third country training on agricultural finance 15-28 february 2004, hanoi, vietnam current situation...

THIRD COUNTRY TRAINING ON AGRICULTURAL FINANCE

15-28 February 2004, Hanoi, Vietnam

CURRENT SITUATION OF AGRICULTURE IN MALAYSIA

Prepared by: Ng Tak Wa Bank Pertanian Malaysia

February 2004

Contents

1. Importance of the Agricultural Sector

2. History of Agricultural Development

3. National Agricultural Policies

4. Agricultural Commodities

5. Agricultural Institutions

6. Poverty Eradication

PART I

IMPORTANCE OF

THE AGRICULTURAL SECTOR

Overall Statistics

• Population (2003): 25.32 million

• Land area: 330,252 square kilometers

• Employment (‘000):

2002 2003

Labor force 9886.2 10337.6

Employment 9542.6 9986.6

Unemployed 343.5 351.0

Unemployment rate 3.5% 3.4%

Importance of Agricultural Sector

Main contributor to the national economy in Main contributor to the national economy in 1960’s to 1980’s.1960’s to 1980’s.

This sector laid the foundation & was the This sector laid the foundation & was the driving force behind the economic growth of driving force behind the economic growth of the country which progressively led to the the country which progressively led to the transformation of the economy towards transformation of the economy towards industrialization.industrialization.

Strategically important as a provider of food.Strategically important as a provider of food.Vital source of raw materials for the agro & Vital source of raw materials for the agro &

resource-based industrial development.resource-based industrial development.

GDP Growth By Sectors (%)

Item 2000 2001 2002 2003P

GDP 8.3 0.4 4.1 4.5Agriculture 2.0 1.8 3.0 2.3Mining & Quarrying 1.9 1.6 3.7 4.5Manufacturing 19.1 -6.2 4.0 6.5Contruction 1.0 2.3 2.3 2.5Services 5.7 5.7 4.1 4.2

Share of Agriculture to GDP,1985 - 2003

Value-Added Share of AgricultureRM million to GDP (%)

1985 11,851 21.0

1990 14,828 19.0

1995 16,231 14.0

2000 17,840 13.0

2003P 18,869 8.2

Year

GDP Contribution By Sectors,2001 - 2003

RM million % RM million % RM million %

Agriculture, Livestock, Forestry and Fishing 18,269 8 18,438 8 18,869 8

Mining and Quarrying 15,892 7 15,826 7 16,545 7

Manufacturing 63,536 28 65,908 28 70,225 29

Construction 7,159 3 7,275 3 7,461 3

Services 118,763 53 124,939 54 130,187 54

Total 223,619 100 232,386 100 243,287 100

Item2001 2002 2003 *

Employment in Agriculture

Employment % of Total

('000) Employment

1980 1,800 37.2

1985 1,796 31.3

1990 1,738 26.0

1995 1,524 19.0

2000 1,407 15.0

2001 1,406 14.7

2002 1,406 14.3

2003 1,403 13.8

2005 1,200 11.9

2010 980 8.8

Year

Share of Agricultural Exports

Item 1985 1990 1995 2002

Total Values of

Agricultural Exports (RM mil) 13,937.7 22,283.7 35,427.4 43,488.9

% of Total Exports 36.7 28.0 19.2 12.3

PART II

HISTORY OF

AGRICULTURAL DEVELOPMENT

IN MALAYSIA

Agricultural Development in Malaysia

1960’s & 1970’sAgriculture was the main pillar of the Agriculture was the main pillar of the

Malaysian economy in the 1960’s.Malaysian economy in the 1960’s.Average growth rate of 8.5% per annum.Average growth rate of 8.5% per annum.Rubber, palm oil, saw logs & pepper accounted Rubber, palm oil, saw logs & pepper accounted

for 42.0% of agriculture sector production. for 42.0% of agriculture sector production. Expansionary policies on paddy and export Expansionary policies on paddy and export

crops (rubber, oil palm & cocoa).crops (rubber, oil palm & cocoa). Development of new lands and in situ Development of new lands and in situ

development.development.


1980’sAverage growth rate recorded during this Average growth rate recorded during this

period was 1.3 per cent per annum.period was 1.3 per cent per annum.Growth came mostly from the increase in Growth came mostly from the increase in

outputs of palm oil, cocoa & sawlogs.outputs of palm oil, cocoa & sawlogs.Malaysia experienced rapid expansion in Malaysia experienced rapid expansion in

the manufacturing sector and this altered the manufacturing sector and this altered the relative importance of the agricultural the relative importance of the agricultural sector.sector.


1980’s (continue)

During this period, Malaysia continued to During this period, Malaysia continued to focus on new land development & focus on new land development & consolidation of uneconomic farm size consolidation of uneconomic farm size through through in-situin-situ development. development.

Agricultural Development in MalaysiaAgricultural Development in Malaysia

1990’sAverage growth rate between 1990-1995 of Average growth rate between 1990-1995 of

1.40 per cent per annum.1.40 per cent per annum.Palm oil sub-sector accounted for over Palm oil sub-sector accounted for over

40.0% of overall value-added.40.0% of overall value-added.Rubber, cocoa & saw logs experienced Rubber, cocoa & saw logs experienced

negative growth.negative growth.Greater emphasis was given to address Greater emphasis was given to address

productivity, efficiency & competitiveness productivity, efficiency & competitiveness issues facing the agricultural sector.issues facing the agricultural sector.

PART III

NATIONAL

AGRICULTURAL

POLICIES

National Agricultural Policy (NAP)

Agricultural development since independence has been guided by the National Agricultural Policies (NAP).

NAP 1 (1984 – 1991)NAP 1 (1984 – 1991) NAP 2 (1992 – 2010)NAP 2 (1992 – 2010) NAP 3 (1998 – 2010)NAP 3 (1998 – 2010)

NAP 1 (1984 – 1991)NAP 1 (1984 – 1991)

Aimed at maximizing income from agriculture Aimed at maximizing income from agriculture through effective and efficient utilization of through effective and efficient utilization of resources and the revitalization of the sector’s resources and the revitalization of the sector’s contribution to the national economy.contribution to the national economy.

Pursued expansionary policies on export Pursued expansionary policies on export crops, in particular oil palm and cocoa.crops, in particular oil palm and cocoa.

In–situIn–situ development to resolve the problems of development to resolve the problems of uneconomic farm size, non-remunerative crops uneconomic farm size, non-remunerative crops and low productivity especially among and low productivity especially among smallholders.smallholders.

NAP 1 (1984 – 1991)NAP 1 (1984 – 1991)

• In-situ development involves replanting, rehabilitating and consolidating activities on existing agricultural areas that are faced with problems of poverty and low productivity.

• Land consolidation is aimed at consolidating and enlarging fragmented and uneconomic holdings.

The policy outlines strategies for The policy outlines strategies for expanding food production, greater expanding food production, greater role of the private sector, marketing role of the private sector, marketing reform and accelerated agro-based reform and accelerated agro-based industrial development.industrial development.

NAP 2 (1992 – 2010)NAP 2 (1992 – 2010)

Address the new developments during the Address the new developments during the 1992 – 97 period that posed new issues & 1992 – 97 period that posed new issues & challenges :- challenges :- Establishment of WTO and rapid liberationEstablishment of WTO and rapid liberation

of agricultural trade.of agricultural trade. Financial crisis. Financial crisis. High imports of food.High imports of food. Growing concerns for sustainable Growing concerns for sustainable

development & environmental protection.development & environmental protection.

NAP 3 (1998 – 2010)NAP 3 (1998 – 2010)

Objectives :-Objectives :- To increase food production and To increase food production and

stabilize food prices.stabilize food prices.To maximize income through the To maximize income through the

optimum use of resources.optimum use of resources.To increase productivity & To increase productivity &

competitiveness of the agricultural competitiveness of the agricultural sector.sector.

To reduce trade deficit in food.To reduce trade deficit in food.

NAP 3 (1998 – 2010)NAP 3 (1998 – 2010)

NAP 3 (1998 – 2010)NAP 3 (1998 – 2010)

Strategies :-Strategies :- 1.1. To enhance competitiveness.To enhance competitiveness.

2.2. To add value to the whole value chain.To add value to the whole value chain.

3.3. To mechanize and commercialize To mechanize and commercialize agriculture.agriculture.

4.4. To promote Malaysia as the Halal Food To promote Malaysia as the Halal Food Center.Center.

5.5. To upgrade business environment.To upgrade business environment.

6.6. To encourage private sector To encourage private sector participation.participation.

NAP 3 (1998 – 2010)NAP 3 (1998 – 2010)

Strategies :-Strategies :- 6.6. To encourage innovations and R & D.To encourage innovations and R & D.

7.7. To draw foreign investment to help local To draw foreign investment to help local business to upgrade their technology.business to upgrade their technology.

8.8. To enhance vocational skills and training.To enhance vocational skills and training.

9.9. To upgrade business environment.To upgrade business environment.

10.10.To adopt an integrated approach in To adopt an integrated approach in agricultural development.agricultural development.

PART IV

AGRICULTURAL COMMODITIES

OF MALAYSIA

Main Agricultural Commodities

Food ProductsFood Products Industrial CropsIndustrial Crops Forestry and Timber- based Forestry and Timber- based

productsproducts Others Economic Crops Others Economic Crops

(Coconut, Pepper, Tobacco & (Coconut, Pepper, Tobacco & Miscellaneous Crops)Miscellaneous Crops)

Food ProductsFood Products

Food CropsFood Crops PaddyPaddy Fruits and VegetablesFruits and Vegetables

o LivestockLivestocko FisheriesFisheries

Industrial CropsIndustrial Crops

o Oil PalmOil Palmo RubberRubbero CocoaCocoa

SUMMARY• Increase in the production of oil palm.• Decline in the production of rubber, sawlogs and cocoa.• Oil palm is the main contributor to the GDP from

agriculture (35% in 2003).• Self sufficiency in fruits, poultry and eggs.• Not self sufficiency in rice, vegetables, beef, mutton,

pork, milk and food fish.• Target to increase food production and to be net exporter

of food.• Continued dependence on the import of rice.

Item 1985 1990 1995 2000Rubber 1,948.7 1,836.7 1,690.0 1,600.1 Oil Palm 1,482.4 2,029.5 2,540.0 3,430.5 Cocoa 303.9 419.1 190.0 77.9 Paddy 655.0 680.6 670.0 535.1 Coconut 334.1 315.6 250.0 158.5 Pepper 5.4 11.5 10.0 13.9 Vegetables 31.8 35.2 42.0 40.3 Fruits 150.1 204.6 260.0 314.9 Tobacco 16.2 10.2 11.0 16.9 Others 94.3 94.8 106.0 125.8

Total 5,021.9 5,637.8 5,769.0 6,313.9

Agriculture Land Use (‘000 hectares)

RM million % RM million % RM million % RM million %

Industrial Crops 8,545 72 10,900 74 11,629 72 11,991 67 Rubber 2,279 19 2,043 14 1,692 10 1,371 8 Oil Palm 3,604 30 5,312 36 6,842 42 8,412 47 Sawlogs 2,104 18 2,315 16 2,255 14 1,444 8 Cocoa 558 5 1,230 8 840 5 764 4

Food Commodities 2,857 24 3,564 24 4,340 27 5,246 29 Paddy 583 5 622 4 672 4 702 4 Fruits 299 3 406 3 476 3 576 3 Vegetables 378 3 427 3 503 3 635 4 Fisheries 1,201 10 1,505 10 1,823 11 2,221 12 Livestock 396 3 604 4 866 5 1,112 6

Miscellaneous 449 4 364 3 262 2 603 3

Total 11,851 100 14,828 100 16,231 100 17,840 100

Share of Agriculture

to GDP 21 19 14 13

Item 20001985 1990 1995

Agricultural Value-Added, 1985 - 2000

Value Added of Major Commodities, 2001 – 2003 (RM million)

Item 2001 2002 2003

Other Agriculture 5,556 5,690 5,767 Crude Palm Oil 6,381 6,389 6,572 Forestry & Logging 2,440 2,562 2,618 Fishing 2,390 2,569 2,641 Rubber 1,129 1,228 1,271

Total 17,896 18,438 18,869

Value Added of Major Commodities, 2001 – 2003 (RM million)

2001 2002 2003 2001 2002 2003

Agriculture, Forestry 1.8 3.0 2.3 100 100 100 and Fishing

Oil Palm 8.9 0.1 2.9 34.9 34.7 34.8

Forestry & Logging 0.6 5.0 2.2 16.8 13.9 13.9

Fishing (10.0) 7.5 2.8 12.1 13.9 14.0

Rubber (10.9) 8.8 3.5 6.1 6.7 6.7

Other Agriculture * 3.2 2.4 1.3 30.1 30.8 30.9

Item

Share toAgriculture (%)

Growth(%)

* Including livestock, cocoa,fruits,copra, vegetables,tobacco,tea, flower, pepper and pineapple.

Self sufficiency Level of Major Food Commodities (%)

Item 1985 1990 1995 2000 2005 *

CROPSRice 73.6 79.4 76.3 73.0 70.7Fruits 101.8 110.4 98.8 99.3 109Vegetables 80.8 75.2 71.6 75.0 79.5

LIVESTOCKBeef 43.0 23.8 19.2 20.8 22.5Mutton 9.4 10.5 6 6.4 7.1Poultry 108.6 113.9 110.7 126.6 125.6Pork 103.3 106.3 104 80.0 87.5Eggs 103.3 109.4 110.3 113.0 112.2Milk 4.0 4.3 3.5 4.0 4.5

FOOD FISH 94.9 91.1 94.5 89.0 89.7

Forecast of Value-Added For The Food Sector

RM million % RM million % RM million % RM million %Paddy 672 15.5 702 13.4 742 12.1 788 10.9Livestock 866 20 1,112 21.2 1,217 19.9 1,394 19.2Fisheries 1,823 42 2,221 42.3 2,563 41.9 2,900 40Vegetables 503 11.6 635 12.1 826 13.5 1132 15.6Fruits 476 11 576 11 775 12.7 1042 14.4

Total 4,340 100.0 5,246 100.0 6,123 100.0 7,256 100.0Share to Agriculture GDP 26.7 29.4 30.9 32.5

2010Item

1995 2000 2005

Forecast of Production of Major Food Commodities(‘000 tonnes)

Item 1995 2000 2005 2010

CROPS 3,110.6 3,599.1 4,353.1 5,457.8 Rice 1,372.6 1,456.8 1,512.9 1,608.8 Fruits 1,019.9 1,234.9 1,660.4 2,232.5 Vegetables 718.1 907.4 1,179.8 1,616.5

LIVESTOCK 1,400.1 1,706.3 1,979.5 2,266.8 Beef 16.9 25.5 38.7 58.6 Mutton 0.7 0.9 1.2 1.6 Poultry 687.4 1,040.0 1,166.1 1,340.5 Pork 283.4 150.0 210.0 220.0 Eggs 374.9 440.4 498.7 560.0 Milk * 36.8 49.5 64.8 86.1

FOOD FISH 764.5 1,012.0 1,228.2 1,500.4 Marine 631.8 756.8 825.0 899.0 Aquaculture 132.7 255.2 403.2 601.4

TOTAL 5,275.2 6,317.4 7,560.8 9,225.0

Trade Balance of Foodstuff 2002 (RM million)

Target : To be a net food exporter by year 2010

Item Exports Imports BalanceLivestock 898 2,303 (1,405) Fisheries 1,293 1,217 76 Crops 3,901 7,816 (3,915) Others 1,330 1,100 230

Total 7,422 12,436 (5,014)

Trade Balance of Foodstuff 2010 (RM million)

Item Exports Imports BalanceLivestock 3,882 2,922 960 Fisheries 4,925 841 4,084 Crops 6,084 10,982 (4,896) Others 2,471 865 1,606

Total 17,362 15,610 1,752

Production and Hectarage of Industrial Crops

Production Hectarage Production Hectarage Production Hectarage Production Hectarage('000 tonnes) ('000) ('000 tonnes) ('000) ('000 tonnes) ('000) ('000 tonnes) ('000)

Oil Palm 4,133.4 1,482.4 6,095.0 2,029.5 7,726.0 2,540.0 10,842.0 3,430.5

Rubber 1,469.5 1,948.7 1,292.0 1,836.7 1,074.0 1,690.0 615.0 1,600.1

Cocoa 108.0 303.9 247.0 419.1 132.0 190.0 70.0 77.9

2000Item

1985 1990 1995

Item 1985 1990 1995 2000

Palm Oil 4.0 4.4 10.1 11.0

Rubber 2.9 3.0 4.0 2.6

Cocoa Beans 0.4 0.5 0.2 0.2

Total 7.3 7.9 14.3 13.8

Exports of Industrial Crops, (RM billion)

PART V

AGRICULTURAL

INSTITUTIONS

Agriculture InstitutionsAgriculture Institutions

Agricultural development in Malaysia is entrusted under the following 4 ministries :- Ministry of AgricultureMinistry of Agriculture Ministry of Primary IndustriesMinistry of Primary Industries Ministry of Rural DevelopmentMinistry of Rural Development Ministry of Land and Cooperative Ministry of Land and Cooperative

Development.Development.

Ministry of AgricultureMinistry of Agriculture

Roles & Functions Roles & Functions

Responsible for improving the incomes Responsible for improving the incomes of farmers, livestock breeders and of farmers, livestock breeders and fishermen by efficient utilization of the fishermen by efficient utilization of the nation’s resources, manages food nation’s resources, manages food production for domestic consumption production for domestic consumption and exports.and exports.


Departments under the Ministry :- Department of AgricultureDepartment of Agriculture Department of FisheriesDepartment of Fisheries Department of Irrigation & DrainageDepartment of Irrigation & Drainage Department of Veterinary ServicesDepartment of Veterinary Services


Agencies under the Ministry :-o Agricultural Bank of MalaysiaAgricultural Bank of Malaysiao Malaysian Agriculture Research & Malaysian Agriculture Research &

Development (MARDI)Development (MARDI)o Farmers’ Organization Authority Farmers’ Organization Authority o Federal Agricultural Marketing Federal Agricultural Marketing

AuthorityAuthority


o Fisheries Development Authority of Fisheries Development Authority of

MalaysiaMalaysiao Kemubu Agricultural Development Kemubu Agricultural Development

Authority (KADA)Authority (KADA)o Muda Agricultural Development Muda Agricultural Development

Authority (MADA) Authority (MADA) o Pepper Marketing BoardPepper Marketing Board

Ministry of Primary IndustriesMinistry of Primary Industries

Roles & Functions:Roles & Functions:

Oversees the development of the Oversees the development of the primary commodities covering R & D, primary commodities covering R & D, production, processing and marketing production, processing and marketing in respect of timber, palm oil, rubber, in respect of timber, palm oil, rubber, cocoa, pepper, tin, copper and other cocoa, pepper, tin, copper and other minerals.minerals.


Departments and agencies under the Ministry :- Forestry Department Forestry Department Malaysian Rubber Board (MRB)Malaysian Rubber Board (MRB) Rubber Industry Small Holders Rubber Industry Small Holders

Development Authority (RISDA)Development Authority (RISDA) Malaysian Palm Oil Board (MPOB) Malaysian Palm Oil Board (MPOB) Forest Research Institute of Forest Research Institute of

Malaysia (FRIM)Malaysia (FRIM) Malaysian Timber Industry Board Malaysian Timber Industry Board


National Tobacco BoardNational Tobacco Board Malaysian Cocoa BoardMalaysian Cocoa Board Tin Industry BoardTin Industry Board

(Research & Development)(Research & Development)

Ministry of Land & Cooperative Ministry of Land & Cooperative DevelopmentDevelopment

Agencies involved in agricultural development :-

Federal Land development AuthorityFederal Land development Authority

(Felda)(Felda)

Land Development Under FELDA (As at 31-12-2002)

Crop Acreage (Hectare)

%

Oil Palm 314,265 69.3

Rubber 132,981 29.3

Sugarcane 4,663 1.0

Cocoa 1,567 0.3

Others 282 0.1

Total 453,758 100

Ministry of Rural DevelopmentMinistry of Rural Development

Agencies involved in agricultural development :-

Federal Land Consolidation and Federal Land Consolidation and

Rehabilitation Authority (FELCRA)Rehabilitation Authority (FELCRA)

FUNCTIONS OF FELCRA

• The rehabilitation of unsuccessful state managed schemes.

• The consolidation of unused government land fringing villages for the purpose of providing additional land to small farmers so as to enable them to possess economic size land holdings.

• Youth land development program to develop unused marginal government land to provide land to unemployed rural youths.

• In situ development project.

PART VI

POVERTY ERADICATION

IN THE AGRICULTURAL/RURAL SECTOR

Incidence of PovertyIncidence of Poverty

• The incidence of poverty in Malaysia is based on the poverty line income (PLI).

• The PLI is defined as an income sufficient to purchase a minimum basket of food to maintain household members in good nutritional health & other basic needs such as clothing and footwear, rent, fuel and power, transport and communications, health care, education and recreation.

Poverty in Malaysia

Year Sector Incidence of Poverty

No. of Poor Households

1990 Urban 7.1 n.a

Rural 21.1 n.a

Total 16.5 n.a

1995 Urban 3.6 83.8

Rural 14.9 281.8

Total 8.7 365.6

1999 Urban 3.4 86.8

Rural 12.4 264.3

Total 7.5 351.1

Strategies For Poverty Reduction In Agricultural/Rural Sector

Providing employment opportunities in higher-paying jobs, while welfare handouts were reserved for the aged and disabled who could not find employment.

Since the poor were largely engaged in agriculture, there were encouraged to be involved in modern farming and non-farm or off-farm activities.

• Resettle the landless and those with uneconomic holdings in new land development schemes;

• Undertaking in-situ development of existing agricultural land through rehabilitation and consolidation of the land, replanting of old commercial crops with new higher-yielding clones and better planting techniques;

Programs For Poverty Reduction In Agricultural/Rural Sector (1)

• Integrating agricultural and rural development with downstream processing of farm products and encouraging village industries and rural entrepreneurship to generate additional sources of income;

• Introducing double-cropping or off-season cropping for paddy, inter-cropping and mixed farming on the same plots of land to supplement the income derived from main crops;



• Establishing farmers’ markets in urban Establishing farmers’ markets in urban centers so that farm produce can be sold centers so that farm produce can be sold directly and fetch better prices;directly and fetch better prices;

• Providing training and education on topics Providing training and education on topics pertaining to farming as well as work pertaining to farming as well as work attitudes and values to motivate attitudes and values to motivate participants to become more productive participants to become more productive farmers;farmers;


• Providing industrial and vocational training for the rural manpower, coupled with credit facilities and related support, to enable them to be employed in non-farm occupations or start their own businesses in rural areas and urban centers;

• Improving educational access as well as providing text books and financial assistance to children of poor households;


• Providing infrastructure and social amenities as part of a broader program to improve the quality of life of all Malaysians. For the rural population, they include the provision of portable and piped water, electricity, roads, medical and health services and schools, including rural hostels.

• Providing micro credit for the financing of Providing micro credit for the financing of income generating projects.income generating projects.

Thank you

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