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INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

INTERNATIONAL DEVELOPMENT ASSOCIATION

MALAYSIA - REVIEW OF THE ECONOMIC SITUATION

(in two volum;-es9)

VOLUME II

AGRICULTURE IN WEST MALAYSIA

July 10, 1967

Asia Department

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rCTTD DI'DXT( V V'C-TTT17 A 7 VXTTr

Currency Unit - Malaysian Doliar

1 Malaysian Dollar = U. S. $0. 3271 U.S. $ = M$ 3.06M$ 1 million = U. S. $327, 000

TABLE OF CONTENTS

Page No.

I. OVERALL TRENDS, PROBLEMS AND PROSPECTS

Introduction 1Recent Output Trends 1Agricultural Problems 2Plan Objectives 3Trends and Prospects in the Maii± Crops 4

II. INSTITUTIONAL ASSISTANCE TO SMALLHOLDER AGRICULTURE

A mrinl tmrnl (.nlornPrtAvP r nri (Crpr14. t. 9

The Rural Cooperatives 11

Overlap between Cooperatives and Farmers' Associations 12A1fernM-Aue flh nne. of' Gred't- to arnr 12Agricultural Extension 13The- Fednranml Anoic1tulfr:al Mnrket.ing Ait+.hori.ty l)t

Research 16A,- icultural Education. 17Summary 18

III. LA1ND HUNGER IN A NATION W4ITH PLENTY OF LAND

Land Availability 19Recent 2an0 DevU,U Trends

Federal Land Development Schemes 21Fringe Alienation 23

State Settlement Schemes 23State-uOwed PlantaonsIllegal Squatters 26

IV. COITCL -- L9

STATISTICAL APPENDIX (Tables 1-9)

NOTE: - Tnis is Volume 11 of a report prepared followinlg the VIbst of aneconomic mission to Malaysia in November/December 1966. The missioncomprised E. Bevan Waide (Chief of mission), AftaD A. Khan!l ShinjiAsanuma, and J. Price Gittinger. Volume I of the report is datedMay 19, 1967.

This volume was drafted by J. Price Gittinger.

CHAPTER I

OVERALL TRENDS, PROBLEMS AND PROSPECTS

Introduction

1. This volume examines recent trends in agricultural production andreports on some of the agricultural policies adopted by the Government.Because of the large scope of the subdect, the report is necessarily selective.It does not deal with East Malaysia,l/ and in discussing West Mala-ysia theemphasis is put on the smallholder economy rather than the plantation sector.Forestry and fisheries also are not discussed. The problems of the smallholdersector are perhaps the most intractable that Malaysia faces - unfavorabletenure relationships. a paucitv of anDlicable knowledge to heln smallholdersdiversify, an acute shortage of agricultural administrators to disseminate newideas, etc.. as well as certain institutional nroblems. Also. the ruralpopulation inevitably continues to increase and an expansion of the land area,as well as an increase in prodiinetvit.v is n cessqrv if rv,rnl inGrmg's are torise. Thus, after a general statement on recent progress and current plans inn.h:nf.pr T - nhnn+.cor: TT mnAr TTT nro Aawn+r*.aA uF.n +.nn Aninzl rnyn -n+- rsf; 4n!v^+. +.11+.; rmnlChapte 1, ChpesII an --- are devoed to the development ofintuioaaids to agriculture, and land settlement problems, respectively.

Recent Output Trends

2. Aggregate agricultural production in Malaysia grew by 42% in theperiod .L Jfrom .) 1959 to. 1966, or.J . ate en O.44arnua' ratJ.4.4. of O 5 1%, A. ~ qui .a S4 erdab..le

pace of expansion by international standards but still slaw in terms of,M,, ~ -1 -4 -1a-it- deelp.e, miio.. h co,bir.ed Jndex for a' 11 tcrp) .1AU V-~L~.4j&L11U.A Ca.LILI VJ.L L QJJ~* .LKL1 %.'.JJ12.L.L.Lukt. .LL LA .5.4e 5 f aU.i. expa rb4. U ' vJ

(which account for nearly 70% of the value of agricultural forestry andfisbheries production) --- Ad forw-ar at- - rate- ofP efLV 4a, yer,-w,ie heo~ 1V .H~'4U X~IJL'Ji/ In..Vt5U .LJ± WCL 51 0.5. C 0. CZ . 0IjV \.5.1 ,)fO a. YUCL.J., WII-L.WU U11%, UUq.jUU.

of domestically consumed products showed an annual rise of around 5.8%,inLdicating that their production not only kept pace with population and incomegrowth but that there was some significant import substitution. Despite thisimpressive performance in output growth, the value added in currernt pricesby the entire agricultural sector has grown at a rate of only 2.9% per annumsince 1959, primarily Decause of a snarp setDaCk in the unit price Of thedominant commodity of this sector - rubber - from 102 cents per lb. in 1959teL) 65 centl- 11s in 1.'L6

3. Th-ne agricultural sector can in essence be divided into threesegments, the estates, the commercially-oriented smallholders, and thesubsistence smallholders. The estate sector has been responsible for Justover half the agricultural investment in the past six years, aided by therubber replanting subsidy, but no large new tracts of land have been alienatedto estates since World War II. Overall, the estate sector has shown anaverage annual increase in output of about 3%, accelerating sligntly recentlybecause of the rapid growth in oil palm output. However, there has beenhardly any change in the aggregate value added in current prices (aboutM$880 miUion) despite a 40% fall in the rubber price over the period. Inother words, the estate sector has maintained its position partly by

-/ The economriies of Sabah snu Saaww. ar-e ho-weve, Utdesritbdu ir. A x Iand II in Volume I of this report.

increasing total output by about 20%, and partly by increasing efficiency andthus reducing costs, Also by about cO0. This is an impressive performance,partly responsible for keeping Malaysia's per capita income as high as it is.In thelu absOU4kerc of ti 1 UAs in ±and area, however, the estate seetor is un-likely to be a growJth sector in the foreseeable future, given the prospects ofsonir fur`het-. decline in the rubDer price, although palm oil output wilU be adyr-ainlc element.4The biuggest proupuorU±Vi±. gro-wth in recelt yearsi has Ueen thab of

the commercial producers, responsible for the output of market garden products,liNvestock , poultry, some fruit, animal feedstufis, etc., and including as wellas some large rubber smallholdings. This sector, predominantly Chinese origin,has responded well to market incentives, albeit receiving little uovernmentassistance. Overall, it appears that this sector has increased output by about60% over the 1959-66 period, and iniereased value added by about 40%.

5. The third sector in agriculture comprises the subsistence smallholdere,most of whom are Malays. This group, numerically by far the largest, isresponsible for most of the rice production and also engages in the small-scaleproduction of rubber and coconuts, fruit and other staple crops. To date,investment in this sector per head has been much lower than in the other twosectors, so it is not surprising to find an output growth of only 22% overthe 1959-66 period, or a growth in value added of around 19%. Recent heavierinvestment in rice irrigatiorn and land settlement should, however, help improvreincomes in this sector.

Agricultural Problems.V

6. The problems of the agricultural sector are easier to define thanto solve. Basically, because of the price prospects for rubber, the existingheavy investment in rubber will probably not be a source of further incomegrowth exceDt insofar as the acreage is increased in land settlement schemes.Oil palm, however, will be a dynamic factor. There is thus a pressing needto diversifv into other crons. and to inerease oiitnut. of stanpl such asrice, produced by the poorest sector - the subsistence smallholder. Part ofthis need to increase incomes of the poorest rural people can be met byincreasing productivity on existing land, but, given the increasing ruralnonulation and the limits to rlral-urban miarationn- some. innrease in the landarea is also necessary.

7. Solving the above problems is in turn delayed by secondary factors.R-ten,ding the land area under cultivati on usin.g settlement schemes, has runinto some serious difficulties, apart from those schemes run by the FLDA.Pushng ahead wIth increasing the producti'ty of e-istng lan.d -ad dversi -fying into new crops has run up against a barrier of lack of applicableresen"ck resul+s, A C!.4 radequa+ue i-r.centive +o q sna,,lholrA-, 4P ̂ 1 .,g - the

lagging development of institutional aids to agriculture such as credit,AMr-n .-.A services,n t h,

4.e 1-Ukea thProbly +he aceuisitioni. of newv alueS Wan .rn

1/ Ar-icultural Problems and Plan O1-.4t . -'-cs more fully in the

last Agriculture sector report - Volume II of "Malaysia's DevelopmentProspectvs Wad Plans'" (FE-5la) dated FebrLuary 0, L966.

new outlooks is no less significant than improved production techniques orbetter institutional arrangements. Furthermore, the problem of properorganization of Government functions in agriculture has also a crucialsignificance for the realization of development objectives in this sector.Recent developments in the provision of institutional assistance to smallholder,and in increasing the rate of land settlement, are discussed in Chapters IIand III.

Plan Objectives

8. In the light of these problems, the approach of the Plan is quiteappropriate. Its objectives are: (a) increased numbers and higher quality ofagricultural staff; (b) more intensive agricultural research; (c) adoption bythe agricultural community of improved cultural practices and patterns ofproduction; (d) increase in cultivated area; and (e) steps to overcomeinstitutional shortcomings in tenure, credit, processine and marketing. Asthe shortage of skilled agricultural specialists and the paucity of applicableknowledge are the two most serious imnediments to increasing outDut, the Planwithin the framework of its objectives of agricultural development, assignsthe highest nrioritv to agricultural researeh and education.

9. Tn Pmrenditrire termT- the 1960-7O Plan nllnrnti n of M.900 million,more than double the 1961-65 expenditure, puts heavy emphasis on irrigationand drainage (M5A1Q million or 35%) and land settlemen.t (M$335 million or 37%)which thus together account for almost three-quarters of the expected spending.Most of the remainder is accounted for by crop subsidies, 10%, (mainly rubberreplanting grants) and the development of agricultural training, and extension,facili+4ties, LI4 Ir Te ffec^+ +hi pan++t o nrepresen+s a aon-tinuation of past practices, with additional emphasis on research, thedevelopment of iretituti4- or.al aids 4- to agrioultu re 1-4n 1b n u a large

I _ I MJ W _ ~ ~ ~ ~ ~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~L~~~~~~~ WAL ~~~~~~~~~~~~~~~~~~~~U.L~~~~~~~~~~~~~~~~~~A.446 uk, ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ~~~~~~~- rU L VS' U

and better staff in agricultural institutions. New programs to introduce newcrops are t U1hus necessar.i.l.,yJ postponed -.til 4the 19.70's, by-.4A which 4.1-

groundwork should have been undertaken. As far as can be seen, the irrigationar.d~ ~ ~ ~ ~ ~ ~~~~~~~41 driXg 1-1djue a-e wllb cive,teb' of th-e alLocation-~~I1U U±dJ t1:.& UJ.J~i1UJ.LULLeV Ul,d..L W-J. L.. U3 CLk41i±LVt3ZU, U11V LUU.LZ'.. '.1 UliLt a..'SJ.±.

being on the IBRD-financed Muda and Kemubu Irrigation Projects. The expenditureonJ la..d settler.er.t, 1hoWVrL , W-wLJ-.

1JAL,J-CML..LJY UV weLL belo.W expectat io.s fAor th

reasons discussed in Chapter III. Research has got off to a slow start, ash,as ,much of the agricU.lUur?al educatuio ogr-a.cul Tha UevelQp1mnt of most otheMrinstitutions, such as credit, (but with the notable exception of marketing),

-. S = -~~~~~~~IUUL .u- Ue reasons dicuse Ina~nn ..Xl.Mewisie isbeUt}-lindbIlvU for thl [-5DXA ViOu;DUV sA WGV1C L.L

iO. Tne publiic sector agricuiturai program for thne 1966-0u period is

thus not one which will have much effect on output until the 1970's. Theinvestments in rubber and oil paim on settlement schemes have a long gestabionperiod so such growth as will occur in these crops is mainly the result ofpast investment. The expectation of a sharp increase in output in 1970 fromthe Muda project area has led to the projection of a doubling of the rate ofgrowth of rice output, although in practice it is probable that the Mudaproject will make a slow start and not have much impact until the 1970's. Theoverall output projections are seen in Appendix Table 1. In terms of physicaLproduction, the overall expectation for the 1965-70 period is for a growth of6.0%, with export products growing by 6.2%, the picture being dominated by

rubber, 6.3% and oil palm, 14%. The output growth of both rubber and oilpalm is about twice that of the oreceeding five yenrs; and already smallholderrubber output is exceeding expectations.. The aggregate output of domesticallyconsumed products is projected to grow at about 5.6%. sliphtly higher than inthe past, with continued buoyancy in output of fruit and vegetables out slowergrowth in livestock as imnort substitution possibilities are exhausted. Thistarget will not, however, be achieved unless rice output grows rapidly.

Trends and Prospects in the Main Crops

(a) Rubber

11. Rubber is by far the most important crop produced in Malaysia,accounting for 19J.L of eVVsU II 4.zl.a.LL gro.ssQ domesic U.LIprodUUI..U aILnU 6JW/0 %j.L of ne

agricultural output in 1965. The program for replanting with high-yieldingaLtUe rl, begunL± in. e s with.L W.UI Y J.ejaU LUI ghtL1U n11 is J3 LLIJ 1rW ng

resu'ts with increased output and reduced unit costs. Nearly 80% of all rubberu ate _1 s n_ r- _ _-4 3 --' 4X1 - -L- _ _X --I _3 - - ._ _ _- -- _I S4 -4_ _eonl co Ud.Ut;: tO LUW j-L.L.LL UeU WI LU11 1L1i-.±.LUli lIg anI'1* d X dflU .lit U1UJe mIoUr e Ud.U

replanting is expected because of the greater relative returns now beingouubtaned± fUroi oil pa.UIL. In iacU, llai UoJ. ruuber e UaUe aureage cuIiLues to

decline slightly by 1-2% a year partly because of planting with other crops andparL.Ly bcUa-use of agz nation into muiizLhnoldings, while tOtal estateproduction rises at around 3% a year.

12. In rubber smallholdings there has been a rather more dramaticincrease in output, as we-l as acreage, although replanting has lagged behindestates, as would be expected. Smallholder planted acreage exceeded that ofestates in 1960 and has been increasing at about 4 1/2% a year since then,largely as a result of Federal Land Development Authority and other settlementschemes. About 50% of the smallholder acreage of 1.6 million acres underrubber in 1952 at the start of the replanting program has now been replantedwith improved clones, and most of the additional 800,000 acres planted sincethen has likewise been high-yielding material, so overall about 66% ofsmallholders' acreage is now in high-yielding varieties. As a result of thisnew-and re-planting, smallholder output has been increasing at about 6.5% ayear - twice that of estates - and in 1965 and 1966 well exceeded expectations*The average yield from that replanted smallholder acreage which is now matureis 800 pounds per acre, compared with only 470 pounds from pre-war plantings.This progress is expected to continue for the next 8-10 years.

13. All told, this rubber replanting program is one of the mostsuccessful smallholder programs in Malaysia. It will tend to decline inimportance in the future, because oil palm and other crops are becomingincreasingly attractive, but it has created a solid basis for growith of outputin the years ahead. The program is administered by the Rubber Industry(Replanting) Board (RIRB) which extends grants of M$750 per acre - financed byan export cess on rubber (a slightly different subsidy scheme exists forestates). Payments are phased to the costs incurred in removing exlstingtrees. replanting, and cultivation, but are made only if, after inspection,cultivation practices are of a standard high enough to qualify. To helpensure high auality, the RIRB maintains a field staff to advise smallholders;

there. Js nlsn a s acty system of checking upon applicnts for gran.ts,and providing suitable planting stock and fertilizer. The RIRB reports thatfrom 1953 +.lwni,rh 1965~ sr.mTh,eld~rd' of Chir.ese dece ac. e', foJ3%o

the total smallholders who received assistance and that they owned 62% ofthe- tot-al acreangVe ir.volved. n,- -cH-4;ntin ---iie are - 4such tha te~~**~ S~ . .LLLV ~.L "'L* ±1V LUJkJZ.CULU.LJLJt6 0UIJ.LU.LUOQ CLL% QUI.,L1 UIJjLdA VIL

smallholders may plant crops other than rubber. The approved crops whichmay be substituted for r-ubber are padL, cocon,-ut, coffee, fruit, sago,pineapple, oil palm, Manila hemp, tea, and - on Penang Island - cloves andrnutmeg. ThrUough L965, Vhe RIRB repUr1eUU 48,036 acres replanted i. tuheseother crops.

1h. The RIRB considers that the replanting subsidy is inadequate tos-uppor a srudllholder family unless it intercrops while the crop is ma urinlg.As a result, the Board's field officers offer smallholders a wide variety ofagronomic advice about suitabLe intercrops. Tne Board recommends principallybananas, pineapples, watermelon, vegetables, tobacco, derris, sweet potatoes,and tapioca as suitable for interplanting. Hopefully, in the future it willextend this list to include more feed crops, especially maize. This extensionservice is well staffed, and consideration might be given to using thisresource to benefit all smallholders, whether or not they are growing rubber,thus supplementing the existing and often inadequate extension system.

15. Since the replanting scheme is financed from an export cess, thereis a limit to the funds available at the present fixed rate of cess, and in1966 the RIRB was forced to announce a cutback in the acreage it could handle,for financial reasons. Since there is still a large area of old and ratherunproductive rubber, which needs replacing with new high-yielding clones orother crops, it would be unfortunate if the RIRB for internal financialreasons was forced to curtail its operations. It is understood that thefinancing of the RIRB, and the warranted rate of subsidy, is under review.

(b) Oil Palm

16. Palm oil output and acreage continue to expand vigorously. Outputhas increased at about 10% a year since 1960 and acreage has more than doubledto over 300,000 acres. The Federal Land Development Authority (FLDA),private estates, and State Governments all plan a high rate of planting,which, if it continues, is likely to bring Malaysia into the position of beingthe world's largest palm oil exporter by the early 1970's, with an importanceto Malaysia at least as great as timber. The relative attractiveness of oilpalm compared with rubber has increased, as yields continue to exceedexpectations, causing at least one estate to uproot young rubber and replaceit with oil palms. In the FLDA's Jengka Triangle Land Development project,probably the entire area will be planted with oil palm. For technical reasons,however, it has not yet been possible to develop oil palm as a smallholdercronp and existing FLDA oil palm schemes are run on a communal basis.

17. So far, the organizntion of this industry differs substantiallyfrom that of the rubber industry. There is no Central Board, such as theRTPB, nor research c sunh as the Ruhbber RAePsrch TnstitutA (RRTT) whichcoordinates Government and private sector efforts to promote the industry. At

- 6 -

present, most research is done by the private sector, so many research resultsare VIA- sh& AA VAv~_J 1113U1~ ed withn the ir.dustry and r.ot W Il 4i11 share te-r reseac-h

results with the Government. The Department of Agriculture has a very smallresearch unit that is inadequately staffed and organized to meet thl1e gro-wingneeds of the industry, although it reports some significant advances with newvarieties Here again, however, it seems that research results are rnot f-ullyavailable to the private sector. Separate research on oil palm is beingundertaken in East Malaysia.

18 . Oil palm has much promise for ivialaysia, and would appear to be acrop which could profitably be wo.ked on jointly by the Government and privatesector, both to advance their mutual interests and to protect the largeinvestment already made. More information is needed on soil management,disease control, planting systems, processing methods and marketing techniques;in addition, as in the case of rubber, more economic work needs to be done onproduction and processing costs and market prospects, so that appropriateinvestment decisions are made. There is, in effect, a strong case for an oilpalm institute along the lines of the RIRB/RRI, financed by an export tax, toundertake the above functions.

(c) Rice

19. Rice, although only one-eighth as important as rubber as a generatorof income and occupying only 13% of the cultivated area, assumes a dispro-portionate importance in Malaysian development. It is the principal foodgrainin Malaysia and as such has a popular importance beyond that of purelycommercial crops. Also, a high proportion of all rice consumed in the countryis imported - 46' in 1964. But there is a less obvious reason, too. Mostpaddy farmers have lower incomes than farmers in other parts of the country,and most are, in addition, of Malay descent.

20. On the whole, efforts to increase rice production over the pastdecade have been fairly successful. Paddy production has increased from549,000 tons in 1955 (during the Emergency Period) to 878,000 tons in 1965,a 4.8% p.a. growth rate. This has been accomplished mainly by yield improve-ments which accounted for 3.5% p.a. of the growth during this period, withthe rest resulting from increases in the planted area which increased from742,000 acres in 1955 to 864,000 acres in 1965. In recent years, however, thelevel of rice imports has, if anything, shown a tendency to rise.

21. An elaborate structure of controls and subsidies surrounds the ricemarket. The price paid to the farmer for paddy is supported by the Governmentat a guaranteed price of M$16 per picul (1 picul = 133r33 pounds), but inpractice reductions for moisture and extraneous matter sometimes drops thisto the neighborhood of M$12 to M8L per nicul. Even this price is considerablyhigher than farmers in neighboring Thailand receive. Accepting the guaranteedprice for the mnment as the actual nriee received hv the farmer, paddy bringsM$413.54 per ton on a milled rice equivalent basis assuming a 65% millingratio. Ir. eeor.trast,, imnn"rtd .mrloa rice tznca reported to have nverpage

M$384 per ton CIF in 1964, so that the guaranteed farm gate price to theMalaysian farmer is the equnvalent of 7% above the landed price paid for

-7-

imported milled rice which is also usually of preferred quality. Of course,to the farm gate price paid in M 'aia rus be 4ddt costs of trar,

milling, and handling down to the retail level, so that it may be seen thatt1he cost- of domes-tic riLce is considerably abov 4that4 of .,,or el ri'ce.

Farmers also benefit from a fertilizer subsidy, which amounts to up to 30%of thle scales price, ar.di' rece' ve irriga-tion wa-Ler in so,,tie areas bue'low cost .All told, the rice farmer, while still poor receives a substantial incometrnseriD' .:Lro ric lLc - uumuIr d±±n taux-payersi -wLJI 2 COI1-2LbU IiL, W L.L.1 -I,Le

Malaysian objective of narrowing the rural/urban income differential. Thetransfer is a substantial incentive to increasing rice production, but onethat still needs supplementing with other Government incentive measures.

22. In order to increase the productivity of the rice farmers and tofacilitate doubLe-cropping, the Government has underway a number of riceprograms. The program to improve marketing practices through the FederalAgricultural Marketing Authority is discussed in Chapter II. The guaranteedprice and the fertilizer subsidy have been mentioned. The Government is alsoconducting a research program to improve rice varieties, and the bulk of thelarge irrigation program is directed toward improving rice production. Underthe impetus of the Muda River Irrigation Scheme and the need for suitablevarieties for double-cropping, the Government during 1966 established a newrice research station in the Muda River area. Many of the best scientistshave been transferred to the station; they appear to be getting the necessaryfacilities to work with, and a good understanding of the place of rice researchin the future development of agriculture in Malaysia appears to be emerging.New links have been established with the International Rice Research Instituteat Los Banos in the Philippines, and a promising variety developed by theInstitute has been introduced under the local name of "riatt . Variety trialsin cooperation with the Institute are progressing, as are exchanges ofinformation and personnel. Much remains to be done if farmers in the Mudaarea are to benefit from the irrigation water as it becomes available tothem, but the basis of suitable varieties has been laid.

23. The largest irrigation scheme in the nation is the Muda IrrigationProject (financed in part by a World Bank loan) which will provide irrigationfor 261,500 acres in the States of Kedah and Perlis. Another, somewhatsmaller, project to improve irrigation on 47,000 acres in the Kemubu regionof Kelantan is about to be undertaken. This scheme is based on a pumpingstation on the Kelantan river with an associated distribution network anddrainage system. The project, to be carried out over a five-year period, isalso beine partly financed by the IBRD. A number of smaller schemes areunderway or are contemplated, but aggregate a much smaller area than thesetwo manor projects. There are no further large proiect sites in West Malaysiaremaining to be developed for paddy production in the near future.

24. Under the Federal structure of the country, the Central Governmentbears responsibility for capital ePmpenditirps for irrigaqtiAon works; bhut thestates bear responsibility for operation and maintenance. The irrigationproram is? Jam +v'Zd +througph the Tliui.Jior of Trrigt*Aon andi Drqinaage within

the Ministry of Agriculture. Maintenance generally is a matter of a jointprogram-, wtwin, Federal offjei.crs +at n th +n+.a 1-eel i,n cag hui+. tT(Yr(t wT ngC vTeryT

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closealy wTrth the State adinistration, Because of the rapi Ac-asv in thearea to be irrigated, the State administrations in some areas will be hardTpressed too mair.tain the h",h rgb rt-n -. .ltesandar-ds that4 r,ow

exist. The cost to the State Governments will also rise sharply unless watercharges., now v,> al-e ir,creased to a 'eve' a' 'eas' sufficienlt to LIee

operating and maintenance costs. Water will remain a scarce input, and therei a sLr -g cas 1o _l - _- I- I _~ _ L n I _- - _- I~ _, - __ - . _ l;j d. ti W,zUug case for tuUyirng tne implLcUation of linrouucing a VUmletric-1usystem of charges rather than the present system which is based on land area.

* * *

25. If agriculture is to play its role in economic growth in the comingdecade, then the productivity of the subsistence producer must be increased.Plantation production is, for reasons of policy, not going to expand much.The smallholder commercial producers, who should be given every encouragementto grow and who should receive much more in the way of institutional supportfrom the Government than they have in the past, can be expected to make asubstantial growth contribution. Their small numbers, however, mean thatalmost no matter how rapidly they expand, they cannot be expected to bringup the rate of growth of the sector as a whole. Because of this problem,Chapters II and III are devoted largely to a consideration of the problemsassociated with accelerating the output of smallholders and small commercialproducers.

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CHAPTER II

INSTImT'rMTT nA AS T CA C'rLcMA?'1TO' F?1C

SMALLHOLDER AGRICULTURE

26'. ~Raising rural incomes requires a sizeable invesuliellu in pDllS4c.Lfacilities, and large expenditures are already being incurred, particularlyin irrigation and land development scnemes. However, if ulil benefits areto be realized from both new and existing schemes, the further developmentof pu-blic sector services to the smaliholder sector is essential. Thisneed is fully recognized and accepted by the Government in the FirstMalaysia Plan, but in most areas there has not yet been much progress. In

effect, the rate at which the output and incomes of smallholders can increase

is determined by the development of extension services, agricultural credit,marketing, research and related activities. A major example is the IBRD-financed Muda River project in Kedah and Perlis, where an investment whichwill exceed M$200 million will enable over a quarter of a million acres of

rice land to be double-cropped. Benefits justifying this investment fill

not, however, be obtained unless these ancilliary services are improved,through improved planning at the Federal level as well as bettercoordination at the project level. This chapter discusses these problems.

ARricultural Cooperatives and Credit

27. One of the areas where institutional development is particularly

lagging is that of agricultural cooperatives and credit to smallholders.Suitable credit available at reasonable - although economic - rates is

important to expanding sales of chemical fertilizer and pesticides, to

imnroving the marketing structure and to the introduction of new crops,

extension of area, or replanting of perennial crops. In Malaysia, there are

in esence twTo kinds of rural credit. One, that for establishing new

holdings of tree crops, is almost all channeled through the Federal LandDevelopment Authority and goes only to settlers on their schemes. Thisagency, the Federal agency responsible for settlement, makses loans to

settlers on its schenmes and later collects from them when their new holdings

come into production. It is quite separate from other Government creditactivities. Relatedito tn t.his Iong-term credit activity is the system of

subsidies for replanting rubber, financed from a cess on rubber exports and

cocon.ut, fruit, etc. The c knnnA inA of erAdit is short-term credit to

smallholders for financing seasonal crops - the credit that will financeimprove..-. in food crop production. Thmi is dise-nssed here. This tvrpe is

also related to subsidy schemes through, for example, the fertilizer subsidy

28 * Most credit reaching smTlholders flow through the local shop-

keepers. Moneylenders as such on the Indian model are relatively uncommon.

Instead, a system known as "padi-Kuncha" is widespread. This systementails repayment of loans, taken at some time from the beginning of theplanting season up to harvest time, with an amount of rice in kind statedin units of the "kuncha", a measure equivalent to approximately 970 pounds.The system operates through a network of shopkeepers whlo are also sma-ll

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dealers in padi. Most are Chinese, but there are also well-to-do MaLayswho participate in this credit structure. The operations of the shopkeeperstend to be quite restricted geographically. It is generally felt thatshopkeepers on the whole will not accept credit risks outside their ownkampong (village). This form of credit has a high risk element and isusually accompanied by high interest rates. Usually, the whoLe transactlonis in hind - the farmer receives the goods he wants from the storekeeper inreturn for padi repaid at harvest - although an increasing number of farmersnow se'tte their debts in monetary transactions. Written records, exceptfor the shopkeeper's accounts, are uncommon. Instead, it is a case of a"regular customer" coming to the shopkeeper and agreeing verbally to repaya loan of goods in kind. A less common kind of credit is one used forlarger loans and is termed "jual-janji", literally "sale agreement". Thisamounts to a loan secured by a mortgage on land. The borrower, in returnfor the money, transfers the title to the lender. If the borrower repaysthe loan and interest, the lender is obligated to return the title to him;if not, the land becomes the property of the lender. During the periodwhile the loan is in force, the borrower is, in effect, the tenant of thelender, and must pay him rent. Many farmers have lost their land under thissystem.

29. The moneylenders are charging quite high rates of interest, justhow much varies from region to region and is difficult to determine.Estimates of the cost of credit, supplied by the Division of Cooperatives,range from a high of 400% per annum to a low of 30 to 40% in certain padi

double-cropping areas. In Kedah the rate of interest on seasonal loans wasfound to be 60 to 80% ona an nial basis. TI. may hbe fair to noint out thatexorbitant as these rates may appear, they generally correspond to economicand risk conditions in rural areas The tyical villag shopkeeper andmoneylender probably serves no more than 50 or 60 farm families, he has toi.a"e a living out of a very limited manrket+. The moneylender/shopkneeper hasto use a large amount of his own funds to carry his clients through thegrowing season, s u ppliers' crealits too hiJiLm are '1lm..A.Aited and rarely exceed 60days. Being on the spot at harvest time and wielding a lot of economicpower over the farmers, moneylenders shoTw, iuch better repayment retordsthan the cooperatives, but in the event of poor harvests, they, too, see alot of defaults or delayed repayment of loans.

3- -It may be useful to compare the moneylender charges with the

actual costs of the rural cooperative credits. If the farmer had to carrythe whole cost of cooperati-ve loans, he would have to paYy iitially a 12%interest charge. As the whole cooperative system makes no profits, anotheramount, say 4 to 5% would have to be added for this purpose. About aquarter of seasonal loans granted to padi planters are usually still out-standing three years 1auer. A reserve of cu uto 30 wuuould thuu have vt

added to the interest charged to the farmer. Thus the true cost of creditwould go up to about 36 to 47A. If we add to this a sign-ificant part of thepayroll and other expenses of the staff in the Division of Cooperatives fortheir direct involvement in credit activities, a total cost of over 50% isvery probable. Moneylender charges are sometimes higher, but on the otherhand they give superior service to the farmer such as on-the-spot credit.

hne Rural Cooperatives

31. Although the Government of Malaysia has for some time attemptedto use cooperatives as a rural credit device, the system at the moment islargely a failure. A network of 1600 primary societies in Malaysia coversthe padi-growing areas in the country. Rural Cooperative Credit Societies(RCCS) are small single purpose units organized at the Kampong (village)level. Average membership is less than 50, total membership stands atabout 60,000, representing about one-fifth of padi farmers in Malaysia. Amuch smaller percentage of the farmers, however, receive cooperative loans.If Kedah and Perlis are an indication, loans are extended to only 2% of padifarmers in the area. The small size of each unit precludes the employmentof professional management, books are in disorder and the governing committeestend to establish themselves and look after their own interests. Unlimitedmember liability and a very slow loan disbursement are further drawbacks.In general, members tend to regard their cooperative as only a Governmentdistributor of low cost finance, their lack of interest in its success isindicated by high rates of defaults in loan repayment, as well as reluctanceto pay in share capital, or deposit savings.

32. The cooperative movement has not proved effective in its task ofproviding adeauate short-term credit to nadi farmers, nor has it Derformedany operations in medium and long-term credit. Its limited funds have beenfurther reduiced by a bad loan rpnavment record. management in all tiersleaves a lot to be desired and the Cooperative Division has proved unable tocorrect dpficiencies through assista.qnee and sunpervision of the Ministry ofAgriculture of the movement. Despite this record, the First M4alaysia Plan has

Farmersc' ASsocatio

33.* Farm.ers' Associations were first. ivr.troduce in~ Mn1aya in 1958..

At that early stage, they were conceived as instruments for betteru4t4ili2ati- on ofP e-xter.sion ----vices ar.d ch-rnes for -1Plem.ertat-ion of smal'lrural projects. Their size would not exceed the limits of a kampong.

Farmerd Associations, with Taiwan and Japanese cooperative groups, as wellas sem.inars, stuM; e-s ad r.ee+i.gslA +o +th- 4?rr.miln+A r% n-' n o rnie a mu , 1r.

role for Farmers!Associations. The typical Farmers Association envisagedby uthe D_Nivs-ion of. Z%gr-icU-1lvlure, is a rWtiWuos scet fr gjhprincipal link between the farmer and the outside world. On the primary

level, ~ ~ .ths soitons wo-uld b'e organized on or.e or more uk. (lse

of villages) areas, anticipated average membership would exceed 1,000 farmhiouseho'lus. ELach AssociLakl.ion wo-uld havlre a paidm ,ar.Iage,,.ent staff of at.u .Least

five. The staff would prepare farm surveys and business plans for theAssociation and have a relatively free hand. in ranaging its af.Lairs. A

administrative, extension, credit, economic and marketing sections wouldeventually fulfill all the farmers' needs. Farmers associations would beorganized on a three tier system similar to that of the cooperativemovement. they would extend credit to their members through theutilization of members savings, capitalization of profits and Government

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loans. As was the intention with rural cooperatives, Farmers' Associationsare to be operated on a profit making basis. By end-1966 there were about700 Farmers'Associations in West Malaysia, of which 200 are in the MudaProject area. Average membership was 50. Ten experimental societies of anew enlarged type were to be set up in 1966, with staff assigned to them bythe Division of Agriculture. Some legal problems concerning the right ofFarmers' Associations to engage in marketing and other commercial activitiesare being dealt with by new legislation. Of the M$l0.6 million allocatedfor extension in the First Malaysia Plan, a large part is already earmarkedfor assisting Farmers Associations.

Overlan between Cooneratives and Farmers' Asnociaticns

3.) There is an o ous duplication of functions between the RCCS andthe Farmers' Associations; considering the shortages of field staff', achioice of a simnle system. - at least for the disbursement of credit - willhave to be made soon. At present the Ministry of Agriculture andCooperatives is in. the position of being r -psl e-- for bth movements.

For several years both cooperatives and farmers' associations have corntinuedsie rlie both4- -it official Mindst--- support and neither . ff ' :1 1favored over the other. At the local level, the same farmers often belongto both. To dAte, th+i; ss a'nis travive ao.. aym has e nic au sen d4o_ p arti cular

problem since the cooperative movement is not very active and the farmers'asc-iat-'u ons are st- Ail l iMimtedtA i1n -C-u- scpe. Re;ently,, newMV legi slati4onl has

increased the scope of activities which farmers' associations can undertake,OaIU apr- j1 .V.L Ua U1 £e'r arger griuupin g1s I. ,1tU -±U'LLF U1. sJUC1UtU d41U 1i' Cu. a X

farmers' associations. Advocates of the cooperative movement are, however,atternpting tvo revitalize RCCS by comubining locaI societies and developingthem into multi-purpose organizations.

35. In view of the past performance of agricultural cooperatives aswell as of the recent widening of the scope of farmers' associations'operations, it would seem advisable to make farmers' associations the vehiclefor Government-sponsored supply activities and marketing improvement where itseemed appropriate, and the vehicle for organizing agricultural extensionactivities. This wouid permit a structure in which there need be no reai"competition". Rather, the value of the cooperatives would be realized forconsumer activities and specialized production activities, while theadvantages of combining extension with credit and supply activities would besecured. The Department of Cooperatives would be able to concentrate itsscarce staff on fewer cooperatives, while the Department of Agriculture wouldbe able to effect an economy in the use of its extension personnel.

Alternative Channels of Credit to Farmers

36. It is quite probable that cooperatives or farmers' associationswill not for a long time be strong enough to do more than supplement othercredit channels and perhaps never should be expected to do more. Attentionis now being given to a range of new agricultural credit systems. Forexample, the Government established the Bank Bumiputra in February 1966which, in the words of the First Malaysian Plan, "will assist particularlyin the creation, expansion, and modernization of agricultural enterprises".

The Bank, through a special exception to the banking law, is defined asa Malay nerson and so can take mortgagAs on land in M1ayv r Tser.rntiJrns

However, over 75% of the $40 million in loans extended at the end of 1966are for urban risks. Tn "rnal areas, +he Pnnl is most. ct,+.v in Io nn for

purchase of land to enable smallholders to increase the size of theirholdings, hibut to dat+.e +.this 4is st;ll a mnoynr_ oranm. To de,+n +the BonLk

has done no financing of cooperatives, largely because of doubts about thea -_ --n -- --iv---- to llec their deb+s and of -ntern.

conflict within the cooperative movement. However, it is intended thatthe Bank urmiputra, toge+her wi+, the Apex-1, -b ,1 1 a -r of cdt

to Farmers' Associations. In the State of Selangor, the SelangorAgricultural Credit -- on has be set u-

to extend both long and short-term finance.

37, Concern with the problems of agricultural credit in the MudaR.ver project area has led to the suggestion, b-y the IBnD of a new creuditscheme for farmers in that area. This alternative has been proposed aspreferable to the difficult tasK OI coordinating existing programWs an,dbuilding them up to an effective level. Under the scheme, every registeredrice farmer within the project area would be issued with a credit book.Wthen he needed credit - limited initially to essential production inputs - hewould go to a nearby registered store and be supplied, say, witn tnenecessary fertilizer, the shopkeeper making a notation of the transaction inthe credit book. Tne shopkeeper could then be reimbursed from the creditfund of a newly established Credit Authority. Notes, signed by the farmerand endorsed by the seller, could be discounted through normal bankingchannels and rediscounted by the Credit Authority or the Central Bank.At harvest time the farmer would approach one of the registered paddydealers and the buyer would then deduct any credit balance showing in thebook of the individual farmer prior to paying him for his paddy. Thescheme would depend upon an extensive mechanical bookkeeping system to keepthe accounts of individual storekeepers, farmers and paddy buyers straight,and would require strict supervision.

38. Such a system, now under consideration by the Government, hasthe advantage that it utilizes existing distribution and collectionchannels, and should bring down interest charges by increasing the supplyof credit for a scheme in which risk is also reduced by the improvedavailability of irrigation water. The repayment record should be good, withcollection of debts being a first charge on sales. Overall, with creditbeing tied to essential inputs, it should foster better farming practices.

Agricultural Extension

39. An important part of the First Malaysia Plan is the expansion ofthe extension services. There are some 600 staff members in the agriculturalextension service, of which about 475 are at the lowest professional level.This works out to about one field worker for every 2,000 smallholders. TheMinistrv of Agriculture has a rather high target of some 6,000 staffmembers in the extension service. This level of staffing would beenuivn1ent. to about one field worker to every 150 to 200 families. In

contrast, in Japan there is about one extension worker for about every 600farms and in the United States about one for about every 310 farms. UnderMalaysian conditions, a ratio of one field worker to every 500 farm familiesprobably is not excessive, but it would mean quadrupling the presentextension staff - an objective which inevitably is far off.

40. The present pattern of extension staffing assignments is to haveone State agricu'ture officer in each State, normally a university graduate.Under him are generally less than five, but in a few of the larger statesup to 15~ or -16 Agr-cutural 'ssis 'an's who have coliege-level training.Each of these, in turn, supervises some five Junior Agricultural Assistantswho are mren who have comrpleted nine years of secondary school and had 17months specialized training. It is at this lowest level that the greatestcurrent shortage of staff is found; and even in the Nuda and Kemubu projectareas - the largest new irrigation schemes - it is unlikely that there will bemore than one field worker to every 1,000 famrilles by the time these schemescome into operation in 1970-71. It might prove possible to make better useof trained personnel by ensurming that the more routine tasks such as ratextermination and distributing fertilizer subsidy tickets are carried outby a mannual labor force.

41. Perhaps the most effective extension activity in Malaysia at themoment is that operated for smallholder rubber producers through the RubberResearch Institute. These "ruober instructors" help smallholders improveproductivity through a program of counseling and group meetings. The RubberIndustry (Replanting) Board under its smallholder scheme also offersextension assistance through its rubber replanting officers. Unfortunately,both services interpret their mandate rather narrowly, and their officersare not trained to undertake a more general extension activity. Given thescarcity of extension personnel in Malaysia and the need to help smallholdersincrease their output of all crops, it might be desirable to enable thesespecial rubber extension officials to broaden their services. It would beparticularly desirable, for example, if the officers made more informationavailable about intercropping in new plantings and about techniques forgrowing maize on upland soils.

The Federal Agricultural Marketing Authority

42. A vigorous new policy thrust in Malaysian agricultural policy hasbeen the establishment of the Federal Agricultural Marketing Authority (FAMA)charged w-ith improving the agricultural marketing structure. It wasestablished in September 1965 under the terms of the FAMA Act of 1965 andin form reports to the Minister of Agriculture and Cooperatives, but inpractice has considerable autonomy. FAMA's objectives are "to coordinateand coonerate with the various existing marketing organizations and thoseGovernment bodies entrusted with marketing in order to improve marketingpractices and raise marketing efficiency (a) by i-ntroducing and implementingmarketing schemes; (b) by providing marketing facilities, such as storage,transport, etc.; (c) by regulating qual4ty, packing s+andards, marketingprocedures and sales, etc.; and (d) by facilitating a more precise adjustment.of the qualities, qu,t± 4

te a -d types of produce so-ld on particu.lar imark.ets,

- 15 -

through marketing research and extension so that the producers can beassured of equitable treatment and a larger share of the consumer's pricethan they now obtain; to protect customers against the impact of sharplyfluctuating agricultural prices; and to provide a favorable economic andsocial climate for the expansion and diversification of agriculturalproduction and development." The Authority feels it has a mandate 'tosafeguard the interests of agricultural producers' in the nation, and itsstaffing pattern is enabling it to undertake a broad research program onagricuitural marketing problems.

43. Although its mandate is extremely broad, the Authority isconcentrating at first on rice and fish which it feels are the areas whereproducers are most in need of better market regulation and protection.Four marketing schemes for rice in different regions of West Malaysia arebeing set up, possibly as forerunners of a national marketing scheme forrice. The four areas are Tanjong Karang, an area of reclaimed land lyingdoirmstream from Kuala Lumpur in Selangor; Perlis; Penang; and Krian, adistrict on the border of Perak and Penang. In the areas covered by theseschemes, the Authority has established itself by the authority of itsenabling legislation as the principal regulator of the rice market. InSelangor and Perlis it has become the sole legal buyer of rice within thearea. acting through agents who are obligated to market their collectionsonly through the Authority. In the case of the Tanjong Karang scheme, intheory cooperatives already have a marketing monopoly, but inadequacies ofthe cooperative structure mean, in practice, that most rice moves throughnrivate hands in a "black" market. A similar situation prevails in Perlis.In Penang and Krian the Authority has also established itself as a purchaserof rire 2rting through agernts; but other dealers licensed by the Authoritymay trade on their own account as long as they abide by the marketingregulations established by the Authoritv- The Authoritv may issue licenseswith broad restrictions about the activities of the licensees. No licenseemay-u mrnchasQ pradi atI. n n2 , cpr mower than that. fixred h the Bioarrd for the

relevant grade, all purchases must be by weight and not volume; all purchasesshall be paid for in cash and a receipt issued specifying details of thetransaction; the Board may limit the marketing outlets which licensees maychoose; ar.d all m1 t rnemt of rice J. thin the scheme area in excess of' 5ni ni-ls

(1 picul = 133.33 pounds) must be authorized by the Board.

44. It is too early to know if these marketing schemes are successful,alth 7-ough1 -- so..e ----- 4he- have- already h- the ePffe^ of- iin hPfrm

price of paddy. The main concern is whether the Authority will attempt tomonopolize markets umaecessarily and w4hether it may be .de-tbir. toambitious a program. So far there has been an encouraging emphasis on

u X * 4| ' r * * ' U- zP- --I A vP - 1-4 , - - q1- - 14-* - -researclh anu invesUtLation in the field of marketing. The prelmin.arystudies prepared for the four existing schemes have helped the AuthorityIramIe rea.lz'stic regulation.s andu to gauge the dU mLLi1.LV1d-CLVV load ilved.

Future plans are ambitious, however, and there are intentions to establishmarketing schemes for fish, coffee, poultry, pepper, coconut, (in BaganDatoh) and additional rice marketing schemes in Malacca and Kelantan overthe next three years. FAVA also expects to undertake direct millingoperations in 1968 or 1969 and proposes to take over the administration of the

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rice price guarantee scheme and perhaps the rice stockpile. If it is tosucceed in all these endeavors, it _.rll put c on the scarcesupply of skilled agricultural administrators.

Research

45. The First Malaysia Plan puts heavy emphasis on research, and* ~ a. LL~~.L LAAJ LL.LiLL, Ah U: iLunet WJlA 4 JJ m. o.re w.jrkJ.L.a a L 1,_a uraTi'at is needed at this point is the kind of field trials and screening testswhLJ4cich can provid-e 4.theI ----y-wt -3roe va-ee and bette cultural-- .4.-- I _~ -L~JLLJA.i ~a.JL UV± ULeL coUntrlLy w-LLdL- ±I1IP.-UI) LLV VcU-.Lt!LJLU- 4111U UtebU::L-~ '_ULU±acJ.

practices which can be confidently recommended to the smallholder and whichare suited to his conuditions of capital structure and risk bear-inLg. Holwever,in practice very serious research inadequacies still remain, but there is somepre-research progress, in that the FAQ is advising on detailed researchpriorities. It is hoped that out of the FAO recommendations will grow a UNDPresearch project which should improve the situation by the end oI the decade.There is, however, scope for internal improvements in routine administrativechores. Also, the present research effort, such as it is, is divided amonga variety of operating departments, and research workers frequently havelittle contact with their colleagues working in the same discipline in otheragencies and abroad. The possible UNDP project and some internal improvements,if realized, could be expected to produce research results having immediateusefulness for the production of imports-replacing crops, which seempromising but on which useful research is simply lacking, as well sa on theproduction of oil palm, on which the most influencial research contributionseems to have come to date from the large plantations in the private sector.

46. The most promising recent development in agricultural research -and a hope for continued future improvement - is the establishment of a riceresearch station within the Muda River project area which will serve lWestMalaysia. The staff assigned to this station represents a variety ofagricultural disciplines, and should be able to mount a suitable program ofrice research. It is encouraging to note this group is increasing its contactboth formal and informal with the International Rice Research Institute(IRRI) at Los Banos in the Philippines. The highly competent staff of theIRRI and its region-wide contacts should provide a valuable complement tothe efforts of the Malaysian scientists. Already, collaboration betweenthe two groups has made the introduction and testing of a new varietypossible. This variety, termed "ria" in Malaysia for popular purposes andIR-8-238-3 by the scientists, is a high-yielding non-photosensitive, diseaseresistant variety well suited to second cropping (and main cropping) inthe Muda River region. Its initial susceptibility to blast is beingovercome by further backcrossing, and it is showing more resistance thanother varieties in the Muda region. Increasing concentration of researchon food and minor crons at the central station adiacent to the agriculturecollege at Serdang will help improve the effectiveness and coordination of,a--r1111-al?1 resarc.h in the fNtirP_ There are substantial advantages to

be gained if research and instruction can be combined, which also arguesfor increasing concentration of research aetivitie at Serdang. Hopefully,

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increasing research activities will be possible for staff members of theFaculty of Agriculture at the University of Malaysia who now have verylittle research responsibility.

WU. A serious omission in present research emphasis involvesagricultural economics. Many of the physical research programs for cropimprovement, fertilizer usage, and the like involve an important economicdimension, yet very little in this direction is being undertaken. Someini tial work of the Rubber Research Institute - perhaps the best knownresearch group in Malaysia - is indicative of the importance additionalagricultural economics research could hold for the nation. Studies of theeconomics of intercropping have shown that proper intercropping bysmallholders in the first two to three years after replanting rubber couldyield a net income to the cultivator greater than that of mature rubberstands. Such information has clear implications for planning future researchin cultivating rubber and other crops, and in extension activities forsmallholders. There is little new research being done on the economics ofsmallholder rubber production. The comments about the necessity ofaccelerating settlement rates in Chapter III below indicate the importance: ofmore precise economic information to provide a better basis for policydecisions. FAMA however has plans to begin to overcome the lack of marketingresearch in the country.

Aaricultural Education

8. L-ving behind many of the earlier comments about institutionalimprovements are implicit assumptions about available staff.l/ TheRnvPrnmPnt is TT1l TTnrp of the edriii(-ati-cn nrohlems involved in inrrpaqin nthe effectiveness of its agriculture development administration, andvrous'f-1q moves area afoot+. toA 1 iTM frt vvo hr)1., thel qulI nt.nit.i + ty annd rali ty of

education. The continuing limitation in numbers of students at the Facultyof Agriculture in the University of Mnln-%min anrl + lhak of undergraduatespecialization at that institution appear to be an unnecessary handicap tofuture grTwh A.. College of i Agricltur at Se-pArdbn is main ae stenou

effort to improve its curriculum to meet the needs of agriculturalr.odernizz,ation .nrl t4he evnn n o-f i+.q i1tis iq nn iso.hoeii1_ In this.c

effort, the College is making use of technical assistance from the FordFoundation A second college is still u-der consideratio - The Governmenthad planned to add 12 new agriculture schools while at the same timeincreasing tAh length of the cus frPom 1 7 monts to 3 yar to ir -ov thequality of the curriculum, but the handicap of a shortage of suitable staff,andU rils-ing cosus, noJw mLearis thLat JrLVLJ %. LyLL siU cUars b.est-rte L Ir. tLU. arL fuUX.U

A new agricultural extension activity with promise is the establishment ofshio-ru courses for adults at fdL IJLa±LU.L1g cete These1 shoU- coJL" QUO

concentrate on a particular subject - poultry raising, for example - and toprovide intensive, complete instruction on. the subJect. 'tere agiLu,however, only 12 of the proposed 19 can be established for the same reasons.It is thus clear that there will be a continuing shortage of trained rmenat all levels of agricultural administration for many years to come.

'1/ rris- is discusse at -reatrlengt ir. 1f7T1-1--as Tevlop.ert Pospctand liLo L U(FE-U51a) F ebuVr LOJ.,U± .1966 Vol4.Ce. IIQ.C and IV

and Plans" (FE-51a) February 10, 1966, Volumes II and IV.

- 18 -

Surnmary

49. The overall picture that emerges is one of general unanimitywithin Mmlawsia over the overall ar+icultur 1 po-s! ; yet amultiplicity of inadequately staffed agencies are moving uncertainly andwi t h o ut cordnto Aoad 4theA 4 S,eed --- als PerXas the1- 4 most- unfortunalte~~ ~ V'WVVJ. .AO UkiU CLA,%; 6ULJ0 11;1., Idle u ii 1 i .,vo UIL ~Iu u41

aspect of this laclk of focus in agricultural administration is the lack ofcoord-ination among agricul-t -U1 UtVt.,UJJILlU agenlclies. ZXpUI'U ULcUrJo 5U-I1 as

rubber are dealt with by the Ministry of Commerce, separately from otheraspects of agricultural development policy. The Rubber Industries(Replanting) Board and the Rubber Research Institute do not report to therInlstry of Agriculture and even operate a separate extension service - onewhich is limited to advice about a single crop. The Federal Land DevelopmentAuthority is largely separate from otner agricuitural development activities.Within the Ministry of Agriculture itself, there appears to be only minimalcoordination between the different unizs. The Department of Agricuiture issponsoring a program of farmers'associations which in many ways overlap withthe cooperatives responsible to the Department of Cooperatives. TheVeterinary Division is not adequately coordinating its attempts to developcropping improvements. The lack of coordination at the federal level isoften even more apparent at the field level, although this differs fromState to State. The Federal Agricultural Marketing Authority is in formresponsible to the Ministry, but in fact formulates its program activitiesquite independently. Land alienation is likewise independent. The lack ofcoordination extends into the education system. Because of a basicdisagreement over the need for university-level specialization, graduatesof the Faculty of Agriculture of the University of Malaysia are not employedby Ministry of Agriculture agencies, but to a large extent are hired upongraduation by the private sector. The technical services of the Governmentmust send college graduates abroad for further training to secure most of thespecialists they need.

50. These are longstanding problems which cannot be solved overnight.Unlike the estate sector, mining and commerce, the smallholder agriculturesector in Malaysia wias long neglected - partly as a matter of policy duringthe colonial period when the preservation of Malay society and traditionsmitigated against agricultural progress. The Second World War, followedby the "Emergency" during the 1950's, meant that only in the last nineYears has an explicit program for the development of rural areas beenattempted on a large scale. Initially, in the late 1950's and early 60's,emphasis was on land settlement, mainly by the FLDA, and on "ruraldevelopment" - for which Malaysia developed the "Red Book" technique tocontrol the imolementation of rural public works - which included mainlYamenity projects. These developments, while excellent, on the whole didnot touch the heart of the problem of increasing smallholder agriculturaloutput (other than tree crops), and the formulation and execution ofagrimcultmral nrograms is thus still generallv at an early stage of developmen.relying upon a multitude of agencies not necessarily well adapted for thetaskl of accleol rati+ng dvenl opment.

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CHAPTER III

LAND HUNGER IN A NATION WITH PLENTY OF LAND

Land Availability

51. Aside from building up a suitable institutional environment forsmallholder agricultural growth. the most strriking single nrobl em inMalaysian agricultural development continues to be the persistence of landhvinaer in a nation with nlpntyr rof' land= The shor+age of iu'hnri ijohb meansthat rural-urban migration cannot be rapid enough to permit a markedi mnrnfvPTmnn+. wit.hin +.the nx+- 920 ears o-r so of +the pr cpi+a 4rienmc of

those who remain in agriculture. On the other hand, more rapid landsettlement - omehi4neg which would appear *ell w thin the capacity of thepeople and the Government of Malaysia - could have an appreciable influenceon rural ircomes. M-ayl sia- i fortnate . +han+ a l a.-.ount of -ad'4 -- n,-'lland suitable for cultivation in tropical upland crops is still availablefor settlement+. Currently, an i ressive l.d caa t survey is in pwhich is expected to be complete by 1970. It is fortunate that this surveyis bDecom,ng ava:LaLY.Le at. a IJtime whe11n CZ ±-I1%3WEU a n .L.LU.u UV de rUU.Laeldlete lan1u

settlement appears in order. Up until a few years ago, there was a widedivergence of opinion about how nri-.ch lad lumight be available for ne-w settle,men,tand where it might be located. Estimates ranged from that given by anoptimistic Department of Agriculture officiai in 1962 of 8,000,000 acres tothat given by T. H. Silcock, a well-known authority on Malaysia, who estimatedin 1961 that only 3,360,000 acres would be suitable for new development. Asa resulti of the new survey, the land considered suitable for new settlementis put at 6,094,000 acres. Since the planted acreage in the Malay peninsulaat the end of 1964 was 6,030,410 acres - of which 2,151,600 acres was devotedto estates of over 100 acres - it can be seen that the land area devoted toagricultural production could be double.

52. Such an increase would, however, necessitate realignment of manypresent lowland forest reserve boundaries, as about half the land in thepotential agricultural category lies within the boundaries of gazetted forestreserves. Some existing game reserve areas would also be affected. Many orthe forest reserves lie close to existing agricultural areas and thereforeare readily accessible. The survey program will produce by mid-1969 maps onthe scale of 1 inch = 1 mile for the whole of the Malay peninsula showingland capability in five classes: mining land, forest land, land of high andmoderate potential for agriculture, and other land. Already surveys for theStates of Pahang and Johore are available - the two States with the largestarea of land suitable for future development. Fourteen areas suitable forlarge-scale land settlement have been identified, ranging in size from about½5 the area of the proposed Jengka Triangle Settlement Scheme (90,000 acres)to five times its size.

53. The problem of accelerating the pace at which land can be openedup in West Malaysia is one which has drawn much attention within the pastfew years, and one which admits to no easy solution. Under the Constitution,land remains a State matter, and the Federal Government retains only an

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advisory and coordinating role over land use and land alienation. It can,L'o-WeverL u V LuV.L L)J: .LUVU1LrU L,11.url LLoi tJ IUUUrt;; ± ,y. Jt;VLU.L-U . 1howve, e-xert cor.siderableleeaetruhisbdtryeo s, dmost Goverinment settlement schemes currently being undertaken are financed byFedera-l L-Lnds. Ai LUuf-i-e culayi-LucdLionl arises fr,la UlLti pUl±t -e UoU WJ part

of many states to open land primarily to residents of that State, and mainlyto Malays. The population distribution on the Malay peninsula is such severalstates, especially in the northwest, have little further land availaole forsettlement, while states lying to the south and east have rich resources oIland which could be put under cultivation.

Recent Land Development Trends

5h. Although there has been a substantial new area brought undercultivation in the past five years, the pace has not been commensurate eitherwith the extensive land suitable for new development or with the demand forland on the part of potential smallholders. Four main forms of land alienationto smallholders can be identified in Malaysia: (1) settlement under largeschemes sponsored by the Federal Land Development Authority (FLDA); (2)development by private capital, in individual smallholder plots, under"controlled" alienation; (3) unsubsidized settlement schemes and other newalienation schemes other than controlled alienation, including group settlementschemes; and (4) development without settlement as in fringe alienation. Therural population also benefits through (5) development through State farms orplantations and (6) development by private estates, and there are alsoextensive development of illegal souatters, holdings. For the period 1961through 1965, the extent of land settlement was apparently as follows:l/

Settler Families or Holders Acreage Planted

1. FLD4 7,800 116,5002. Controlled Alienation 10,900 25,2003. New Alienation and Unsub-

sidized Schemes. etr. 18.200 77,8004. Fringe Alienation 25,300 123,100

55. However, because of wide variations in the quality of thedeveLopment of this new land, this tabulation seriously overstates the rateof new settlement and planting. FLDA schemes are generally excellent, andthe 116,500 acres planted during the period was, in fact, the main settlementactivity. Fringe alienation - a program enabling smallholders to expandtheir holdings - was rapid in 1961-63 but it was soon realized that mostof such land was either not being cleared, or, if planted, was not beingadequately maintained. Since 1963, little additional fringe land has beenalienated. The various other State schemes suffer from the same problem toa somewhat lesser degree. The exact area planted is not known, but isunlikely to much exceed 200,000 acres during the 1961-65 period - i.e., lessthan half the increase necessary to keep up with the 3% per annum growth in

1/ For details see Appendix Tables 7 and 8.

- 21 -

the rural population. During 1966, the FLDA planted another 29,000 acres,but other settlement schemes were virtuaUy at a standstill, so the pace ofland settlement has fallen seriously behind both the need and Malaysia'sobjectives.

56. The First Malaysia Plan sets a land settlement target of 400,000 to450,000 acres for new settlement during the Plan period from 1966 through 1970.This would provide holdings for 65,000 families assuming an average of about 7acres a family, somewhat less than present FLDA standards but much more thanexisting padi holdings. This target represents at least a doubling of theaverage 1961-65 rate of settlement and even if achieved would barely meet theneeds of an expanding rural population. Achieving it, however, is clearlygoing to be difficult. The FLDA's present target is for 141,000 acres, probablythe most that can be achieved given their Dresent capacity and operatingtechniques, so reliance upon other forms of settlement, many of which werenotably unsuccessful in the nast. is heavy. The exnerience, and nrospects. ofthe various forms of land settlement is discussed in the remaining sections ofthis chanter.

57. By far the most effective and efficient planned settlement agency inAsia is the Federal Land Development Authority. Since its founding in 1957, it

ment programs. Many of the staff and some of the working procedures wereoorrowed fror. tex- eri-ence of resettlem.ent acti.-4t A,,-4- di +1,th Emency

period. The Authority undertook its first directly administered settlementschvemne i r.'17 5 8 i n4- the -4 Bilut -Valywhr 00 fmieswere e stablished- on 6,5001ktLk~ 4.1 ±7.YJ ± V1LhU J..±1 . VMO.L4.=.V WVL1'01 t .JJ'. .1. a4L.L& .4..LZ;C W~-l ~1 VCLJU L141.. 4.lU '..LL '.4, j-"-

acres of land. The Authority has followed a similar pattern to that of itsfiLrstu schleme in 'Vile years siLnce, '-tihoug it has .de- a nme -f oiicto

mostly in the direction of using contractors rather than settler labor forclearinLg, planting, ho-use construction, and road builuing. From. 1957 to 1960the Authority opened 17,000 acres, settling 1,700 families, and during theSecond Plan increased this to 116,500 acres with 7,800 families. In addition,to the costs directly incurred by FLDA, there are Government expenses forschools, roads, and vii age services. PMost .va scuiues are' fur aUouU 40U

families (with a population of 2,500) on approximately 4,800 acres. Of this,the main crop area allocated on the basis of 8 acres per settler typicallyaccounts for 3,200 acres, a 2-acre plot for each settler for miscellaneouscrops and fruit accounts for 800 acres, unplantable swamp and steep areasabsorb about 500 acres, and the village site comprises 300 acres. Each settlerthus has about a quarter acre for his house plot.

58. FLDA selects its settlers from those wno are citizens between 21and 45 years of age, married and with several children, and holding less than2 acres of land. Some states require that a high proportion of the settlersbe drawn from the State as a condition of alienating land. In practice,the selection system keeps the proportion of Chinese settlers quite low.Settlers receive subsistence allowances which are repayable when theirholdings come into bearing. FLDA estimates that of some M$18,000 per familyfor settlement costs on its "typical" scheme, about M$14,000 to M$15,000 plus

- 22 -

interest will eventually be recovered from the settlers. The schemes aredcs-A.F Led + -rv deA a- -. r@l - ily ino. to seQlr 4f - -4-- I-- -' - - , -- eI

- PAJ. "V L~~ 0. ALWA&JAJJ~L. .LC"'SIJ_.y I.1'A1AIJ. L~'.J QV1 U LVLQ VJ.L CFJ.kL J.&.L11L= UV.J_

M$300 per month, and a net income after loan repayment of some M$150 perr,onth, z-. bouth gi slrea h to-aeaefrs.lh]es*1J UI, ~Li~ LI ii-.L.L. CD~ LCI6- d.ts Ul,le 1i± k.LU±11a.L cW:1c t LUI o11CJ.i.L11JUtLL1L .

It is the intent on rubber schemes, which constitutes the bulk of the programto date , uthau sttlerLs -w.LL hoLu Lu.Lu.Lt tju lAth1eJIr Lul±5 ho ,uULI s on asthy

repay their development loans. On oil palm schemes, which will be increasinglyixuOrtant inl tne future, tne pattern of ownership has yeT to De uefinitUelydetermined. On the largest oil palm scheme to date, at Kulai, FLDA is ineffect operating an estate, but intends to issue shares to the villagers wnoalso constitute the labor force. The principal reason lying behind thedecision at Kulai to proceed for the moment, at least, with joint ownershiprather than individual holding is related to management problems of harvestingthe fruit economically.

59. During the First Malaysian Plan, FLDA is expected to settle familieson 141,000 acres of land. The Authority expects settlement costs to come tosomething in the neighborhood of M$2,180 per acre excluding schools, roads,and health services, and that the average holding will remain in the neighbor-hood of 10 acres per family, although only the eight acres for the main cropplanting and the quarter acre house plot will be cleared initially. FLDAcame very close to meeting the First Malaysian Plan target for 1966 of 32,000acres. The actual settlement during this year was 29,000 acres, and theAuthority expects to clear 31,000 acres during 1967, somewhat above the Plantarget, so that it will be back on schedule.

60. Given the very creditable performance of FLDA and the laggingachievement of other land settlement programs, the frequent suggestion is heardthat FLDA should step up its rate of settlement. The most serious obstaclefacing rapid expansion of land settlement on the part of FLDA is administrativein nature. There is a serious problem of staffing. Suggestions of secondmentfrom other programs do not seem to offer a solution, since the suitable officersare those engaged in productivity increase programs in peasant agriculturewhich are, if anything, more critical than land settlement. The new officerswould have to be trained for their responsibilities. FLDA itself feels that itcould train personnel enough to reach a target of 50,000 or even 70,000 acresa year by 1971, but this would mean at least doubling the staff. Such anexpansion would certainly not be impossible, but it might drain off a ratherhigh proportion of men with agricultural education and epirience; so that amanpower allocation problem for agricultural development is raised. FLDA'sapproach to land settlPmAent iTnvolves a m anagement !ivrhead!t whic-h is rathercostly in view of such limitations. It is also difficult to leave landallocations far enough in ad,vqnce to bh able to plnn rationally, and to secureadditional contractor services. Although the agency is trying to developsuit2b1e cntrar-tor r'apn'ityv it is rnot. on+.imns+.ic +.)n+. it+. oniilri fnd suitabh1

contractors for land clearing by the end of the Plan period. Aside from thecleain-g, it also is faced w-ih a _tge of conr.tracto _c+y fr oth.eractivities. FLDA points out that it is currently falling behind its targetpace not so much in landa clearing as . n proVCi',g -v,-ia s4+its road consthuc-

tion, and providing other settler amenities.

- 23 -

61. hne most important single land settlement project now planned bythe FLDA is that proposed for the Jengka Triangle, an area of 470 squaremiles lying roughly 75 miles northeast of Kuala Lumpur in the middle of theMalayan peninsula. A consultants' report submitted to the Government ofMalaysia recommends clearing land enough to establish smallholders on 65,500acres of oil palm and 27,500 acres of rubber between 1967 and 1973. Some9,300 settlers are to be established on ten acre holdings. The total costof the project is estimated by the consultants at M$239.9 million from 1966through 1978. Although the Jengka is an imaginative large scheme, it isimportant to realize that the maximum clearing pace proposed is only 15,000acresper year, and even that rate will not be reached until 1970 according tothe schedule. Since the First Malaysian Plan calls for a settlement paceof roughly 30,000 acres a year in the latter part of the Plan period, itcan be seen that the Jengka Triangle project, although important, 'rillaccount for only a third to a half of the target area. Hence, FLDA willhave to continue to plan and develop additional project areas throughout thePlan period.

Fringe Alienation

62. Fringe alienation, a program to alienate parcels within a fewmiles of established holdings to enable smallholders to expand their farmsby clearing the area and planting rubber, reached a pace of almost 40,000acres annually in the period from 1961 to 1963 (Table 8). However, experiencewith the program has turned out to be poor, and alienation has almostceased while the program is being reassessed and measures undertaken tocorrect the faults which appeared. Several major problems have beenencountered in the fringe alienation program_ Much of the land alienatedwias not, in fact, cleared. On land that was cleared, the rubber which wasplnnted is frequently not well tended. Often vJi1-gers work less ontheir additional acreages after an initial burst of enthusiasm. Since highyielding ru'ber requir-es rather carefuil antd regalarv eivatiTo+4 n during the

initial years, the failure to maintain a high standard of cultivation hasled Government offIcials to fear a i-i+li -tion of patchy plots of poorquality rubber removed some distance from the smallholder's residence.R.ecently, the Government has established the National T.Ld Rehabilitati+iand Consolidation Authority which is responsible for framing and implementinga program to rescue the existing fringe alienation plots. So far, theAuthority has not proposed details of its program.

State Settlement Schemes

63. Most land settlement other than the FLDA can be grouped under thegeneral heading of State shIemIesU, LUi±uuh these 1i.uLbaCe quite a variety ofsettlement attempts. Table 8 shows that more land was alienated for Stateschemes than was settled by FLDA, although these figures are unreliable. Insome States, however, these schemes appear to have been relatively successful.In Johore, for example, between 1960-65 some 105,000 acres are reported inState records as having been alienated in various nonsubsidized schemesother than fringe alienation. An additional 13,000 acres was reported

alienated in 1966, and an additional 3,717 acres were alienated to State-operated subsidized schemes. Also there are 21 FLDA schemes in the State.

S~tate of Jonhore - Nonsbidize Land.~,r

Alienation Schemes, 1960-1965

Area Total Number Ethnic Origin~~ ~~SL S -U.L Im I±i± 0± 1n ~~ ' diI1±.L.U .

Year (acres) (acres) Affected Malay Chinese Indian

1960-62 16,206 11,851 2,109 717 l,36h 281963 53,539 21,115 5,389 2,945 2,394 501964 31,597 6,20u 3,4h6 1,700 1,709 291965 3,872 200 178 148 30 0

Total 105,214 39,375 11,122 5,518 5,479 107

Source: Government of the State of Johore.

64. The figures in Johore shed some interesting light on the Statesettlement schemes. It appears that - whatever the quality of settlement -some 11,000 families were, in fact, enabled to get out onto land in the State.Although a rather large area of land was alienated but not planted in thesix year period, these holdings will probably be gradually brought intocultivation over the next five years as the cultivators have the opportunityto arrange clearing. It is significant from the standpoint of the futureof the country, too, that this settlement program enabled substantial numbersof families from both Malay and Chinese ethnic communities to take upcultivation. The sharp falloff in the rate of alienation toward the end ofthe period is attributed to a failure of the survey department to keep pacewith alienation and thus delays in granting the necessary settlement permits.

65. Other states, too, have alienated rather extensive amounts of landin the past few years to unsubsidized or slightly subsidized settlementrrograms. In Kelantan, State authorities reported about 10,000 acres a yearsettled on unsubsidized schemes. Settlers receive high yielding clones forplanting, but bear all the other costs themselves. They also receive seedfor cover crops and intercropping and limited fertilizer. Settlers opentheir holdings over a four to five year period, typically working only a fewmnonths of the vyear on the holdings and the remainder of the year in Kota Bahruor in the riceland to the south. The program is operated by the State LandDevelopment Board and principal. limitation is the limit2tion of filndsavailable to the Board, despite the low cost per acre of its operat:ion. The

Board builds village sites (but not houses), schools, mosques, and directsthe survey work. A bottleneck is the limited transport for logging.Another is the pace of the survey work. Settlers are allocated six acressuitable for rubber, an acre for garden, and two acres of riceland where itis available. Home sites are one-fourth acre. The State is attempting tonegotiate with foreign firms to construct an oil palm processing factory sothat it will have the processing facilities necessary to undertake an oilpalm settlement scheme along the lines of its present rubber planting schemes.

State-Owned Plantations

66. For more than 20 years, Malaysian policy has been not to alienatenew land to privately-owned plantations. Nonetheless, the efficiency andprofitability of well-managed plantations is recognized, and there are sug-gestions that State-owned plantations could be used as a means of increasingrural incomes and. if Drofitable enough. for financing public-sectoractivities. This has proceeded furthest at Sungei Tong in the State ofTrengganu on the east coast of the Malay peninsula. Trengganu is a relativelypoor state with limited agricultural and mineral resources. In recent yearsthe State has derived a good nortion of its revenues for nublic services fromroyalties derived from iron ore exported to Japan. Never a very big operation,this mining at-+ivity has now virtually .huted i the nndep t.s and theroyalties, already sharply reduced, will soon cease. The State Government hasbeen casting around for alternative sources of finance to continue its presentpublic services and - hopefully - to permit it to undertake some newAdera ^-m-n,-d ae+ite 4T 4+4- a+r iv o++ f + Yes iso r.ot ni p oing

There is virtually no industrial or commercial activity in the State. There-are nI lae -b.k-- ---- rs. The f- +,ar..ers are t lose to a bare -bi-st+n-c

a& c Ji's ~.L rL %Al. ULAOLU S,UAAULJ C. *A' _.LaL £I~J Q A aJ V;.js' -~iJ - j' a tia -s -_&iiL - Js- -

to be able to pay substantial new taxes, and, in any event, the deveLopmentan anbo.,.y of the. C-

4Sts« (lna¶vnar+.e4t is stror,ngl orier.ted

4n to incrennasinga lkL.LJCiJjJJj 'JJL. , UJ C L VauIc ',A s V L~J. UA I 'UUU I .J L V A. Q L *1

6.L 'S.Y J.'sU*JLV' V's .A.SL *4I_~~

peasant farmer incomes and so there is a strong reluctance on the grounds ofsocial justice to tax peasant farmers.

6. ILn Uthese cirumsncUes, U the St.u-Leu to the approac of

developing a state oil palm plantation to produce revenues needed for stateactivtiessA sieo apo,,tl 2,0 ace 1-4 ng '"on g 4the QwngaL,.L LU.L A J. u~ 0..eU±IL.I y. I~UJ. acre L'C .J.L1 L~,d.LL . UiJ LjW.jr'O-j..

Tong near Kuala Trengganu has been selected, land clearing operations havealready begun on 4,u0u acres and planting stuuck hia been sc-uedu. I- isexpected this phase will be complete by June 1967. The land is cleared,terraced, planted, and maintained for the first few months by contractors.The plantation has a labor force of 90 persons drawn from nearby villageswho are expected to take up residence wnen housing construction is complete.Development to this point has proved costly for the State, and it is nowlooking for outside resources to permit it to proceea with lana cLearingand planting at a more rapid pace. In general, from an agronomic standpointthe results to date of this State plantation appear to be of a standardcomparable to private sector plantations elsewhere in Malaysia.

- 26 -

68. Another modification of the plantation approach is also found inTrenrggarnu. In the souther pa of the state the State Govern -ent and theMalaysian Cooperative Insurance Society are jointly developing a plantation-,h4 Cl, ::4- 1 11 If5. rem___=zL;__nn _ -4 4 _w0w

reach 50,000 acres. The State is making land available on a 46 year lease,after which the plcntation will revert to the State. The Socievy-, o-.peraiVngthrough a subsidiary corporation, is supplying management and capital -

obtained by selling shares in the curporatio-n to policyholders of theSociety. The Society agrees to pay the State a premium for each acrecleared and planted, rent during the life of the proJect, and 1% of the grosssales of palm oil. The State Government foresees from this project not onlya source of revenue, Dut a substantial new employment opportunity in thearea; it appears to prefer the estate form of organization rather thanalienating available land to smallholders - probably because of themanagement skills which are available for estates.

nleZal Squatters

69. The problem of illegal occupation of land in Malaysia is acontinuing one which relates directly to the lagging pace of land alienation.Although universally decried, illegal settlement does at least provideemployment for rural people otherwise condemned to idleness. Establishmentof these holdings is evidence that peasants of both Malay and Chinese descentcan open land and create farms although substandard without subsidy orguidance. Given the evidence of land hunger, the problem is perhaps nothow to prevent illegal settlement but how to create an environment in whichthe abilities and energies of these farmers can be channeled into buildinga productive agricultural resource for the future growth of the nation.

70. No estimates are available about the amount of illegal settlement.The Ford Foundation Agricultural Diversification team in 1963 reported that"'more people have established themselves on the land during the past severalyears by squatting than have been settled by the land development plans". Ifthis is true, there might have been at least 25,000 acres a year of illegalsettlement at that time. It is possible that this pace has been maintainedover the past four years. A factor which complicates the problem of illegalsquatters and increases condemnation of it is that a fairly high proportionof the squatters are Malaysians of Chinese origin. However, in the importantarea of illegal squatting along the railroad in Kelantan State officialsreport that most of the squatters are Malays. nflegal settlement is mostnrevalent in the states of Pahang, Trengganu and Kelantan where there aresubstantial areas of uncleared land far from areas of traditional settlement.Many of the holdings are found along the railroad which passes north throughthese states in an area otherwise inaccessible. Squatters plant a varietyof subsistence crops and may grnw some rubhber which they market eitherthrough small intermediary dealers or by carrying it to a marketing center.

The Need for Alternatives

71. This analysis has stressed the excellent quality of the FLDAprogram, at hLOugh doubtir.g V.-nener it can be douled '-Tithi.. th.e n-. f-

years, as some have suggested. The First Malaysian Plan allocates more

- 27 -

than a third of the total investment in agriculture and rural developmentduring the Plan period to the FLDA land settlement program. Of M$900.2million allocated to all agriculture in Wlest Malaysia, M$305 million isassigned to FLDA. FLDA is not expected in the Plan to undertake morethan one-third of the total settlement projected. Yet settlement outsideFLDA schemes is falling behind, so that most of the present settlementactually is being accomplished by FLDA. At the FLDA costs projected peracre in the Plan of M$2,180 per acre to open land and establish settlersand the target figure of 450,000 acres, the total allocation would come toM$970 million - greater than the entire allocation for agriculture in WlestMalaysia in the First Malaysian Plan and probably beyond Malaysia's financialcapacity to carry out. There is thus an urgent need to find supplementarysettlement patterns which are less costly than the present FLDA patterns.Given also Malaysia's financial strains, there would still be a costconsideration favoring renewed emphasis on less rigidly supervised settlement.

72. There are probably some possibilities of reducing the cost ofsettlement, even in existing FLDA schemes. bv means such as intercropping.Such economies would enable FLDA's existing Plan allocation to be stretchedfurther. The nresent FLDA nattern calls for no intercronning, and, hence,no return from the cleared land until the main crop of oil palm or rubbercomes into bearing= The reasonqs for res4itn-nc tn intrrrnnnpping appear moreadministrative than agronomic. It is felt that the problems of encouragingsettlers to tend crops plan.ted in the row^ms between the manin crops, as well asthe main crop would be too great. There is, additionally, the expressedfear that settlers once they began intercr^pping would not be willing tocease intercropping when it began to interfere with the maturing of thetrees. PBut -the ence- rof sr.l 1 inl.-1 stat s c- f.+n chetmes, andr1 cm a+.q++ers

indicates that a family can maintain itself through intercropping the first+t_ee -Ars or so ate-r plaWnting ru1kbAe T AndA lng ovedu farm

VsS VV ;w - w; w W iAV VV . V-ss6 V ^W

management studies at the Rubber Research Institute indicate that intercroppingof. certain specia'4.Ly crops, parti-.4cula.-ly . hJi, pepperJI --d - --s has-eepracticed with such success by certain farmers that they actually are nettingmore o.f tlheir holdings eachlu o'L. tLJhe L.LLU U.te yLear afe L1a.-in th

they will when their rubber comes into full bearing. Even with lessprofit.u c-u. e crops - s*ucll also me g o ,o examle - OV c0uOVdearn enough to eliminate the need for subsistence loans. Furthermore, astaggered pla,nting pattern might permuit settlers to intercrop their rubberthe first three years and then shift to intensive cultivation of their"'dunsun" or garden areas -which now for the mmost part go undeveloped un,tilafter the rubber comes into bearing. Costs might be reduced in otherareas too. rFD& has concluded, based on its past experience, that it isnecessary to hire contractors to build houses for settlers on a turnkeybasis: Perhaps the criticisms about the quality and regularity oi housesbuilt by the settlers themselves on early schemes have been overstated.Observation indicates that after several years most such houses are of fullyacceptable quality, and have a much less regimented quality. (In one scheme,uniformity in housing was enforced to such a degree that a settler who hadbuilt a room onto his house was forced to tear it down by the projectmanagement.) More use could be made of settlers to clear their own land andto undertake other development activities.

- 28 -

73. Essentially, it is a question of ba ancing the higher cost ofFLDA-type schemes, with the consequent higher immediate returns and a rapidtransitl .on to hligher living standards., against 4tbe low er cos+ fls hg.Jorganized schemes with a longer gestation period and which represent less ofa departiure f Irom JU tbraditional LKS.IPong life. Given the growing fin -cal

problems faced by the Government _ problems which did not exist to such adegree du.ring the formative years of FLDA - the case, for consideringsuppTementing the FLDA with better "second-class" schemes of the kind whichhave been noted above as successful in Johore and Kelantan, is strong. It isnot essential that all land alienated be put under cultivation within theyear of alienation. Indeed, it is preferable if peasants are to open t.heirovm land, that they have a sizeable enough holding - 8 to 10 acres seems tobe about right - to earn an above average living, but it may well taXe thera decade to get it all under cultivation. Better provision of extensionservices and special help to settlers on these schemes mignt go a long waytoward inproving the standard of their cultivation without adding too muchto the cost. Also, the new land capability maps now becoming available wiilenable more effective control over site selection. Some sacrifice in thestandard of initial cultivation in the interests of more rapid opening ofthe land may not be too high a price to pay to have families becomeproductive within the next few years instead of being condemned to live outtheir lives in idleness.

- 29 -

CHAPTER IV

CONCLUSIONS

74. Agriculture in Malaysia has performed creditably over the past sevenyears. The annual rate of growth of export crops, mostly rubber, from 1959 to1966 was 5% per year, while that of crops produced primarily for domesticconsumption was 5.8% per year. The most impressive growth was in the poultryindustry which increased at an average of 9% per year. Paddy performance wasnot so impressive moving forward at 3.8% per year although the outlook for thefive years of the First Malaysian Plan is for accelerated growth at the end ofthe period as a result of better irrigation facilities. New irrigation,principally that arising from the 261,500 acre Muda River scheme in thenorthwest and the 47,000 Kemubu scheme in the northeast, give rise to anexpectation that paddy production can continue to be increased through the1970's. Rubber production will grow more rapidly in the next few years asareas replanted to high yielding clones come into bearing. The most rapid rateof growth is expected to be in the late 1960's when it should reach 7.3% perannum, but by 1975 the improvement from better planting materials will have beenachieved and rubber output growth will decline to 3.1 ner annum by 1975. Oilpalm output, in which considerable interest is being shown because of its highyields under Malaysian conditions and favorabTlh market nrosnActs. is exnectedto grow rapidly, but the total value of the crop at present is only 2.8% oftotal agrirulturnl ott.i The growuth of food production is uncertAin.Unfortunately, as is discussed in Volume I of this report, adverse price trendsin these export crops w.ill nullIfiy much of the increase in the volume of output.

7C ~ TV%n Ynno+4mme ; mn r.- i nne 4A -4 rMl o-a4 ov-4n AX _ ti;ril r-in1 r1anl 1nM=n+. ; C +.. .

accelerate the growth of smallholder income to narrow the gap between rural and-bar. ircoes The disparity Af ir.come arises" In m r fIo.%m. +he low " r,,'+. trr4 +-Tr~A LJS J.M.1SE& A. Al4.. Lj~ WA f. -*_4L4 .L. -J P_ .k- - - - J_

of Malaysian peasants engaged in smallholder agriculture. To increase thisrdu cts-4-4y, 4the First- Malaysi Plar +1. lcse.ai nrsac , th" J V .L. L

4, L'.Val XJJ. U , XICjCLY _c LAj_ 1 A L~jrA&j.LJ V. '..W,L

development of better institutional assistance to agriculture, and an^acceera e ra4-e 04' 1- q-44 OA - n m A.T_ r> TT n-mi TTT on; mf n it.

u LJ4 I LA~~4 A.CL.LALA 0UV U.L.UA'A7ISV* LAW"VV' V U , _,J eVU.I -_4 'III -- .- t - -

significant progress has yet to be achieved in all these fields, although as UartJ L±Chs bUeen rdeIa'Uy .LL1 irE..ULL"1r 0. par,w L. t0esea ULI jprogJr La r,,IU and inrJ. .J.4.L UUA. 4

education. Physical investments in new facilities - the largest of which areEllie rwiuda and nei-uuvu IrrigatUiorl sucuhe,,,, arl prl1V-ESSilg WteLl. UL,b wi.L.Ll Inlt

produce full benefits unless ancilliary services are improved.

76. At present, the dominating characteristic of the rural andagricultural development effort is that it is diffused by the large nu-mber-of agencies involved. At the Federal Government level the Economic PlanningUnit, Ministry of Agriculture, Ministry of Rural and National Development aridthe Ministry of Commerce each has its particular responsibility. To theseMinistries also report various autonomous agencies - the Rubber ResearchInstitute, Rubber Fund Board, Federal Land Development Authority, Federal

- 30 -

agricultural Marketing Authority, Federal Land Consolidation andRehabilitation Authority, etc. Within the Ministry of Agriculture, inparticular, responsibility is divided, as is exarmled above with referenceto the cooperative movement, farmers' associations, and rural credit. Belowthese Federal agencies, each of the eleven States with an average populationof under 1 million each has a range of its own agencies and responsibilitiesinc'luding, for examDle. responsibilitv for determining land use, and theorganization of state land settlement schemes and extension services. Thecoordination and staffing of all thesp aapncies. most of which have laudable ifnot entirely consistent objectives, will have to be improved if the objectiveof *ncre2qing 'i3rql nrndIiirtivI+.v is to 'h ac-hievedr

77. Land developmIe.n+. bh e +.I T.nh eontinues to progress Pffinienrtly. andis only slightly behind the Plan targets. However, settlement under otherschemes is at a standstill. * Lnd 4S r.t scrc in 1et+ or1 East Maasa

and exteiision of the land area offers one of the best ways of increasingxrral -nco,es. Despite their exce'l&nc, the high cost of FLDA schemes, at atime of financial strain, underlies the need to minimize FLDA. costs and tofPind a satsfactory supplementary method of low=cost ldan settlement to meetthe demand for new land. State schemes, which under the Plan were set at atarget of 150,000 acres - more than FLDA - mIght well be more efficient if animproved agricultural extension service could be utilized.

STATISTICAL APPENDIX

Table No.

1 Malaysia - Agricultural Output, 196h-66 and 1970

2 West Malaysia - Public Capital Expenditure for AgriculturalDevelopment. 1961-65 and 1966-70

3 West Malaysia - Production of Rubber. 19q9-66 and ForecastProduction, 1967-75

4 West Malaysia - Total Area Planted and Harvested and Padi andRic-e Produeod; 1952-1965

5 West Malaysia - Tmnnrt Trade in Food- Other Agricniitn.iralProducts and Forest Products in Relation to Total Trade,l9U8-196S

6 West Malnysia - TImnorts of Agriculturnl Products ProducedWithin the Country, 1964, Excluding Rice

7 West Malaysia - Federal Land Development Authority SettlementA rogr ess 19 5-1976. an.d IlJ , A.La.4LA.V Ad V 19J66=19VJJ.L7 W- -70 I 7-

8 W ±la.LO . - Stat .%ILand Dr..UJAevelop.ment SIchler, e s, 1960IU6

9 Cost Estimates for a Rubber and an Oil Palm Scheme FromThception to Mat-urity-

TABLE 1

MALAYSIA - Agricultural Output. 1964-66 and 1970

Weights 1964 1965 1966 1970- - - ~~~(Proleted)

Rubber = . ....... . . . . . .. ,. . 58.8 114 121 128 164

Forest Products .. ,., 8.2 191 196 2Rn 8 229

Rice . . . 7.4 L35 140 144 177

Livestock Products .... 7.0 166 175 181 229

Coconut Products ...... 4.7l 191 129

Fish ................ 4. 1 'I Cf7 167 177

a UOil and Kernels ..s 1.9 168 188 215 358

U'rier Agriculture ...u..... ±.± 134

Combined Index ........ 100.0 128 135 142 177

Export Commodities .... 69.8 125 133 140 177

Domestic Commodities .. 30.2 136 142 148 177

Source: Mission estimates based on the First Malaysian Plan and dataprovided by the Department of Statistics, Kuala Lumpur, Malaysia.

TABLE 2

WEST MALAYSTA - Public CaDital Expenditure forAgricultural Development, 1961-65 and 1966-70

VM$ Million,)

1961-65 1966-70(Etm+e) ynn+1 (Targ+).

A w4

l1~ +11V.-

Animal Husbe,.Wr 11.3 28.0nl

Fiheie 23 . 5 17 0 V .LQI~ ~ 11.

Forestry 6.6 10.0

Land Development 129.8 335.0

Rural Credit and Marketing 1.3 19.5

Emergency Contract Personnel Services -

Total 411.1 900.2

Source: Fir s t .M-ys iP1 16ola P , 1966=7.

TABLE 3

WEST MALAYSIA - Production of Rubber, 1959-66and Forecast Production. 1967-75

Prorduction in 1 000 TongTotal Annual

Year Estates Sm. a l h_ l Hi n as(percent)

1959 408 290 698

1960 414b 294 708 1.4

1961 429 307 736 4.0

1962 439 312 751 2.0

1963 459 328 787 4.8

1964 477 347 824 5.0

1965 491 379 870 5.6

1966 501 426 927 6.6

1967 530 448 078 5.5

1968 570 467 1,037 6.0

y969 620 462 1,082 7.3

1970 653 502 1,L55 6.7

1971 685 547 1,232 6.7

1972 710 584 1,294 5.0

1973 733 613 1,346 4.0

1974 754 641 1,395 3.6

1975 770 668 1,438 3.1

Source: Fimures for 1959 to 1966 from Department of Statistics,Kuala Lumpur: The forecast for 1967-75 is a mission adaptationbased on IRI nroenitionns

ThDL7 b

WTE.'ST MALAYSIL - Tota:L Area Planted and Harvested anclPadi and Rice Produced, 1952-1965

Production o:r We-t 1i>11 ;d Rice Productionancd Dry Padi Combined

Wleighted *'Total Planted l'otal Harvest;ed From Wet From Dry Average Total

Season Area Area Gantangs Tbns Padi Padi Yield per Production Imports(acres) (acres) (00O's) (to:ns) (tons) Acre (lbs) (tons)

1951-1952 681,680 650,,o01o :1c2,2290 455,725 260,340 6,740 989 2a7,080 31(,5711952-1953 686,220 677,21h0 235,407 588,518 363,720 6,990 1,226 370,710 28hl,0691953-1954 697,04O 673,480 220,(10 550,025 351,570 4,890 1,185 356,L460 352,'3081l95!-1955 7I41,9>90 718&,010o 219,',57 548,893 337,000 8,750 1,079 5,7'50 197,9'2'1955-1956 727,120 711,6l70 226,106 566,015 345,310 11,250 1,122 356,.60 37, 4871956-1957 7'48,270 740,310 264,917 662,292 398,280 18,930 1,262 417,210 362,630:1957-1958 7'60,130 752,h45o 265,776 664,L,4o 405,960 12,680 1,246 1h18,640 3W0,5161958-1959 773,490 730,510 237,-L61 592,902 358,720 lh,750 1,lhS 373,L70 3h6,1291959-1960 788,720 782,340 303,,518 758,795 461,800 16,180 1,369 4 77,5980 418,64;15960-1961 802.,640 79',210 332,-L77 830,443 508,930 1L,190 1,h68 523,120 356c,978:1961-1962 816,650 811, 8'0 313,545 783,863 479,260 14,580 1,363 L93, 840 315,6631962-1963 838,570 832,08 0 3400,2'93 850,733 521,040 14,880 1,443 535,920 2 8 8,0 t61963-1,964 835,620 795,5(0 '293, 567 733,918 462,640 14,710 1,344 477,350 38'9,16'7:196h-19c5 &64,7770 840,9 80 351,:L79 877,946 556,920 14,100 1,521 571,C020 401,8L0

;ource: Malaysia. Kementerian Pertanian dan Shrikzat Kerjasama (linistry of Agriculture and Cooperatives).,Statistical Digest. Kluala Lumpur: Ministry of Agriculture and Cooperatives, January 1966.

-- Amended figure.

TABLE I

WEST I4ALAYSIA -- Import Trade in Food, Other Agricultural Productsand Forest Products in flelation to Tota:L Trade, 1958-19,65- - (4 MIill-o n

Food Other Total Agricultural Imports (4)and Agricultura) ForeEt Total Non-.Agricultiaral Total as Percent

'Year Feed a Product,s./ FroductsC/ 1+-2+3 Products Imports of Total (6)

1958/59 581 1h5 10 736 962 1,693 43(Average)1960 627 201 10 638 l,3:L2 2,150 39.0

1961 634 163 13 810 l,8'O 2,2323 36.3

1962 624 149 11 71'84 1,663 2 , 447 32.1

1963 707 125 12 41d4 1,69?0 2,5314 33.3

1964 739 103 10 652 1,669 2,52:L 33.8

1965 655 123 12 790 1,818 2,608 30.3

Sou:rce: Malaysia. Kiementeriar Pertanian dan Sharikat KerJasama (vIinistry of Agriculture and Cooperatives).Statistical Digest. Isuala Lumnpur: Ministry of Agriculture ancd Cooperatives, January 1966.

a. Includes live animals for food, meat, dairy products, fish, cereals, fruit and ve,getables, sugar, beverages,and spices, feedstuffs, fats and oils, and miscellaneous other cat-egories.

b. Includes tobacco, hides and skins, natural fiter, natural rubber (vr;ucih of :LL' 1'01 re-ey.pFort) and a range ofmiscellaneous produc ts.

c. Includes veneers and ply-viood and miscellaneous wood products.

TABLE 6

WJRFST MAT,.AYFTA - Tmnr-t.s of Agrirn1tr,%1 ProrhiitsProduced Within the Country, 1964, Excluding Rice

Value Total ImportsP r oduct (M-Mll-o.-(erert

Live Animals for Food 12.8

Meat 20.8

Fish 33.2

Fruit and Vegetables 80.4

Sugar 113.0

Coffee, Cocoa, Tea 30.0

Feedstuffs 45.6

Fats and Oils 26.3

Beverages 28.6

Subtotal 390.7 15.5

Dairy Products 90.7

Sub-Total 481.4 19.1

Source; "ementerianL Pertanianl dan K erjasamn (Ministrl"y ofAgriculture and Cooperatives). Statistical Digest. Kuala Lumpur:Minis ry of gri, CULL-a 19-

TABLE 7

WEIST MALAYSIA - Federal Land Development Authority SettlementProgress 1 956-19615 and Planned Development 19i66-1970

Settler DevelopmentPeriod Year Rubber Oil P'alm Total Families Population Expenditure

Tthousands of acres7 (000) (000) (NI$ mil.)

First 1956 .- - -

Malayan 1957 .h .h .4 2.4 .5Five- 1958 3. L 3.1 .5 3.0 1.0Year 1959 3.5 - 3.5 .3 1.8 1.7Plan 1960 10.0 - 10.0 .5 3.2 4.0

1956-6o0 17. 1.7 10.4 7.2

Second 1L961 14.2 .9 15.1 9 5.lL C.2Malayzan 1L962 24.8 1.0 2,5.8 1.4 8.4 1]7.8Five- :L963 23 .7 6.9 310.6 2.1 12 .6 22.1Year ]L964 17.0 8,2 215.2 1.7 9.9 25.7Plan ]L965 10.,3 9.5 1908 1.7 10.3 25.5

1961-65 90,(D 26.,5 116,5 7.8 46.6 99.3

First 1966 180() 14.0 32.0 4.2 25.1 58.3ilelaysian 1L967 5.09 16.0 21,0 h.7 28.0 60.9Plan 1968 5O0 2h.0 29.0 4l1 21..8 60.9(Planned) 1969 5,O 2h.0 2990 h.1 24.8 62 .8

1.970 5.0 25.0 30.0 h.1 24.8 362.1

19,66-7110 38.( 103.G0 lbl.o 21.2 127.5 3055.0

Source: Tan 'Sri 'aib bin Haj:i Andai:. Land Development in Malaysia under the Federal Larnd DevelopmnentLfuthority - D)escrirtion of P:ro. .urne and Tec'rni-cues of Development ITiiplemen t ttior, Kuala Lurnpur:I'lalaysian Centre for Dnvelopment Studies.

TABLE 8

1KEEST YALAYSIA - State Land Development Scheemes,1960-19b66

C u m u 1 a t i v e T o ta, l s- -IncreaseLand A:lienation Schemes FDecember

31 Dec. 31 Dec. 31 Dec. 31 Dec, 31 Dec. 31 Dec. 1960 t,c1960 1961. 1962 1963 L964 1965 1966 December

1966

1., Fringe Alienation

holders, number _ 3,l53 12,3463 22,620 214,609 25,2'99 25,299 25,29?'otal area planted, acres - 20,015 65, 651 115,999 118,204 123,09o4 123(,094 123,094Area with Rubber as Main Crop, acres - 19,277 65,113 115,261 117,1466 122,356 :L22,.356 122,356Area with Palm Oil as Main Crop, acres - - - -. -_Area with Ot;her Crop as Main Crop, acres - 738 738 738 738 7 38 738 7382,, Controlled Alienation

Holdje!rs, number 210 1468 5,231 10,h2L 10,929 10,'929 10,929Total. area planted, acres 69 1468 114,950 231, 171. 25,1'10 25, 350 25,350Area with Rubber as Main Crop, acres - - 114,238 18,668 20,665 20,6h5 20,665Area with Pa,lm Oil as Main Crop, acres .- - -_Area with Other Crop as Main Crop, acres 69 1468 721 )4,503 4,525 1hi685 bj6853. Group Settlement Schemes

Settlers, number 5914 682 797 9L42 1,134 1,217 1,217 623Total area p'anted, acres 2,238 2 2661 4,207 6,336 8,378 '8,1414 8,E1414 6,606Area with Rubbe-r as i,lain CrOp, Ecres 2,1<6 ' 156 3,686 5,?27 7,135 7,135 7,1i35 5,279Area witii Palm O1l as Main Crop, acres - - - -Area with Other Crop as Miain Grop, acres 82 105 52-1 1 ,i.09 1,2243 1,I409 1,1409 1,327

_ Page 2 -

TABLE 8

N0TESD:

1. "Holders" comprise the beneficiaries of these programmes under the State Land Development

Schemes. In many instances the benefit consisted in obtaining additLona:L acreage to

supplement the land they already owned. As such, the number of land:Less individuals wJho

obtai:ned land through these programmes is substantially less than indica-tsd by the

cuamulative total of 60,701.

2. Some of the land developed under these non-FLDA State schaemes has been abandoned and the

cultural practices on much of the remaining acreage are generally in:ferior to those

adopted in the FLDA schemes.

TABLE 9

Cost Estimates f'or a Rubber and an Oil ]'aln SchemeF'rom Inception to Mat;urity (Rubber 6 Years, Oil Palm 4 Years)

FLDA Rubber Szcheme FLDA Oil Palm Scheme

Rubber 4,000 acres Oil FPalm 4,000 acresVillage 300 " Village 330 "Settlers 500 fami:Lies Settlers 500 families

Items Cost; to Maturity (6 years) in M$ Cost to M-aturity (4 years) in M$

Total for Cost per Cost per Tota L for Cost per Cost cerScheme Acre Selttler ScheDme Acre Settler

Loan Account

Establishment and Subsistence 5,C)80,OOO 1,270 10j,160 :3,6761,000 9:19 7,352Settlers Hlouses and Village Area Establishment 1 ].24,C)00 281 2-P248 :L26'7,oo0 316 2,528Processing Factory and Ancillary Facilities 800,OOO 200 1,,600 2,800,000) 7100 5,600

TOTAL UNDER LOAN ACCOUNT 7,004,000 1,751 114,008 7,743,000 1,935 15,480

Administration Account

Management, Offices, Quarters and Vehicles etc. 9>99,o000 250 2,000 653,0oo 1614 1,312

TOTAL CO'ST TO AUTYIOR.ITY 8,003,000 2,001 16,008 8,396,000 2,099 16,792

Pub:Lic Uttilities and Social Amenities 953,000 238 1,901 95'3,000 238 1,904

TOTAL COST --TO AT70N 8 ,556,000 2,239 17,912 9,349,00oo 2,337 18,696

Source: T,n Sri Taib bin Haji Andak. Lend Development irni-lalaysia .lnc!er the lederal Land 1'exr_lor mc,ntAu-tiority - Descr-ption of' Pro{-ran]ne and Techricques of Derelopnent; Imp lementation. ;uala Lumpur:M-"a'aysian Centre for Development Studies.