STRENGTHENING AGRICULTURE AND THE AGRO-BASED INDUSTRY
(Ninth Malaysia Plan 2006-2010 - Published by The Economic Planning Unit, Prime Minister's Department Putrajaya 2006)

INTRODUCTION

The agriculture sector registered favourable growth during the Eight Plan period. Export earnings of the sector expanded significantly due to the increase in export volume and better prices of agricultural industrial commodities. The sector continued to provide the raw materials required by the domestic agro-based industries and part of the nation's food demand.

During the Ninth Plan period, the agriculture sector will be revitalised to become the third engine of growth. The emphasis will be on New Agriculture which, will involve large-scale commercial farming, the wider application of modern technology, production of high quality and value-added products, unlocking the potential in biotechnology, increased convergence with information and communications technology (ICT), and the participation of entrepreneurial farmers and skilled workforce. The functions of agricultural agencies will also be streamlined to enhance service delivery and efficiency.

PROGRESS, 2001-2005

During the 8MP, the performance of the agriculture sector improved in terms of production, value added and exports, driven by the utilisation of new technologies, shift to large-scale commercial production, wider adoption of the group farming system, increased market accessibility and better commodity prices. Emphasis was given to the redevelopment of alienated agricultural land, particularly to expedite modernisation and improve productivity. The improved output of the agriculture sector contributed to better income and standard of living, particularly for farmers in rural areas.

Growth Performance

The agricultural value added grew an average rate of 3.0 per cent per annum during the Plan period, higher than the target of 2.0 per cent, as shown in Table 1. The higher growth was due to better performance of the agricultural industrial commodities subsector, particularly oil palm and rubber. The share of the sector to gross domestic product (GDP) decreased slightly from 8.9 per cent in 2000 to 8.2 per cent in 2005. Nevertheless, total agricultural value added increased from RM18.7 billion in 2000 to RM21.6 billion in 2005. The value added of agro-based industry grew at an average rate of 4.5 per cent per annum to reach RM16.9 billion in 2005. The combined value added of the agriculture and agro-based industry was RM38.5 billion or 14.7 per cent of GDP in 2005. Total agricultural and agro-based export earnings also increased by an average rate of 9.5 per cent per annum, as shown in Table 2.

Table 1: Value Added of Agriculture and Agro-based Industry 2000-2010

Source: Department of Statistics and Economic Planning Unit
Notes: (1) Includes coconut, vegetables, fruits, tobacco and pepper.

Table 2: Agriculture and Agro-based Manufactured Export, 2000-2010

Source: Department of Statistics and Economic Planning Unit

Employment in the agriculture sector continued to contract at an average rate of 0.2 per cent per annum to 1.4 million in 2005, as shown in Table 3. However, labour productivity improved, as reflected by the increase in value added per worker from RM13,120 in 2000 to RM15,750 in 2005, at an average rate of 3.7 per cent per annum. The Agricultural Census 2005 (1) identified a total of 816,813 individuals or 7.2 per cent of the total labour force who was involved in the agriculture sector. Of this total, 52.8 per cent was agricultural operators, 37.2 per cent workers and 10.0 per cent unpaid family workers. In terms of age profile, 43.8 per cent was in the age group 55 and above while only 25.3 per cent was in the 15 to 40 year age group.

--------------------------------------------------------------------------------------------

(1) The Agricultural Census 2005 covered:

1. Occupations involved in primary agriculture activities including agricultural services;
2. Worked at least three months in the sector; and
3. Smallholdings

Table 3: Employment and Value Added per Worker in Agriculture and Agro-based Industry, 2000-2010

Source: Department of Statistics and Economic Planning Unit

Land Utilisation

Agricultural land use increased from 5.9 million hectares in 2000 to 6.4 million hectares in 2005, largely due to the expantion in the hectarage of oil palm, coconuts, vegetables and fruits. Of the total land area, 4.0 million hectares were under oil palm followed by 1.3 million hectares under rubber. During the Plan period, a total of 163,000 hectares of agricultural land remained idle. Efforts to optimise the utilisation of idle land were hindered by several constrains, particularly absentee landlords, ageing landowners and farmers as well as difficulties in consolidating native and customary land.

Agricultural Production

During the Plan period, production of agricultural commodities except sawlogs, cocoa and pepper, continued to record positive growth. The increase in production was attributed to higher prices and market expansion as well as the effective implementation of programmes and projects to improve productivity and quality of outputs.

(i) Agricultural Industrial Commodities

Crude palm oil (CPO) production increased at an average rate of 6.7 per cent per annum due to improvements in yield, higher oil extraction rage (OER), expansion in matured areas as well as higher palm oil prices. The palm oil industry benefited from the tight world supply of edible oils and fats, which resulted in palm oil prices rising to its highest level of RM1,610 per metric tonne during the Plan period.

The production of rubber increased at an average rate of 3.9 per cent per annum, attributed mainly to increasing demand for natural rubber, particularly from The People's Republic of CHina, which resukted in higher rubber prices. The higher production was also due to increased tapping and wider adoption of the Low Intensity Tapping System (LITS) among smallholders. These contributed to an increase on the average monthly income of smallholders from RM500 to RM2,000.

Cocoa bean production declined to 28,000 metric tonnes in 2005, in tandem with the reduction in planted area due to protracted low prices of cocoa beans. The production of pepper declined to 19,100 metric tonnes in 2005, largely due to low prices and high production costs. The implementation of the grower-curer system, upgrading of irrigation and drainage facilities and better support services contributed to an increase in the production of tobacco to 14,000 metric tonnes in 2005.

With the continued commitment to conservation of natural forests and the implementation of sustainable forest management, the annual allowable cut rate (ACR) was reduced to 272,800 hectares per year during the Plan period. In addition, selective harvesting contributed further to the reduction in loggable areas. As a result, the production of sawlogs declined at an average of 1.6 per cent per annum.

(ii) Food Commodities

During the Plan period, the production of food commodities recorded positive growth as a result of the aggressive implementation of programmes and projects to increase food production and exports. Subsequently, self-sufficiency levels of almost all food items improved. In addition, export of food grew at an average rate of 8.7 per cent per annum, higher than that of imports at 7.9 per cent.

Further consolidation of padi smallholdings through the group farming concept in the eight granary areas and the implementation of the Ten Tonnes Per Hectare Project, enabled the greater adoption of the Good Agriculture Practices (GAP) and better farm management. As a result, padi production increased at an average rate of 2.3 per cent per annum.

The expansion in hectarage for fruit cultivation led to an increase in production at an average rate of 9.8 per cent per annum. Production was concentrated on 15 types of fruits with potential for commercialisation. Coconut production increased at an average annual rate of 4.8 per cent, particularly due to greater utilisation of higher yielding clones, namely kelapa matag and kelapa pandan, as well as expansion in cultivated areas and increase in demand.

The production of vegetables grew at an average rate of 13.8 per cent at average rate of 13.8 per cent per annum attributed to the expansion in cultivated areas, intensive implementation of estate-based activities and higher productivity from good farming practices as well as improvements in post-harvest handling. The production of organic vegetables was further promoted with the introduction of the Malaysian Organic Scheme, which enabled growers to sell their produce at premium prices. At the end of the Plan period, a total of 132 hectares of organic vegetable farms was certified under this scheme.

Fish production increased at an average rate of 1.6 per cent annum to reach 1.6 million metric tonnes in 2005. This was due to the increase in marine catch as well as expansion in aquaculture, particularly by the private sector.

Livestock production recorded positive growth during the Plan period. Mutton registered the highest growth, averaging 10.8 per cent per annum followed by beef at 10.2 per cent per annum. The increase was largely contributed by the rearing of cattle and goats in oil palm and rubber plantations as well as feedlots cattle rearing by the private sector. The poultry industry, including production of eggs, remained resilient despite the outbreak of the avian bird flu in 2003. This was due to the expansion in the application of the closed-house system. Pork production, which recovered from the outbreak of the Nipah virus, increased at an annual growth rate of 5.5 per cent.

New Sources of Growth

The development of new sources of growth, particularly ornamental fish, seaweed, tuna and floriculture was continued during the Plan period. The production of ornamental fish increased from 306 million tails in 2000 to 438 million tails in 2005 with a market value of RM103 million. With regard to seaweed, production increased at an average annual rate of 73.7 per cent, to reach 65,000 metric tonnes in 2005, as a result of intensive cultivation based on the estate concept in the offshore areas of Sabah. The first integrated tuna fishing port was constucted in Batu Maung, Pulau Pinang under the privatization concept to promote the development of the tuna industry. The performance if the floriculture industry improved with the production of flowers increasing to 126 million stalks in 2005. The nursery and lanscape industry was further developed to take advantate of the increasing demand for nursery products and lanscaping services.

Agro-Based Industry

The agro-based industry grew at 4.5 per cent per annum. Total export earnings of the agro-based industry increased significantly by 8.7 per cent per annum to reach RM37.4 billion in 2005. The processing of end-products from agricultural industrial commodities such as palm oil, rubber and cocoa increased during the Plan period.

The processing of food commodities continued to be encouraged and to support small producers, the products were marketed, particularly under the brand name Agromas and Olemas. Towards this end, the Ministry of Agriculture and Agro-Based Industry (MOA) provided extension services to 14,883 entrepreneurs. The Malaysian Agricultural Research and Development Institute (MARDI) developed 44 food products and 200 processing technologies, particularly to facilitate the activities of small and medium-scale enterprises (SMEs).

Agricultural Programmes

During the Plan period, agricultural programmes were focused on transforming traditional farming into modern and commercial farming to increase the income and productivity of farmers as well as improving their competitiveness. In this regard, efforts were intensified to encourage agricultural entrepreneurs, farmers and smallholders, particularly among the Bumiputera, to adopt new agronomic and modern farm management practices, increase mechanisation and familiarise them with GAP.

REPLANTING. The replanting programme under various agencies, which comprises replanting of rubber to rubber as well as rubber to oil palm, achieved 77.6 per cent of its target. Of this total, 74 per cent was replanted with rubber and the balance with oil palm. The performance of this programme was affected by the high rubber prices, which led smallholders to delay replanting.

LAND CONSOLIDATION AND REHABILITATION. A total of 31,332 hectares of land was consolidated and rehabiliated whereby FELCRA Berhad managed to consolidate 10,200 hectares. Lembaga Pertubuhan Peladang (LPP) rehabilitated 4, 433 hectares including idle land for commercial farming of food commodities, which benefited 3,159 farmers.

PERMANENT FOOD PRODUCTION PARKS. During the Plan period, large-scale commercial production of food was undertaken through the establishment of Permanent Food Production Parks in various states including Pahang, Selangor and Johor. These parks were aimed at creating entrepreneur farmers with a minimum income of RM3,000 per month. In this regard, 28 parks were established involving 2,007 hectares of land and 319 entrepreneur farmers.

FOREST DEVELOPMENT. To provide adequate and sustainable supply of timber and rubber wood for the local furniture industry, measures were undertaken to convert degraded forest and idle land into forest plantations including rubber forest plantations. About 3,400 hectares of rubber forest plantations were developed in Peninsular Malaysia.

MARKETING SERVICES. Marketing services, particularly in the food subsector was further improved with the setting up of the FAMAXchange in 2004 and the expansion of Agribazaar portal. In addition, other portals were also developed including Ikan Online, SIRIP and Padi Net.

TECHNICAL ADVISORY SERVICES. The regional offices of Malaysian Palm Oil Board (MPOB) Technical Advisory Services Units continued their effords to increase market acceptance and consumption of palm oil. The Malaysian Rubber Board (MRB) continued its efforts to encourage local and foreign direct investments in rubber product manufacturing and promote the products to local and overseas consumers.

Efforts to penetrate hypermarkets were intensified through the arrangement of more agricultural products supply contracts by the government agencies. Marketing of marine fish was enhanced through the increased involvement of fishermen associations as wholesalers from 15 in 2002 to 43 in 2005. In addition, the sale of agriculture produce under the brand names of Malaysia's Best, Agromas and Olemas was further promoted. The introduction of the farm accreditation schemes and development of food safety standards enabled greater access of local agricultural products to international markets.

RESEARCH AND DEVELOPMENT. Agricultural research and development (R&D) continued to be emphasised to further improve competitiveness of the sector. During the Plan period, of the total 535 R&D projects undertaken by the agricultural research agencies, 90 were commercialised while another 30 were ready to be commercialised.