.0 3.0 3.0 n. - 6503/

981. Iw017

lot.1mlnpiD 19 18 19 23 25 35 38 58 83 113 113 181 224 17.3 28.1 22.8

S of -.Id e 2.4 2.5 3.2 n.- a. . . a D.. 20.2

L1 ftd 1 bI.d D D.. at h&-.g2/ Priip.11 St.e zDd R2(R)8

7 .T/ p - to ol I- f ,-cElc-d OD E.F.I. .tlt-

D/ 9i..ti- b A-d OD CrUT*Dt (i770) p3ala1ig plan.

3ce. De.9rtC of 2.ti.ti-c; E.P 3.: i.- 9313 o3rove r ;l, 13RD- E '1c . pr, t and 9lSOioi i stu-i.-

:1 MALAYSIA

AGRICULTURAL SECTOR ,T1RY

F- RICE: AREA, PRODUCTION AND IMPORTS 1962-1969

W. MALAYSIA

A R E A PRODUCTION IMPORTS TOTAL PR03UCTIOi

(Acres) (thousands of tons) AS % OF TO

Main Season Off Season Dry land Main Season Off Season Dry land Total

1962 868,440 45,910 57,690 555.7 31.3 18.4 605.4 228.0 893.S 67.8

1963 880,760 47,880 55,090 592.6 34.8 20.3 647.7 389.2 1,036.9 62.5

1964 841,020 56,960 52,160 532.8 ho.6 18.2 591.6 401.8 993.!1 59.6

1965 875,090 89,720 52,790 594.9 65.!& 17.1 677.4 293.3 970.7 69.8

1966 851,960 103,340 50,170 573.1 77.4 16.4 666.9 239.4 906.3 73.6

1967 771,44o 154,970 4h,830 532.9 111.8 14.3 659.1 295.9 955.0 69.0

1968 862,610 224,170 50,080 598.1 166.0 15.8 780.0 240.5 1,020.5 76.14

1969 940,190 237,330 56,520 662.9 186.4 17.3 866.4 227.0 1,093.4 79.2

Average Annual

Growth Sate S 1.1 26.0 -W.3 2.6 29.1 -0.9 5.3 -3.3 2.9

Source: Department of Statistics, Kuala Lumpur

PO

MALAYSIA

AGRICULTURAL SECTOR SURVEY

wOCONf: ARm * RaDUCTION AND B2aTS. 1964-1968

1964 1965 1966 1967 1968

Area (tboancs ot acres)

Smlbo1inLgs

Johore 133.5 133.8 134.6 134.1 134.6Selanger 90.2 90.3 90.3 90.4 93.3Perk 54.7 56.9 54.4 60.2 72.0Keatabn 41.2 41.6 42 .6 42.9 43.1Others U6.5 u6.1 113.5 U3.9 117.2

Total 436.1 438.7 435.4 44l1.5 460.2

lstates n71.7 68.0 63.1 60.2 56.6

Total. 507.8 506.7 498.5 501.7 516.8

fodcLon (t_ns af log of copra)

smallholamw 78.5 78.2 109.1 111.7 123.7

Estates 29.7 30.7 27.7 27.4 28.0

Tot-alo108.2 108.9 136.8 139.1 151.73/

wtJ mbs(ands ao 1og tons)

Copra 6.3 16.0 12.7 2.8 3.5

Cocamt oil, crade 13.8 17.9 24. 6 27.7 38.0

Ooco,mt oil, refined 0.7 0.2 0.5 1.3 0.4

1/ 1bstIy in Perak, Salanger and Penang2/ This refers only to the amou,it of copra purchased by oil mills, and

does not include on-farm consumption or other uses3/ Including re-exports

Source: Deprtmnent of Statistics, Kuala LImpur.

MATLAYS l.A

ACr [CNULTURAL SECT(R SUfY

ANN (k 9LIVESTOCK PCY'ULATION - MALAYSIA Table 2. 1l

(Number of Animals)

State Year Cattle Buffaloes Goats Sheep Pigs

Sabah 1968 (a) 28,000 62,000 29,000 1,000 85,000

1969 (c) (c) (c) (c) (c)

Sarawak 196 4 9,766 8,463 10,219 (b) 278 71?3

i965 7,082 7,861 8,224 (b) 218,277

1966 6,648 7,503 6,864 (b) 227,931

1967 8,296 7,768 7,454 (b) 225,219

1968 7,978 8,630 8,136 (b) 206,705

1969 (c) (c) (c) (c) (c)

West Malaysia 1964 305,759 283,922 319,513 42,674 462,781

1965 311, 8 44 274,698 312,417 38,061 504,285

1966 310,476 259,4v33 330,475 37,967 599,393

1967 285,686 237,84.8 307,769 36,819 600,71h

1968 286,241 226,994 320,655 36,108 691,556

1969 (d) 299,803 230,490 292,639 39,126 622,708

Source: Veterinary Departments

(a) Estimate

(b) Not available

(c) Not yet available

(d) Preliminary

March 19, 1971

MALAYSIA

AGRICULTURAL SECTOR SURVE ANNEX 9Table 2. 15

XNOWN LIVESTOCK SLALUXHTER(Number of Animal)

State Year Cattle Burfaloes Goats Sheep Pigs

Sabah 1964 1,391 5,394 (a) (a) 44,315

1965 1,188 6,468 (a) (a) 43,573

1266 798 6,233 (a) (a) 52,737

1967 948 5,212 (a) (a) 55,679

1968 1,177 5,129 (a) (a) 56,939

1969 1,271 5,326 (a) (a) 67,865

Sarawak 1964 554 I,421 681 (a) 58,869

1965 404s 1,646 553 (a) 61,924

19wo 858 1,255 431 (a) 70,444

1967 1,088 1,398 844 (a) 67,362

1968 1,364 1,066 612 (a) 60,947

1969 (b) (b) (b) (b) (b)

West Malaysia 1964 33,945 38,243 78,030 45,021 751,182

1965 38,563 38,159 84,971 37,503 781,256

1966 44,820 38,336 90,710 36,754 824,874

1967 477,342 37,174 75,620 35,864 795,627

1968 42,9519 34,055 65,959 34,655 773,169

1969 (c) 44,329 32,349 72,627 40,298 878,739

Sourcet Veterinary Departments

(a) Not available

(b) Not yet available

(c) Preliminary

March 19, 1971

ADIUOUIT1JiKA SECTLR SURVEy

ESTD'hATED MEAT SUPPLY1968

H

Local Net Total

Local Net Total Production Imports Supply

Commodities Production Imports Supply Value Value Value

(M/Tons) (TMYTons) (M/Tons) (r$ 1,000) (M$ 1,000) (M$ 1,000)

- 1~ ~~/ 31 4/ 5/

Beef (Buffalo) 8o,56 6o5 8,661 27,245.L 1,368.2 28,613.6

1/ 3/ 4/ 5/

Beef (Cattle) 6,909 1,817 8,726 23,366.2 5,L38.9 28,805.1

1/ h/Pork 53,h63 150 53,613 108,520.2 LOL.2 1IJ8,92h.h

1/ 3/ h/ 5/

Mutton (Goats and Sheep) 1,134 2,7L2 3,876 h,677. L,629.3 9,307.0

2/ h/

Poultry Meat 54,510 590 55,100 62,913.9 1,1118.1 63,562.0

Other M4eat 608 6o8 872.5 872.5

Totals 12L,072 6,512 130,584 266,223.L 13,861.2 280,084.6

1/ Based on known slaughter plus estimates of unrecorded slaughter of 2050 for buffaloes and pigs,

23% for cattle and 501 for goats. Assumed average carcass weights of 400 lbs for buffaloes,

300 lbs for cattle, 110 lbs for pigs and 25 lbs for local goats.

2/ Source: V\etorinarv Division, Ministry of Agriculture and Coperatives.

3/ Includes imported chilled and frozen meat and carcasses from live animals imTDorted for local

slaughter.

4/ Based on average 1968 market prices for local meats.

5/ Represents average live weight value per head for imported live animals an, C.'---L value fo,

imported meat. Source: 1969 Statistical Digest, Ministr, of Agricultu-c a- l`-jpe-ratives.

MALAYSIA

AGRICULTURAL SECTOR SUlll

AEA IWDER FOREST

Domestic and Witd Life TOTALProtection ComerciaL Ame n d iangrove Permanent Other Reserved and DLtf Crown or d HD

State Year Forest Forest tenty Forest Forest Foregt Forest Forest State Land UD:EForest Reserves FOREST

196. 977 8, 03 194 311 ( 9,885

1965 993 8,190 91 30B 9,582

1966 1,O5 9,225 91 308 (a) (a) (a) (a) (a) 10,629

1967 1,007 9,229 91 297 10,627

1968 1,017 5,740 97 297 7,151

1969 (b) (b) (b) (b) (b) (b) (b) (b) (b)

5 .~1M 1961. 11,681 23,620 ( 35,3C4

1965 11,852 23,410 35,292

1966 (a) (a) (a) (a) 11,875 23,400 (a) (a) (a) 35,217

1967 11,920 24,199 36,419

1968 11,921 24,.98 3C,419

1969 (b) (b) (o)

WEST HAULYSI 1964 ( 13,414. 2,648 17,190 33,252

1%5 13,390 2,570 17,060 33,020

1966 (a) (a) (a) (a) (a) (a) 13,430 2,580 15,270 31,2BO

1967 13,370 2,570 15,690 31,S30

1968 13,2(0 2,590 16,110 31,900

1%9 (b) (b) (b) kb)

(a) ParticuLars not avaiLabLe on this basis.(b) Not yet avaiLabLe. e !

Source: Malaysia: Annual Bulletin of Statistics: 1969

MALAYSIAIi

H AGRICULTURAL SECTOR SURVEY

PAST AND ANTICIPATED PRODUCTION OF FOREST PRODJCTS

WEST MALAYSIA

1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975

Round Timber

Production ('000 tons) 2,105 2,278 2,691 2,965 3,586 3,789 4,200 4,800 5,200 5,300 5,200 5,200

Exports (1000 tons) 493 575 777 816 941 994 1,050 1,082 958 948 888 819

Export Value ($ million) 26 31 43 59 76 82 87 92 83 81 75 66

Sawn Timber

Production ('000 tons) 947 951 1,004 1,219 1.,418 1,454 1,618 1,920 2,200 2,200 2,120 2,100

Exports ('000 tons) 323 335 345 405 565 630 736$ 976 1,190 1,119 963 862

Export Val-e ($ million) 59 61 56 70 106 121 142 190 236 223 193 172

Veneer

Exports (Million sq. feet) - 9 23 8 20 7 10 10 10 15 15 15

Export Value ($ illion) - 1 3 1 3 1 1 1 1 2 2 2

Plywood

Exports (IMillion so. feet) 1i 21 29 67 131 200 263 337 420 512 595 691

Export Value ($ million) 2 3 4 11 20 31 42 55 69 84 98 114

Sources 1964 - 1968 - Economic Planning Unit.

1969 - 1975 - Economic Planning Unit as modified by IBRD . z

MALAYSIA

AGRICULTURAL SECTOR SURVEY

PAST AND ANTICIPATED PRODUCTION OF FOREST PRODUCTS_

SABAHD

H

196h 1965 1966 1967 196-' 1969 157C 1971 1972 1973 1974 1975

Round Timber

Production ('000 tons) 2,527 2,939 3,928 4,037 4,177 4,577 4,800 5,200 5,460 5,680 5,91C- 6,080Exports ('000 tons) 2,367 2,697 3,437 3,764 4,095 4,372 4,590 4,996 5,249 5,463 5,679 5,736Export Value ($ million) 148 185 259 316 335 374 395 439 472 503 511 516

Sawn Timber

Production ('000 tons) 39 45 45 40 36 V 45 47 49 52 63 67Exports ('000 tons) 4 5 3 3 3 7 7 7 8 8 14 15Export Value ($ million) 1 1 1 1 1 1 1 1 2 2 3 3

Veneer

Exports (million sq. ft) 39 42 40 27 37 47 48 48 49 49 55 58Export Value ($ million) 1 1 2 1 1 1 1 1 2 2 2 2

Exports (million sq.ft) - - _ 6 11 10 11 11 12 12 20 24Export Value ($ million) _ - - 1 1 1 1 1 1 2 3 2

_/ Possibly an error - Annual Report Sabah Forest Dept. shows h9Source: 1964 - 1968 - Economic Planning Unit,

1969 - 1975 - Economic Planning Unit as modified by IBRD

'CM

MALAYSIA

AGRTCIT,TITRAL SECTOR SRVEY

PAST AND FUTURE ANTICIPATED PRUD WCTIUN OU FUKEST PHD W CTS

SARAWAK

196L 1965 1966 1967 1968 1969 1970 1971 1972 1973 197h 1I75

Round TimberProduction ('000 tons) 1,31L 1,653 2,128 2,587 3,007 3,027 2,970 2,ddO 2,760 2,670 2,630 2,810Exports ('OOG tons) 611 856 1,36L 1,583 2,108 2,160 2,121 2,068 1,980 1,S25 1,856 1,960Export Value ($million) 30 47 83 100 139 143 12 139 132 1?5 123 128

Sawn TimberProduction ('000 tons) 326 365 345 45L L406 315 318 314 310 309 312 360Experts ('000 tons) 184 192 157 186 2 215 215 2Ud 201 196 196 220Export Value ($ million) 30 34 25 35 L1 13 416 63 63 62 43 48

VeneerExports (million sa.ft) 17 43 50 36 34 23 23 23 23 23 23 23Export Value ($ million) 1 2 2 1 1 1 1 1 1 1 1 1

PlywoodExports (million.sq.ft) 1 1 2 2 3 27 28 2% 3J 31 38 42ExTort Value (N million) - - 1 1 2 3 ' 3 L 5 5

Source: 1966-1968 Economic Planning Unit.1969-1975 Economic Planning Unit as modified by IBRD,

ODX

V'N

.

ANNEX 9

SECT'ION III: CONSUMPTION

MALAYSIA

AGRICULTURAL SECTOR SURVE3YH PRPOJECTION OF DEMAND FOR MAJOCf FOOD COMMODITIES (1968-1980)

Income Total Per C p. Per Cap. TDz.a1 Per Ga-ap. Tota^Elasticity consumptisn Consurmt,ion Denan-nc De7Land Dem.tid Demno.of Deran' itn 1?68 in 1 in 1:75 in 1)75 in 1980 in 1=80(000 ~~~~) 7d4o~~~~~) (~kilos) (020- iM) (kiloo) (0500 mT)'raD_ a=.:' lt

c. >5.0 3)14 37-% )!8 .3 39.7 57?7OO 1,17.a 1.8. 118.0 1,477.7 118.0 1,696.3

jsln 0.5 350.7 3h4.3 3.0 475.9 41.2 592.3

Palses -A'A".!:; 0.2 13.1 1.3 1.)4 17.5 1.4 90,1inoonU;3 0.2 **1,1l)3.9 *107 *111 *1,397.5 *115 **1,653

V_____^ - 0.3 77,5 7.5 8.o 100.? 8.14 120.C?rui 4 2 _.tE _0]- 3.9 .8 1.1 1.3 16.3 1.5 21.69anarnas 0. 220. 31 .' 32-5 407.) 33-5Pinle a-pl= 3. ) 4.3 14.0 15.7 Q16.6 17.0 241.o,Veget:-bs e OiL), (e.s- C.7 11.0 1.1 1.3 10.3 1.)4 20.1C do onu .7 )i.3 5.6 7:.1

z zo.1

0.5 5.7 "6 0.7 5.8 0.o8 11Te-. 0,6 L.5 0.)4 0.5 r.3 0.5 7.2A;:7i- '.Po u _

Ani~~~~~~~~~~~~~~~~~~~~~~~~~~~ 2. ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ -.R .nT s.e <1. 3 2178 .33 20 391.8 42.1 2.9 7

1.37.141 Th li3. ±av.)

1. - 17.4 1.7 2.2 27.5 2. .7.4H.-'t:)n =k!-K Lamib 1.0 3.9 04 0.5 6.3 0.9 Po->, 5R-6 14.6 .F3. 7.1 7S- 2I.l IJ.~~~'~~~r N~~~~~~~ 1.? ~~~~~~55.1 .3 6.8 85.2- 117 .9

1.p tJ 1 , - ' * 9Q . A- L "'D 5 .1 * 0 3*119 1, UO9 *139.0 . 1,9980 - r 4 3 9 .8 _/ _ ., 3 5 . .8 KS., 3 8 _ O'0.8 1., 0.14 0.17 2,1 0.) 2 7k'ms * *Oils 0,5 8 41 8 0° 11.3 1,!

**- millijnsPopulation Growth Rate - - 2. 8 %p.a. Per Canita Inconm iUrowth Rate - - 3.1%p.a.1/ Conswumed by Chinese Population orLdy (Ponula+.ion Gr,owth Rate 2.h% p.a.)7/ Production of Sarawak excluded in determining totaL con:umption - figures not available.

MALAY S IA

AGRIrjTT.T-rAL SECTOR SURVEY

PERCENTAGE INCREASE IN TOTAL DEMAND FOR FOOD PRODUCTS

Annual Growth Rate

e 1968 -80

1968 - 75 1975 - 80 1968 - 80

COMMODITY

Crops and Fruits

Wheat 31.9 21.9 60.7 4.0

Rice 21.3 14.8 39.2 2.8

Sugar 35. 24,5 68.8 4.5

Pulses and Nuts 33.6 14.9 53.4 3.6

Coconuts 26.7 18.2 49.8 3.4

Vegetables 29.3 20.5 55.8 3.8

Citrus fruits 18.1 32.5 56.5 3.8

Bananas 26.4 18.3 49.5 3.4

Pineaples 36.2 24.3 69.3 4.5

Vegetable oils (excluding coconut oil) 48.1 23.3 82.7 5.2

Coconut Oil 42.5 27.1 81.0 5.1

Coffee 54.3 30.6 101.7 6.0

Tea 40.0 14.2 60.0 4.0

Animal Products

Fresh Milk 60.1 38.5 121.8 6.9

Reconstituted milk (fluid milk equiv.) 50.0 33.5 100.5 6.0

Beef 58.0 36.0 114.9 6.6

Mutton and Lamb 61.5 36.5 120.5 6.8

Pork * 46.8 31.2 92.7 5.6

Poultry meat 54.6 38.3 113.9 6.5

Eggs (Fresh) 50.4 34.0 101.6 6.0

Fish 31.9 21.8 60.7 L.0

Butter 50.0 28.5 92. 5.6

Animal o-1- 34.5 27.4 71. 4.6

Pop. growth rate = 2.8% p.a.Per Capita income growth rate = 3.1%p.a.

* Consumed by Chinese population only (pop. growth rate 2.4% p.a.)

ANNEX 9MALAYS IA Table 3.3

AGRICULTURAL SECTOR SURVEY

GROWTH IN DEMAND FOR FOOD PROIUCTS

Projected Annual Rate of Growth of Demand Commodities

I Low (less than 3%) Rice

II Moderate (3.0-4.5%) WheatSugarPulses & nutsCoconutsVegetablesCitrus fruitsBananasPineapplesTeaFish

III Intermediate (4.5-6.o%) Vegetable oils (excludingcoconut oil)

Coconut oil

CoffeeReconstituted milk

PorkEggs (Fresh)ButterAximal oils

IV High (more than 6.0%) Fresh milk

BeefMutton & LambPoultry meat

March 19, 1971.

ANNEX 9Appendix

MALAYSIA Page L ol'

AGRICULTURAL SECTOR SURVEY

NOTES ON PROJECTIONS OF DOMESTIC DEMAND FOR FOOD PRODUCTS

1968-1980

1. Long run increases in demand for food products will be largelydetermined by (a) population increase and (b) changes in per capita in-

comes and demand responses to these income changes, i.e., the income el-

asticities of demand for food products. No allowance has been made for

the possible impact on food demand of changes in the age composition of

the population, in the distribution of income, in dietary habits, or inrelative food - non food prices owing to the obvious difficulties in

quantifying the effect of these factors.

2. There is very little information on consumption of food at

different income levels available in Malaysia. The only householdbudget survey available was conducted as far back as 1957/58. Moreover,

it presents consumption data at only three income levels which is in-sufficient for t. purpose of measuring the correlation between changesin consumption in response to changes in income.

3. Owing to the above difficulty, the primary source for the co-

efficients of income elasticity of demand used in these projections is

the FAO "Agricultural Commodities - Projections fDr 1975 and 1985". An

additional source utilized is the studies on oneand for food productsprepared by "Hunting Technical Services", a London based firm currentlyworking in south-cast Jahore. In the case of products whose incomeelasticities of demand, arrived at by FAO, were clearly inconsistent withwhat the miision fe].t was the actual situation, they were altered accord-ingly.

4. In studying demand projections for certain livestocl prociucts in

Malaysia it is important to take note of the diverse dietary habits amongthe various components of the population, based on racial and religousmores. Pork is consumed almost exclUsively by the Chinese population,while beef is consuned largely by the Malays and Pakistanis. Mutton con-sumption is accounted for mainly by the Malay, Indian and Paki tani com-ponents of the population. Freshi milk, however, is consumed mainly byIndians and Pakistanis. Except, in -The case of pork where Chinerse arevirtually the exclusive contsumers, it is difficult to arrive at a quantifiedconsumption breakdown on an ethnic and religous basis for each product. For

this reasoni, the religouis and racial diversities in consumption patternshave not been incorporated in the demand projections (except in the case ofpork).

5. Total domestic consumption for each commodity in the base year, 1968,has been arrived at by subtracting net imports from total domestic productionfor that year. Owing to lack of information, utilization of stocks accurnuJatedin previous years has been discounted.

ANN EX ()

Append i x{'a; e , i o l,

-2-

6. Population growth has been assumed at 2.8% p.a. and pet capitaincome growth at 3.1% p.a. based on a GNP growth rate of 6% n.a. Onthese bases, per capita and total demand for food product,s haa been pro-

jected to 1975 and 1980. Individual commodities have been classifiedinto four categories on the basis of tJheir projected annual rate of' growthin demand. Rates of growth may be described as low (less than 3%), moderate(from 3.0 to 4.5%), intermediate (4.5% to 6%), and high (more than f.Op).According to these criteria, commodities are grouped by class in Table 3.

7. From Tables 3.1, 3.2 and 3.3, it is clear that the grea$cst. iln-crease in demand will be in livestock and dairy products, all which areprojected to have a demand increase of over 100% from 1968 - 1980 (exceptpork). The demand for pulses, nuts and cereals (e.g., rice) is projectedto have the smallest percentage increase. This is typical of most counLriessince demand for livestock and dairy products is relatively income elasticand that of' cereals and other staple foods relatively income inelastic. Itshould be pointed out hiere that the increase in demand for poultry meat islikely to be somewhat higher than projected. This is because production of'table birds is expected to become increasingly commercialized (from l10% ofall table birds marketed now to about 70% by 1980) resulting in greaterefficiency in production and marketing techniques. This would lead to adecline in costs which would in turn suppress prices and thereby stimullatedemand even J'urther.

March 19, 1971

ANNEX 9

. SECTION IV: FOREIGN TRADE

MALAYSIA

AGRICULTRAL SOR SURr ANNEX 9EXPeRTr OF MAJOR CO9OOITIES (MALAYSIA), 1965 - 1969

(S Hf Miion Malaysian)

1965 1966 1967 1968 1969(a)

Rubber

Export iolume ('UOD Tons) ,, ,. 950.7 997.1 1,026.9 I, 153.t 1,333.5Export Value (I Million) .. .. 1,461.8 1,473.9 1,274.6 1,353.2 2,031.0F.0.6. Unit Value (U Per Lb.) .. 69 66 56 52 68.0

Tin and Tin Concentrates

Export 0Ltume ('000 rons) ., .. 73.9 72.4 74.4 87.0 90.4Export Value (I Mi lLion) . .. 71. 792.0 755.6 829.7 939.7F.O.S. Unit Value (2 Pcr Ton) ., 11,797 10,939 10,154 9,535 10,395

Round Tifb6r

Export Volume ('000 Tons) , .. 3,355.1 4,536.4 5,010.6 5,811.8 6,146.3Export Value (S Mil lion) .. .. 262.3 38L.8 475.2 548.9 601.5F.O.E. Unit Value (2 Per Ton of 50 cu.ft.) 76 85 95 95 9L

Sawn Timber

Export Volume ('OO Tons) .. .. 520.8 496.3 592.5 772.4 845.5Export Value (8 MIoni .. .. 95.4 bl.5 105.2 147.4 165.0F.O.B. Unit VaLue (2 Per Ton of 50 cu.f1.) l 83 164 1 78 191 195

Iron OreExport Volume ('000 Tons) ., .. 6,634.2 5,680.7 5,245.9 5,iO6.7 5,220.9Export Value (9 MilLion) .. .. 161.3 136.2 122.0 110.8 114.6F.0.8. 6nit Value (8 Per Ton) .. 24 24 23 22 22

PaLm Oi L

Export Yo Lume ('000 Tons) 1lO.9 l^1.7 185,9 281.1 348.9Export VaLue (I FiiIon . 107.3 120.1 116.0 124.5 ISi.8F.0.O. Unit VaLue oer Ton) * - 762 661 624 442 435

P,r,m KerneLs

Export Volure ('000 Tons .. .. 18.7 23.3 24.9 35.0 38.0

F.O.B. Unit ,iLue (2. Pir Inj) 471 399 371 440 350

Export Volune (|000 Tons) ,. ., 18.8 14.4 20.7 24.1 30.3Export Value (8 Million) ., .. 44.3 35.8 37.4 36.4 55.4F.O0B. Unit Value (L Per Ton) .. 7,356 2,1,86 I,303 1,513 1,826

CooraExport Votume ('000 Tons) . .. 0.5 39.1 16.6 18.6 18.5Export Value 18 Hiliion) .. .. 23.7 18.4 7.3 8.6 8.3F.O.B. Unit Value (u Per Ton) .. 585 471 438 465 449

Coconut 01L (Crude and RefI ned)

Export Volume ('000 Tons; .. .. 20.0 27.9 32.1 42.2 28.9Export VaLue (8 MillionI .. ,. 18.2 21.8 25.1 40.6 24.3F.0.8. Unit 4alue (e Per Ton .. 910 761 782 964 841

Plneapple Canned

Export Volume ('000 .. 53.0 58.0 61.7 1 65.9 64.3Export Value (I l li in) .. .. 40.1 43.6 4 2 47.6 44.6F.O.O. Ilnit Value (9 Per T1n0 .. 757 5Z2 7.T 725 694

Total line Exporto 3,095.0 3, 117.4 , 9tl 1 3,263.,j 149.5

Other E.njrt~ 687.6 728.4 751.7 859.1 92.3

Tot3l Egrorts 3,782.6 3,845.8 3,722.8 '4, ?,5 ,041.8

2oursti Malaysia Annual haltatin of Statistics 1969.

March 1.9, 1971 41

MALAYSTIA

AGRICULTURAL SECTOR SURVEY ANNEX 9Table b.i

(1~ dLl.' iectinri1y2 9. f rt 2'. Q(, 19/ '}; 1;

0.1 l4iry Icod cctfn: lve arids,> , ci,it atnd mostprop::ratlr:n': 151.1 232.9 ':3. h 1515.( 7;.3 ),I., I24 2. J .'

0.2 4-1C' I1c. I6. 21b 1 192.3 1J,?.u) I 30. 1 202.0 175;. I '.0D.13 (<ther 17r':le S 7i.5 Y5.fl 313 1099c 121? .-( 17J1. I131.7I I 1K' 15!,. ]0. !, Kials: an:? fin,ih pr.;pa r:ct.Liis 36.3 33.1. 1,0 /. 1:2.1, 37.9i I' 1 )7. "I. ht.4 I 3. 00.5 Fruits and ee;je I ncludzi;c pr-paratJons, 77. 2. 8]. 6 11.1I 95.I1 51k.) 1(10. 9 97.9 91 .' 93J.50.6 Animal Ccrdili,c: sturC' 32.0 1',2.9 116.3I 55.5 " 63.!2 6 5.! 6?.. /2,. I 61 .O0.7 Otho,r f.os'f )3 113.5 --1>9 16.0) J $U. 1 <52 9 3 1 2'

Sect~;-v rzim *.-s P rnvc.n'-j aol tA'I:I;c' 127.7~ lilt 6 f ii3 13j >. c 7 :1.1 'Myrn 'cm ¼nalnl, srsn'ffic) Jo.? ich,(~~~~~~~~51. 3:.' n 2. 3 {6P.o 2" I .r ")'

I.? I2b'cL;,. '19.7 (1. 1I 72.'1 1j;3 26 11 i. .

.entiOi, 2 [r,irdJOcri.k2'1...: :11 1-0? l ;1 22 1,, 233.,2 1/1' I (. .'

21 1S'ud.: rulbor P2. 11Y.5 it'J 51..), 51,. 19.7 ' ,0 cW1 1.2. 2 Tic, nrc. 12P.2. 0 17/.6 <tIc 1 107.3 72'.21 22.-7 321 A 12: W5 32>.2.3 Othcr cru'Ic mat:;ria's 89).7I 83.1 W? ccO 79.7 V15.3 91 .3 89 1 2/r 1.. 99.2,

S-enti.cn 3 I- c'nral fCurls 355.6 %56.0 31.5 36!)!, i ' 353. 5 f,' 7 (it. 7 50. .6.

3.1 Crud., ctroleu,w IP.9.9 191),.-5 2.1< .2 200.9 1.. 30%. 0 3 32.Sic<. 3423.2 Ref1ined ptlunand pcrlvnpr odut 166.7 I181.5 195.2.L I j 106.1. 19.3 132:? 131 2. 1

Section 1. Animal/ve.otable oils anti fats 15.7 17 )).h 25J 263.1 2 15.-2 25.1 219 29.5

Section 5 -ClIumirAls uff½Ž. 1573 1239 201.3 ?_ 2212'.0 729..1 2351.21 772. 1

5.l Ic~dicln3l tcs30.0 29.14 30.9 33.6 39. I.6.2 4,. 7 1 9.0C 52.25.2 Porfun,er., and tlr:2.1... 18.0 I15'.6. 25.?, 16.0 725.5 17.7 25.6 27.05.3 OCe~nical ecompo's:ds and othovr ci:erical

products 127.5 125.9 t.3.1A '<52.3 1I78i. 2 187.3 165.7 165.0r -195. -9

-ctln'.S -inif:I zrunre I -modeA 173.2 ~2Li 7(9~ 532:.? 5>77 tot;. 592. 613 622

6.1 Metal and rietal proricets 275.1 212.7 229.9 22,.2 252:.l ~ 27?.). 273<, 2 67. 263.66.2 3'ertiles 117.6 109.6 iL5.«~ 1't .5 11.7.3 115.12 10•i.7 1772. 2 1>".6. 3 <s'per and T:cp.-r prncl: 3.i Jt 5.6 :99 "0.:, 67.2 7.1 717 78.). 0~5.5

68 thr nani-factcU'od n'ns136.6 166.9 129.7 150.1j 156.21 D,5.6 121:.85 93.)it 772

Sect I nec 7 - 5nicocnc I traf.;'-c rt. "ccc 'cxnenl 1. 58.0o 561 .21 6<3.02 '_ IL2 70.6 729.7-_ 731:.? 792.7? 212 r.7.1 Non-eloctr. c mnochinery 350.7 21 5.5 221 .3 2 32

c.' 256. -1 32i, .3 319.5 31,75 II; 7.2 Electric nachiner,( 176.7 110.7 13:L.7- 11,7. 151.1 15':.( 15f.8~I 1 .. 7 .1:7.97.3 Trarcopztrt equ)wuenc. 120.6 235.2 2(3. 7 22,9. 3 371.1 296.0 257.9~ 307).5 35,;':

Section P3 - Lclnees manufacturvd articles 160.7 171.7 1 17.?II 1911 .3 2r1/x3 3816. 9 1 93. 2 189, 19q2.6

8.1 Clothing and footc!ear 1..5 50.2 56,.0 56.2 55.5 L9.5' ).:3.7 2:2.), 1.6.116.2 Scientiflc instru-nen?s! 21.7 33. 5 23.10 23. 9 22. 2 30.9 3l.5 36.2 35.58.3 Other itemis ~0.5 88.0 1013.0 111.3 222.6 108.5 113.0 107.6 102.1-

Secli-n 9 - iae.ccostranrnnczaons 6,1,.I 66.5 69.,,2 66.0 22.2 76. 2 75.1 66.6 CC).!

GROJSS DYO).lTS 2,815.7 3,056.3 3,192.6 3,205.3 3,356.1 3,379.9 3,325.0) 3,554.6 33,1.510.9

1.j 4xccudinL; inports of nilitaLry equipment and amnurnt&o:,.

Source: Ikepartenent of Stati.stica, W.103aia&

M4arch 19, 1971

ANNEX 9MALAYSIA Table b.3

AGRICULTURAL SECTOR SURVEY

Imports and Exports of Live Animals Mainly for Food1965 - 68

West Malaysia

Number of Animals Value (M$ 1,000)Species 1965 1966 1967 1968 1965 1966 1967 1968

Imports

Buffaloes 6,602 5,285 4,094 3,329 2,726.3 2,020.5 1,501.6 1,232.4

Cattle 1,193 3,965 5,457 4,324 250.0 1,024.8 1,414.2 1,083.1

Goats 5 5 18 - 0.1 2.0 0.9 -

Sheep 38,940 43,480 36.620 37,220 1,733.5 1,871.1 1,717.2 1,677.6

Pigs 33,800 27,300 12,500 100 3,138.7 2,205.7 884.3 26.3

Live Poultry 1,330,000 649,000 475,000 382,000 3,284.3 1,367.3 826.9 547.1

OtherAnimals 2C 210 90 1,010 0.4 0.3 0.6 1.2

TotalImports 11,133.3 8,491.7 6,345.4 4,567.7

Exports

Buffaloes 472 515 294 288 175.2 215.1 113.3 73.5

Cattle 52 24 - 15 25.0 6.2 - 3.0

Goats 1,584 1,684 1,589 1,011 56.7 59.9 57.6 35.8

Sheep - - - 140 - - - 5.9

Pigs 16,200 14,400 3,600 - 691.9 588.5 173.4 -

Live Poultry 641,000 582,000 579,000 734,000 120.8 1,216.4 1,170.5 1,478.8

OtherAnimals 1,800 1,370 9,170 6,960 16.1 4.9 21.2 11.2

Total Exports 1,085.7 2,091.0 1,536.0 1,608.2

Source: Economics and Statistics SectionMinistry of Agriculture and CooperativesStatistical Digest - 1969.

March 1.9, 19l1

MALAYSIAANNEX 9

AGRICULTURAL SECTOR SUgVtY Table 4.4

RELATIVE PERCENTAGE OF MILK PRODUCTS IMPORTED1965 - 1968

(Expressed in Percentage of Total Value of Dairy Produce Imports)

1965 1966 1967 1968

'1(0 (%) (%) (%)

Sweetened Condensed Milk 55.2 36.2 9.3 0.8

Unsweetened Condensed Milk 3.5 4.6 3.7 1.2

Fluid Milk Including Cream 1.4 1.6 1.8 2.1

Full Cream Powdered Milk 8.1 10.1 13.4 17.7

Milk Powder, Infant Food 8.6 9.7 13.0 16.0

Skimmed Milk 8.1 14.9 23.4 28.2

Butter Incl. Anhydrous and Ghee 14.2 22.1 34.4 32.5

Cheese and Curd 0.9 0.8 1.0 1.5

100.0 100.0 100.0 100.0

larch 19, 1971

ANNEX 9:4LAYSIA Table r

AGRICULTURAL SECT2LO_ajR

World Production Ex-ports and Impoi's of Palm Oil

(i,000 netric tons)

Average1955-59 1964 L965 1966 1267 1968 1962

ProductionNigeria n.a. 515 530 508F, 325 370 1J25Congo, Dem.Rep. n.a. 165 125 1L7 1 m 2L 0 200DIndonesia n.a. 161 165 174 174 179 lY)Malaysia n.a. 1?3 150 190 226 283 351Others n.a. 232 2_.45 249 261 2 7 319

World Total I,76 1i196 1,321 1,268 -165 1.3h? 1, T,l6

EortsNigeria 1.I 136 l5' 116 17 3Congo, Dem.Rep. 160 124 79 78 115 1i9 :PS 1/Indonesia ?19 133 V16 177 131 1631 I l/l"'alaysia 62 2/ 1^5 l- 11 180 .68 3°9Others 33 5 3 9" 2 - 63

World Total 556 571 550 626 h95 667 700

Retai ted ImportsEEC 2°6 279 249 ?69 252 28. 29LUni ted Kingdo.-m 1. 8 l16 '17 150 98 'IT 139United States 13 3 - 34 9 N'Japan 2) 18 16 ?2: 22 P RIraq 29 50 36 52 5LrOthers 9? 1?7 76 9h ___ 81 931/

World Total '53 ,'- ;1i 6') 5>? 601 G'

n.a. ~ not availabTe

1/ Ea'3timatad2/ Exclu(Ung trade with SingapolE

Source: U.-.. Denartmnmt of Agriculture, _or,,', iriculturl* Productionand 'Trade, July lT7) and pv.'7vous issues; b'AC, fr e Ye'.ar6ook

1 :? and Nionth l 3Buletin of Avricult'ira1 Econowi.cs anC'. tat-isLLcs, Oct. 1970; 0ECD, Tfra(le by Conmodt_ies, Series C.

ANNEX 9

SECTION V: PRICES

MALAYSIA

AGRICULTURAL SECTOR SURVEY

C.)~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

West Malaysia - RetaOl Plrice IrdidAces' , 1961-June 1970

(1559 = 159-

Total Beverages Services Rent, House-Weighted &nd and Eter- Repairs, and hold

Pe od Indrx Food Tcbacco Clot:hing tainLm3nt etc. 2/ Su n di-' es Power Transport Goods

Weight' 1.000 .671 .071 .049 x046 .044 .036 .033 .031 .019

196Q1 99.6 99 99 102 100 101 106 98 102 100196? 99 .7 100 1C 102 55 101 108 97 102 i1o1903 4r_3 lGh 101 100 83 101 107 97 103 10

102. 4 10 L 101 101 83 101 108 96 103 1001f ,- 102.3 103 102 101 89 102 112 95 109 10119OD .03.? 1Ch 134 103 94 103 112 95 109 101-`67 108.0 10 105 103 95 10h 112 97 109 1021968 108.2 109 l05 103 22a Ioh 115 98 110 1021969 107.1 1O3 107 103 108 105 115 98 111 100

1969 1st Quarter 1C6.8 107 106 103 108 105 116 g9 111.3 1002i i rt:; 106.7 107 107 103 103 lOL 115 98 111.2 1003rd Quarter 107.3 108 107 103 103 104 116 99 111 100Lthl Quarter 10?.7 109 107 lOL lo 106 115 99 111 1CO

1970 1st Quarter 103.8 108 107 1DL4 108 120 116 100 126 1022nd Quarter 108.0 107 108 105 108 120 116 100 126 102

1/ Quarterly and annual indices are averaues of -monthly indices.2/ "Ybent, house repdrs, etc." ituem has base 1960 = 100 since no reliable figures were available for 1959.?/ Retail price indices have weights based on data fron 1957-1958 Household Budget Survey.

Scurce: Deartmeent of Statistics, Malaysia.

HID.

MAIAYSIATal5 2

AGRICULTURAL SECTOR FgjR

RUBBER, PAX OIL & COCONUT OIL PRICES

RUBBER COCONIJT OII,

Prices of RSSI, f.o.b.5ingapore and spot. prtceNew York -1960/1970 Malayan ,Thite Ceylon

Singspore New York c.i.f. Europe c.i.f. Europe

(MO p.1b) (US¢ p.lh) (US$/LT) (Us$/1.T)

1960 108,1 38.?

61 83.5 29.5 235.2 ;Y.o

62 78.2 28.6 219.5 255.4

63 72.4 26.3 226.2 286.7

64 68.1 25.2 244.2 300.1

65 70.0 25.7 277.8 365.1

66 65.4 23.6 239.7 315.8

67 54.1 19.9 226.2 331.5

68 53.1 19.8 172.5 378.6

1969 - Jan 58.2 22.3 160.8 405.1

- Feb 64.2 24.3 n.q. 402.7

- Mar 69.3 26.2 182.4 394.3

- April 70.8 26.7 172e8 382.3

- May 67.8 26.1 170.0 358.8

- June 69.6 27.2 168.0 344.4

- July 74.1 28.7 164.4 332.2

- Aug 78.9 30.3 174.2 336.0

- Sept 73.8 28.1 183.8 337.9

O Oct 68.4 26.2 206.4 342.0 1/

- Nov 61.5 23.9 n,q. 363.1

- Dec 64.2 24.1 259.2 406.3

1970 - Jan 68.7 25.7 259.4 412.3

- Feb 65.4 24.3 260.4 412.8

- Mar 60.3 22.4 263.0 412.8

- April 57.3 21.7 271.9 412.8

- May 56.7 21.5 283.2 405.6

- June 56.1 21.3 281.5 396.0

- July 52.2 20.0 265.2 396.0

- Aug 5o.7 19.5 244.0 384.0

- Sept 49.8 19.3 229.9 387.1

- Oct 47.4 18.2 ?61.6 404.9

- Nov 51.0 19.1 274.3 408.0

- Dec 50.4 19.5 257.6 411.0

1/ January to October 1969, average

n.q, - no quotation

Sourcet International Rubber Study GroupIBRDt Economics Department

March 19, 1971

SECTION VI: MISCEILNEUS

ANNEX 9MAIAYSIA Table 6.1 a

AGRICUL-TURAL SLCTOR Suavir

FLDA Land Devesloment Proegram. 1966-1975

A. First Malaysia Plan. 1966-70kin acres)

1966 1967 196& 1969 i073

1. AcreagesTarget Acreage 2 ),30 9, noJ 29,000 30,000Achieved Acreage ?e,I7L 27,379 33,388 38,2109 51,5611/Excess/Deficit -3J526 +6,379 +4s,3e8 -9J249 +21,561Target Acreage Cum.2/ _2,000 53,000 82,000 111,000 ll41,000Achieved Acreage Cum. 28,h74 55,853 89,241 127,490 179,0511/Excess/Deficit Cum. -3,526 +2,853 +7,241 +16,490 +38,051

2. Settler Intake (Families)Achieved Intake 1,h65 1,670 3,791 2,619 3,8001/Achieved Intake Curr.. 1 ,465 3,135 6,926 9,545 13,3453/

3. ExpenditureV/ (M$ '000) 2y,0838 W,295 52,020 57,321 83,058-Jengka Triangle - ( 1,257) ( 3,454) ( 6,878) (11,058)-Non-Jengka (29.088) (39,038) (48,566) (50,443) (72,000)

/ F1 DA estimates./ Cumulative.3/ Target for cuulative 1966-1970 under the F.M.P. is 12,673 faK..lies.i/ Figures for 1966-1968 are aotual. Figures for 1969-1970 ars FLDA's revised estimates.

Source: F.L.D.A., *ialaysia.

-AAYI ANNEX 9

A_RICULTURAL SECTOR 'Nble 9.1 b

FLUA Land Develororbnt Prorr.oi', 1.066-19751.Second KYIT i11

(in acre -_

_ _ _~~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~ _ _ __ _ _ _ _ _ ___ _ _ _ _ _.

1. Target Acreage O0O°° 50.000 02o02O 50,Co0 5;,C oo :,,;,of whicht(i) Rubber

-Jengka Triangle - ( 9,071) 8 8,637) ( b,349) ( ,235) (26,2Q2)-Non-Jengka (25,000) (15,929) (16,363) (20,65).) (20,765) (Qt0,708)

(ii) Oil Palm-Jengka Triangle (13,1l31) ( 3,6h5) ( hl,040) ( 9,]40) ( 9,176) j , -Non-Jengka (11,866) (21,355) (20,960) (15,860) (15,828) (J5,6$)

2. Target SettlerIntae'e (Fanilies) 4 482 B 556 L 380 i I 76 ),-ol 2? ,

-Jengka Triangle IF17 3 Yb3 T472 -T-Ncn-Jengka 2,849 3,135 3,133 3,269 3,105 15,5fl

3. Estimated Eppenditure 55,212 59,126 61,838 64,941 60,955 302,072(F $ ,CYDo)of whieih(i) Development F.penditure1/ 36,980 39,721 43,494 47,154 49,710 217,r5)

-Jengka ( 6,193) ( 5,7h1) ( 6,369) ( 7,216) ( 8,469) (33,588!-Nion-Jengka (30,787) (33,980) (37,125) (39,938) (41,241) (183,071)

(ii) Ot.er2/ 18,232 19,05 18,34h 17,787 11,2b5 85,013

Includes land clearing, house Bite development, oonstruction of settler houses,subsistonce costs and operating coats.

2/ Processing and marketing facilities and miscellaneous expenditure (e.g. research,loan service charge, etc.).

Sourcet PDA, Malaysia.

Ma,rch 19, 1971