UNCTAD Secretary-General's
High-Level Multi-Stakeholder Dialogue on Commodities
in the context of UNCTAD XII
28-29 January 2008
Successful Agricultural Commodity Development
and Diversification Strategies
– the Case of Malaysia
By
Mr. Tawang Ariffin
Director, Malaysian Agricultural
Research and Development Institute
The views expressed are those of the author and do not necessarily reflect the views of UNCTAD
SUCCESSFUL AGRICULTURAL
COMMODITY DEVELOPMENT
AND DIVERSIFICATION
STRATEGIES :
THE CASE OF MALAYSIA
MALAYSIAN AGRICULTURAL RESEARCH AND DEVELOPMENT INSTITUTE (MARDI)
www.mardi.my
Content of Presentation
¾ An
introduction to the agricultural
sector
¾ Evolution of agricultural development
agenda
¾ Trends in commodity development
¾ The critical success factors
¾ Some lessons
Rubber
Cocoa
Oil Palm
Tropical Fruits
THE MALAYSIAN AGRICULTURAL SECTOR
¾
Core role Æ economic growth
Æ fulfill food requirement
Æ employment
¾
Also as the vital sector for attainment of
national unity
- Enhance income of agric producers, poverty
- Minimize inter sectoral disparity / inequality
between agric and non agric sector, as well as
between ethnic groups
Sectoral Performance
Growth in the Agricultural Sector Malaysia, 1960 – 2005
Period
Growth Rate
%
1961 – 1970
1971 – 1980
1981 – 1990
1991 – 1995
1996 – 2000
2001 –2005
7.0
5.0
4.1
1.8
1.2
4.5
Share of Agriculture* in total export earning,
employment and GDP
60
50
40
30
20
10
0
1980
1985
1990
Export Earnings %
1995
Employment %
2000
GDP %
* Comprise of agriculture, livestock, forestry and fishing
Source : Five years development plan (various years)
2005
Share of major commodities in
agricultural exports (%)
Sector
1970
1980 1985 1990 1995 2000 2005
Food
Palm oil
Rubber
Saw logs
7.7
50.5
18.8
25.9
20.4
24.6
11.9
28.3
20.6
19.9
15.5
19.7
13.6
18.1
12.7
29.3
11.4
6.4
19.5
43.0
11.2
13.2
15.8
50.1
15.5
10.8
Growth in Agricultural Commodity – Agriculture Land Use
for Major Commodities (‘000 ha)
Crops
Industrial Crops
Oil Palm
Rubber
Cocoa
Food Crops
Paddy
Coconut
Vegetable
Fruit
1970
1985
1995
2005
320
2,182
-
1,482
1,949
304
2,540
1,679
191
4,049
1,179
45
533
349
-
655
334
32
150
673
249
42
258
450
180
86
375
The Evolution of the Agricultural Sector
Pre-Independence
• designed to serve the British colonial rule
• neglect of rural sector
• focus on plantation crops esp. rubber
• economy based on primary commodities
and extraction of natural resources
• rubber and timber contributed >50% GDP
1980’s
• launching of First National Agric Policy
Ædesigned to ensure a balanced and sustained
rate of growth
Æmaximizing farm income
Æaccelerate new land and in situ development
1960’s
• policy of crop diversification due to narrow
based economy,
• new land development and settlement for
oil palm and cocoa
• development program designed to improve
rural farming commodities
• reorganizing institution to modernize and
develop rural sector
• rural infrastructure
• development of large and extensive land
development scheme
1970’s
• equitable income distribution policy
• eradication of poverty and restructuring of society
• public sector intervention in agriculture development
1990’s
• balanced development between agricultural
and manufacturing sector
• introduction of sustainable agric concept
• greater emphases on food sector
Æsubstituting import and exploiting export market
potential
2000’s
• agricultural as the third engine of growth
• emphases on agro-industry
• food security
• new source of growth
Why Diversify?
¾
¾
¾
¾
Narrow based economy Æ rubber, tin,
>50% GDP during Independence
Rubber production in 1950’s (area : 1.5
million ha) faced stiff competition from
synthetic rubber; price affected income
Introduction of oil palm (1917) showed vast
potential
Result: oil palm area from five folds from
320,000 ha (1970) to 1.5 million ha (1985),
and 4 million ha (2005)
The Crop Development and Diversification Scenario
PreIndependence
Coffee
Paddy
Rubber
Coconut
1960’s & 70’s 1980’s & 90’s
Rubber
Oil palm
Paddy
Pineapple
Pepper
Cocoa
Coconut
Rubber
Oil palm
Cocoa
Paddy
Fruit
Vegetables
Floriculture
Coconut
Current
Oil palm
Rubber
Cocoa
Paddy
Fruits
Vegetables
Floriculture
Coconut
Specialty new
products (inc.
herbs)
Current Land Use (2005)
Commodity
Oil palm
Rubber
Paddy
Fruits
Coconut
Cocoa
Vegetable
Herbs
Floriculture
:
:
:
:
:
:
:
:
:
Hectarage
(‘000 ha)
4,049
1,179
450
375
180
45
86
2
3
Targeted Annual
Growth (2005 – 2010)
2.4%
-1.2%
-1.0%
2.6%
0%
6.2%
6.1%
15%
5%
Sources of land area expansion
¾
Intensification of new land development by federal, state
and private sectors
Opening up of new 1971area (‘000 ha)
1980
19812985
19861990
19911995
Federal Agency
State Agency
Private Sector
202
158
57
105
21
7
15
27
151
455
157
120
¾ Conversion of area under rubber to oil palm
Oil palm (‘000 ha)
Rubber (‘000 ha)
1970
1985
1990
1995
2000
320
2182
1482
1948
2029
1837
2540
1679
3380
1596
Number of Plantations by Commodities
4500
4000
3000
900
Oil Palm (No.)
Oil Palm (,000 ha)
3500
Rubber (,000 ha)
2500
2500
2500
2000
2000
1500
1500
No. of Plantations
OIL PALM
Hectarages
RUBBER
2000
600
500
1500
400
1000
300
1000
1000
200
500
500
0
0
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2003
500
100
0
0
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2003
700
250
Cocoa (No.)
600
Cocoa (,000 ha)
200
500
400
COCOA
300
150
100
200
50
100
0
0
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2003
Hectarages
3000
700
3000
No. of Plantations
No. of Plantations
3500
800
Hectarages
4000
Rubber (No.)
THE CRITICAL
SUCCESS FACTORS
Government
Policy Direction
Identification of
Potential Commodity
Socio Economic
Considerations
CRITICAL
SUCCESS
FACTORS
Resource Availability
Institutional
Support
Dedicated
Development Authority
Strong
Plantation Sector
THE CASE OF OIL PALM…
Socio Economic
Considerations
• Employment opportunities
• Socio economic disparity
between regions / states
Resource Availability
• New Agric. Lands
• Infrastructure
Development
Plantation Sector
• Large land banks
• Efficient plantation
management
• Aggressive ‘land
conversion’ policy
• Marketing and NetWorking
• Abundant resources
(land, capital, labor)
Policy
•Diversification Policy
to economic base
•Poverty Eradication
Program
New Commodity
• High demand
• Better return
• Employment creation
CRITICAL
SUCCESS
FACTORS
Development Authority
• Federal Land development
Authority (FELDA)
• Federal Land Consolidation
and Rehabilitation Authority
• State Agricultural
Development Authority
• Regional Development
Authority
Institutional Support
• Palm Oil Research
Institute
• Palm Oil Registration
and Licensing Authority
• Malaysian Palm Oil
Promotion Council
THE CASE OF TROPICAL FRUITS….
Socio Economic
Considerations
• Limited opportunities
for employment and
‘business’ opportunities
Resource Availability
• Limited among
small farmers and
plantation sectors
Plantation Sector
• Little involvement
• Farm labour issues
Policy
• New export commodity
• Deepen existing/
new markets
CRITICAL
SUCCESS
FACTORS
Development Authority
• Department of Agriculture
• State Agricultural
Development Authority
New production areas
New Commodity
• Papaya (Eksotika)
• Star fruits
* Small farmers
commodities
Institutional Support
• Research and
development
• Marketing and
Promotion
THE FELDA MODEL
The concept
•Centrally manage small holdings
•Resettlement schemes
•Individual land titles (average 4.2ha)
•Total area about 500,000 ha
The settlers
•Poor and landless
•Age group 21-50 years
•Married and physically fit
•Total settlers 113,000
The socio-economic Impact
•Stable income, currently between US450US900/month
• Reduction in poverty
• Establishment of new growth centers
• Employment opportunities
• Successful 2nd and 3rd generations settlers
New Potential Crops Under Consideration
Biofuel
• Jatropha
• Nipah Palm
• Sweet Potatoes
New Material
• Kenaf
• Stevia
Some Lessons….
¾
¾
¾
¾
¾
The crop diversification policy first
introduced in the early 60’s had been
successful in changing the scenario of
agricultural sector in the country
Current state of agricultural development is
the result of proper agric planning
‘Bold’ and right decision to select oil palm
as new agric commodity, other commodities
are not that successful
Supportive measures in place, strong
support by government and private sector
Benefited both large (plantation) and small
farmers ( in terms of income and standard of
livings)
Managing Success…
¾
¾
¾
Labor issues
•
settlers as managers
•
2nd and 3rd generation settlers moving out from the
schemes
•
High utilizations of foreign workers
Conversion of land schemes to non-agriculture
purposes; new townships, industrial zones etc.
Æ creation of a few millionaires
Since 1985, no large new forest land been allocated to
the Land Development Agencies to develop into
smallholders land schemes.