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Persidangan Tahunan MANCID Ke8 (8th MANCO),

23-24 November, 2000

‘Opportunities in Agriculture’

NAP3-A Comprehensive Approach Towards Agricultural Development in Malaysia

Keynote address by:

Puan Rahimah Md Said

Ministry of Agriculture, Malaysia



1.    The agricultural sector has contributed significantly to the growth and development of the Malaysian economy even though the Malaysian economy has undergone significant structural changes over the last four decades. For the first three decades since independence, agriculture was the main contributor to the national economy. This sector laid the foundation and has been the driving force behind the economic growth of the country. Agriculture was used to finance the development of the country, which progressively led to the transformation of the economy towards industrialisation. The rapid industrialisation during the last decade led to a decline in the sector's relative contribution to national income, export earnings, employment and investments.

2.    But even as Malaysia moves towards becoming a highly industrialized economy, the changing economic scenario and structure has necessitated the re-evaluation of the role and contribution of the agricultural sector vis-a-vis the economic development of the country. With the focus given to industry and manufacturing as the engine of growth, we see that the agricultural sector's importance to the economy was reduced relative to the position it held before. The new macro economic framework therefore requires that adjustments be made to ensure that the sector remains relevant and continue to provide the support required towards the efficient performance of the industrial sector. The agricultural sector need to redefine its role in its contribution towards the economic development of the country. Agriculture is now required not only to play the role as supplier of raw materials to the manufacturing sector to support the agro-based industry, but also in getting good returns from increasing productivity on land which is becoming increasingly scarce due to competition from other sectors for its utilization. Agriculture should be undertaken on a more commercial basis with greater private sector participation, utilizing modern methods of employment and management. Within agriculture itself, activities have to be implemented in an integrated basis whereby, crops, fisheries and livestock rearing should be worked upon alongside agrotourism. These are the challenges that is faced by the agriculture sector. However, within these challenges lies the opportunity that can be taken advantage of.

3.    Income and population growth as well as changes in lifestyle resulting from urbanisation have increased the demand for food, generated changes in food habits, food purchasing and consumption patterns. Local production of food has increased at about 4.2 per cent per annum during 1985-95 period. This increase has not been able to match with domestic demand resulting in increasing imports especially during 1990-95 period. Food import bill in 1999 stood at RM 11.0 billion, compared to RM 10.0 billion in 1997. (With the exclusion of animal feeds, food import would be lower i.e. RM9.0 billion in 1997 and RM9.6 billion in 1998). Major food imports include wheats, rice, maize, sugar, dairy products, fish, vegetables, fruits and meat products. The increasing deficit between domestic demand and local production is expected to continue. The recent financial crisis has highlighted the need to pursue more aggressive policies to enhance food security through expansion in domestic food production and lesser dependence on imports. It is also not in the long-term interest of the country to be increasingly dependent on external sourcing for food, as there is uncertainty in its long-term international supply. However, economic factors limit Malaysia's capabilities in enhancing domestic supply to fully meet her total food requirements. Against this scenario, NAP3 has focused its policy formulation on enhancing domestic production and strategic sourcing to ensure adequate supply and accessibility to safe, nutritious and high quality food at affordable prices.

4.    In the NAP3 there are seven (7) issues/challenges and future prospects of the agricultural sector that have been identified. Specifically they are: -

(i) Food security

(ii) HRD

(iii) Maximising the Utilisation of Scarce Resources

(iv) Liberalisation

(v) Low private sector investment

(vi) Intra and Inter-Sectoral Linkages

(vii) Sustainable Development

5.    The NAP3 is build upon the strengths of the product-based and agroforestry strategic approaches to overcome the issues and challenges that constrained the progress of the agricultural sector. The products-based approach will enable a more effective formulation of policy thrusts to meet the challenges of increasing competitiveness and enhancing profitability in agriculture. In implementing this, the agroforestry approach on the other hand will enable policy formulation to focus on resource constraints such as land and labour as well as addressing the sustainability agenda in agricultural development. With these approaches, the NAP3 will focus agricultural development through the following strategic policy thrusts that will provide the enabling environment to sustain and enhance the growth of the agricultural sector to meet national needs and become globally competitive.

6.    The product-based commodity development approach will enhance the development of agricultural industries through the transmission of market signals and consumer preferences upstream to the farm. Through this approach, agricultural production will be more specialized to meet the needs of various domestic and global market segments. This will encourage the production of high quality and high value produce, facilities product differentiation and increase value-added of agriculture and forestry products.

7.    By relating end products directly to primary production, the product-based approach will strengthen the strategic role of upstream agricultural and forestry industries in linking and supporting the downstream industries and other sectors of the economy. This will encourage vertical integration and the internalization of value-adding activities such as sorting, grading, packaging and processing at the farm level to increase farm income.

8.    The product-based approach will also enable the identification of opportunities for market expansion and deepening. The strategy of utilising market signals transmitted upstream will facilitate agricultural producers in making decisions to produce the necessary raw materials to support agro-based manufacturing and other economic activities. This will widen the scope of agricultural and forestry development and create business opportunities for a wider range of business ventures through a system of linkages. This includes R&D and technology generation, primary production and processing, manufacturing of intermediate and final products as well as distributing and marketing the final products and services to the consumers.

9.    Currently, Malaysia is still not self-sufficient in many food products, particularly milk, mutton and beef where the self-sufficiency levels are below 20.0 per cent. Consequently, the country has to depend on imports to meet her food needs, amounting to RM7.7 billion in 1995. This import has increased to RM 10.0 billion in 1997 and RM11.0 billion in 1999. As mentioned earlier, the major food imports include wheat, maize, sugar, rice, dairy products, fish, fruit and vegetables and meat products. However, Malaysia also exported RM4.4 billion worth of food products in 1995 and RM 5.3 billion in 1997 consisting mainly of fish, live animals, cereal products and tropical fruits. For the period January-August 2000, our food export was RM4.2 billion

10.    At the global level, there are market opportunities for developing halal food and other livestock based and input industries. Malaysia is now developing and exploiting her potential as an international halal food-hub. Capability for inspection, monitoring, standardisation and certification for Malaysian Halal Standard will be strengthened and this standard will be internationally promoted.

11.    There is also an increasing global and domestic need for natural ingredients for manufacturing of nutraceuticals, supplements, health food, pharmaceuticals, cosmetics and toiletries. Malaysia's flora and fauna are sources of these natural ingredients. These opportunities provide conducive atmosphere for successful industries that utilise our rich biodiversity to be created in the country.

12.    Based on production capability and demand, there is potential for the country to enhance production of fruits and be competitive to cater for selected fresh fruits demand in the domestic market and in niche export markets. Outsourcing of a more secured and stable supply of raw materials through joint-ventures in regional growth areas offers opportunities for the local processing industry to further expand to meet demand for both domestic and export markets.

13.    The processed fruit industry such as juices, puree, concentrates and processed fruit products has become one of the world's major agri-businesses. Opportunities also exist for Malaysia to produce specialised fruit products such as minimally processed fruits, tropical fruit juices, natural food ingredients, functional food, modified food ingredients, health food, convenience food, frozen fruits, beverages and high fiber products. Floriculture is another industry that will provide new growth to the agriculture sub-sector and more land will be earmarked for its expansion.

14.    As for the fisheries industry, it has undergone rapid development in the last ten years with remarkable improvements in fish production. The gradual shift from artisanal fishing to one that is commercially oriented has been made possible by active participation of the private sector and the use of new technologies. This has led to the rapid development of deep-sea fishing and commercial aquaculture contributing towards an increase in fish production. At the same time, through prudent management measures, the inshore fisheries is still the major contributor to fish production.

15.    Malaysia has the potential and the necessary resources to further increase supply to meet domestic and export demand. Considering the availability of fisheries resources in EEZ waters, the deep sea fishing industry can be further developed on a sustainable basis. It is estimated that about 434,000 tones of fish can be exploited annually from this source. By 2010 the inshore fisheries' contribution will be sustained at about 600,000 tones annually through prudent and systematic sustainable management measures.

16.    There are available suitable lands and water bodies for further development of the aquaculture industry. It is anticipated that the contribution of aquaculture production to total national fish supply will increase from 11 per cent in 1995 to more than 30 percent by 2010. This will provide opportunities for the development of supporting industries including the production of feed and fish fry. There is also tremendous opportunity in ornamental fish culture and its expansion will be supported with infrastructure facilities and services to facilitate exports.

17.    Having said that, we also realize that the imperative need to increase food supply has to take cognizance of the increasing scarcity of water and farmland, which also need to be addressed. This will be done through the integrated approach to water based production and services. There is significant scope for better integration of agriculture, aquaculture and inland fisheries practices. Programmes on approaches of co-management and community-based management of common property resources must be given increasing attention. At the micro production level, integration will need to focus on production technologies, such as by-product recycling and improved space-utilisation. At the macro-level, an integrated economy needs to be organized and structured so that constituent units function co-operatively. Integration needs to be pursued at all levels, should be interdisciplinary, and has to take into account the socio-cultural context of the locality and region. In this regard, human resources development and institutional strengthening will be the primary requirements for achieving better integration at the level of individual farms and communities, in river basin and coastal area management.

18.    Private sector expenditure constituting private investment and private consumption will be the driving force of the economy during the NAP3 period. This is consistent with the VISION 2020 policy of encouraging the private sector to play the lead role in forging economic growth with the public sector playing a reduced but supportive role to private entrepreneurships. The achievement of the growth and structural transformation targets towards the year 2010 will hinge on the performance of the private sector, the performance of the international economy and Malaysia's ability to position itself to take advantage of the opportunities in the international markets. While the international economy may or may not be conducive for the achievement of these growth targets, pragmatic and flexible policies coupled with strong government supportive services implemented to reorientate the domestic economy to dynamic external changes, will go a long way towards putting the economy on a stable and sustainable growth path. This will require greater private sector participation in critical areas of the food production, post-harvest handling, processing, distribution and marketing to further enhance efficiency and productivity, as well as to diversify the structure of production in order to deepen and widen the country's agro-industrial base. This would entail an increase in the utilization of the country's resource potential to cater for export markets given that domestic demand alone is insufficient to support this objective. The emphasis would be towards increasing value-added and greater utilization and processing of domestic natural resource and agricultural produce such as palm oil, cocoa, fisheries, fruits, vegetables and livestock as competitively as possible.

19.    In addition, postharvest handling, agroprocessing, and skills that address the environment, consumer health, and worker safety will also be required. Advanced farm management, agribusiness management, marketing, and enterprise planning become essential skills for dealing with inherent risks and responding to new consumers, competing prices, changing quality and health standards, and contractual specifications and deadlines.

20.    One other important ingredient which will determine the success of the market-driven transformation of the structure of the economy and export-led growth is fast, reliable and timely information. In general, a business organisation has four general sources of information that it routinely tap to assemble its management information system: its own business records, market visits and contacts, proprietary information available for a fee from market information firms, and public information on its industry and market channels including census data, trade publications, newspapers, directories, published reports of competitors, university studies, government reports and other publications. To be efficient and effective, any information system whether at national, state or firm level must be able to deliver the Right Information to the Right Person at the Right Time. In any business organisation operating in a competitive environment, information are required for strategic choices on pricing of products; selecting technology for production, marketing, and distribution; investing in capacity building, advertising and product development; sourcing of inputs; diversification into new lines of businesses; and the acquisition or diversification of business units.

21.    In the production decision making process, information needs is on product standards and quality, prices of inputs, technology, input standards, major suppliers of inputs and their market shares, production process and lastly sources of inputs and availability. At present, there is a lack of information on product standards and quality of many tropical agricultural commodities and products. Information on prices of inputs and technology of production and processing are also lacking.

22.    In the investment decision making process, information on investment laws, regulations, investment opportunities and project information are important. Information on potential partners and their credibilities are fairly important. With regards to investment laws and regulations, information on taxation and incentives are considered to be very important. Malaysia offers a wide range of tax incentives to attract both local and foreign investments in selected industries and products. Tax incentives such as total or partial exemption from income tax, Import tax, export tax, sales tax and service tax are very important information in the investment decision making process. Malaysia is currently facing a very tight labour market. Thus information on laws and regulations with regards to employment of expatriate and foreign workers are also important.

23.    As for the local market, information on sources and availabilities of products, customers' requirements, demand structure, trend and seasonality, distribution channels, import and export regulations and taxes, competition with regards to producers, importers, traders and their market shares, ex-farm prices, wholesale prices and retail prices are considered to be important in the marketing decision making process.

24.    For the export markets, information on customers' requirements, market access (product safety, standards, labeling, packaging etc.), trade practices (ordering, payments, transport, delivery etc.), competition, distribution channels, demand structure, trend and seasonality, trade documentation, trade policies, import regulations, FOB and CIF prices are considered to be important in the export marketing decision process. Because of the higher risk involved in the export markets, practical hints about a particular foreign market become more important than practical hints regarding local market.

25.    During the NAP3 period, the development of information intensive and knowledge-based agricultural industries will be accelerated through the establishment of a National Agricultural Information Centre (Business Development Centre) with a centralised and electronically linked data base to support decision-making, business development and marketing activities. This Centre would coordinate and integrate all the information services provided by the departments and agencies under the Ministry of Agriculture to the private sector. Systematic improvements would be made in the methodologies of data collection, processing and analysis of data so as to increase the reliability of information disseminated to the private sector. Systematically and continually ascertaining the needs of its users would be a major task of the Centre given the rapid changes in the economy.

26.    The future performance of the food production industry will continuously be determined by its capability to overcome supply constraints, its ability to maintain its competitiveness in the world market, to meet the changing food needs of the modern and more affluent Malaysian society, and also its ability to exploit the applications of scientific and technological knowledge for growth and expansion and efficient management of the environment. We notice today the rapid changes in food needs of the modern and more affluent and urbanised Malaysian society. During the last ten years, several demand-side events have together resulted in a different and an augmented consumption patterns for certain food products. These events will become more important in the future as a result of higher income levels and greater urbanisation. The introduction of brand names for poultry products and fruits, the marketing effort to develop consumer allegiance to brand names, the ever-increasing food volumes marketed through fast-food outlets, restaurants and modern retail outlets and the increasing health consciousness of the consumers will generate changes in the nature and composition of food demand. Here therefore are the opportunities for the rationalization and consolidation in the approaches to our agricultural development. The integrated F&A Incorporated approach, with each department and agencies contributing towards the wholistic success of programs will be the determining factor in realizing the opportunities before us.

27.    Under a more market-driven economic policy framework and guided by the NAP3, agriculture is capable of facilitating trade expansion and GDP growth, while also helping to generate incomes and jobs for the poorest part of the population, facilitate more appropriate land and natural resources practices, and provide broader social benefits within an increasingly decentralized political framework.

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