Persidangan
Tahunan MANCID Ke8 (8th MANCO),
23-24
November, 2000
‘Opportunities
in Agriculture’
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.
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
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
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
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.