CHAPTER 7 AGRICULTURE AND THE MALAYSIAN ECONOMY – ECONOMICS OF AGRICULTURAL DEVELOPMENT
TOPIC 1 CONRIBUTION OF AGRICULTURE TO GROSS DOMESTIC PRODUCT (GDP)
• Contribution of Agriculture to GDP has declined from 31% in 1965 to 9% in 2010. • Characterized by a dualistic system: plantation (estate) sector and smallholder sector.
• Plantation agriculture is normally single crop with land area of more than 40 ha. Crops such as rubber, oil palm, coconuts, cocoa, pineapples and tea are planted. • It is more systematic, uses modern technology and hired labour.
• Smallholdings are small areas between 0.4-4 ha. • Production capacity is low due to limited technology and poor management practices.
• Two types of smallholders: 1. Subsistence farmers who cultivate their land for their own consumption or sell produce in the marketplace or to middleman. Practice mixed cropping systems of vegetables and fruit trees or mixed cropping combined with livestock farming (chicken, goats or cows) 2. Farmers that practice monocropping type of subsistence farming similar to plantations, cultivating rubber, cocoa, or oil palm
• In the past, emphasis given to production of primary commodities for export earnings. • However, agriculture now expanded into secondary downstream processing for value-added products.
•
Malaysia’s agricultural development is guided by the National Agricultural Policy (NAP).
•
Development programmes are aimed at: 1. expanding food production to improve food trade balance 2. increasing export of primary commodities, and 3. ensuring supply of raw materials for local downstream industries
1.1 Agricultural Growth • In the 7th Malaysia Plan (1995-2000), the agricultural sector grew at 1.2% per annum, lower than the targeted 1.9%. • The 8th Malaysia Plan (2001-2005) targets the sector to grow at 3.0% annually. However, during the midterm review, the agriculture sector grew only at 1.5% per annum. • From 1995 to 2005, the value of rubber and forestry products has decreased while that of palm oil, livestock and fisheries has increased.
•
In 2005, of the total value in agriculture: – Industrial crop production: 60% – Food sector (with significant increase in livestock and fisheries): 40% Agricultural value of major crops (USD million). 1995 2000 2005 2010 ____________________________________ Industrial Crop Rubber Oil palm Forestry & logging Cocoa
499 1943 536 234
534 1674 873 71
647 2261 862 24
190 239 571 475
169 434 712 865
181 597 683 914
730 2877 789 39
Food Commodity Padi Livestock Fisheries Others
282 709 1107 1329
1.2 Land Utilisation For Agriculture • Agricultural land use increased from 5.7 million ha in 1995 to 6.3 million ha in 2005 due mainly to new land cultivation for oil palm in Sabah and Sarawak. In the same period, hectarage in oil palm, pepper, pineapple, vegetable and fruits has increased while that of rubber, cocoa and coconut has decreased. Rubber increased back from 20052010 • About 400,000 ha of rubber and cocoa land were converted to oil palm.
Agricultural land use (hectares) 1995 2000 2005 _____________________________________
Industrial Crop Rubber Oil Palm Cocoa Pepper Pineapple Tobacco
1727000 2507611 234538 8600 9081 10539
1430700 3460000 105000 11480 10233 15000
1301500 3100000 105000 12500 16000 12500
592410 298740 42000 244471 268146
572196 220000 51420 297436 67534
611000 201000 77290 379613 67737
5743137
5949934
6314977
Food Crop Padi Coconut Vegetables Fruits Others TOTAL
1.3 Food Commodities • Implementation of NAP3 to meet national food requirements and broaden exports have increased food production. • Self-sufficiency levels (SSL) for food commodities have generally improved or decreased only slightly.
Self-sufficient level (%) of food commodities
Rice Fishery produce Beef Mutton Pork Poultry Eggs Fruits Vegetables
1995
2000
2005
2010
76.3 92.0 19.2 6.0 104.0 110.7 110.3 -
72.0 89.0 16.0 6.0 99.0 113.0 116.0 94.0 95.0
71.0 90.0 23.2 9.0 100.0 123.0 109.0 117.0 74.0
86.0 103.0 28.0 10.0 132.0 122.0 115.0 106.0 91.0
• Impressive growth in livestock production is due to improvement in animal husbandry and shift from traditional to commercial agriculture especially in poultry subsector. • Poultry increase is due largely to fast-food chains such as KFC. It is most popular meat due to pricing and religious acceptability • Increase in feedlot and integrated beef cattle farming in rubber and oil palm estates have led to increase in beef production. • However, Malaysia is still not self-sufficient in production of beef and mutton.
The Star 11 May 2008
• Production increase in fruits is due to government efforts in consolidating small orchards into larger organized farms and instituting group farming projects. • Per capita consumption of fruits and vegetables has increased from 40 kg in 1985 to 65 kg and from 42 kg to 64 kg in 2005, respectively.
TOPIC 2 INTERNATIONAL TRADE IN AGRICULTURE
• Agriculture contributes significantly in earning foreign exchange although declined from 40% in 1980 to about 8% currently • Over the years, agricultural trade has consistently generated trade surpluses • In 2002: Exports: USD 7,375 million (palm oil, 52%) Imports: USD 4,300 million Surplus: USD 3,075 million
•
Malaysia is still a food-deficit country (food imports exceed exports)
•
Food imports in 1985: USD 0.92 billion 2000: USD 3.0 billion
•
Major import items include maize, sugar, wheat, rice, soybean and various food preparations.
•
Raw rubber, palm oil and cocoa beans are imported, processed, and then re-exported as final products.
•
Malaysia itself exports palm oil, rubber, fatty acid complexes, food preparations, sugar and cocoa butter (78% of total agricultural exports in 2002)
Total agricultural imports (USD million). Item Import
Year =
1999
2000
2001
2002
Maize
259
255
218
262
Sugar
255
253
286
257
Wheat
215
187
206
201
Rice, milled
181
175
134
124
Natural rubber
119
214
180
185
Soybean
145
132
150
167
Food prep.
141
148
157
150
Cocoa bean
63
77
93
141
Oil palm
92
15
46
137
TOTAL
3733
3792
4028
4300
Total agricultural exports (USD million) Item
Year = 1999
2000
2001
2002
Oil palm
3738
2558
2534
3824
Rubber
521
589
427
580
Fatty acid
422
389
322
430
Food prep.
96
106
119
142
Cigarette
142
141
139
117
Sugar
50
64
76
99
Cocoa butter
108
83
84
93
TOTAL
7117
5821
5521
7375
Export
AGRICULTURAL EMPLOYMENT
• Currently, Agriculture sector accounts for 12% total employment from 42% in 1980, reflecting transformation from agriculture to industrialized economy • No. employed in 2010 is 1.5 million out of total workforce of 11.5 million (13%) • 80% employed in crop production, 9% in livestock, 6% in fisheries • Biggest no. growers are rice farmers (239,000 in 2005)
