CHAPTER 8 Agriculture and the Malaysian Economy 8.1 Contribution of agriculture to the gross domestic product (GDP) Agriculture is part of the primary sector in the Malaysian economy which contributes to the gross domestic product (GDP) over time. The relative importance of the primary sector to the GDP has decreased since 1965 from 31% to 9 % of GDP. Malaysia: Contribution of Sectors to GDP 1965 & 2010 Agriculture in Malaysia is characterized by a dualistic system where the plantation sector exists side by side with the smallholder sector. Plantation or estate agriculture is normally single crop cultivation in a land area of more than 40 ha. Crops such as rubber, oil palm, coconuts, cocoa, pineapples and tea are planted. The plantation management is more systematic, using modern technology and hired labour. The smallholder consists of those farmers who cultivate small areas, between 0.4-4 ha. Consequently, production capacity is 67
low due to the limited technology and disorganised farm management practices. There are two types of smallholders: (1) the subsistence farmers who cultivate their land for their own consumption and sell the produce in the marketplace or to the middleman. These farmers normally practice mixed cropping systems where vegetables and fruit trees are the main crops being cultivated. Others have mixed cropping and livestock farming systems whereby the farmers grow cash crops and fruit trees at the same time raising chicken, goats or cow on their farm, (2) those that practice monocropping type of subsistence farming. Normally, these farmers cultivate their land with commodity crops such as rubber, cocoa, or oil palm similar to those planted by the plantations. In the past, emphasis was given to the production of primary commodities from which the country enjoys export earnings. However, agriculture has expanded into secondary downstream processing for value added products. Malaysia s agricultural development is guided by the National Agricultural Policy (NAP). The development programmes are aimed at expanding food production to improve the food trade balance, increasing export of primary commodities, and ensuring supply of raw materials for local downstream industries. Agricultural Growth In the 7 th Malaysia Plan (1995-2000), the agricultural sector grew at 1.2% per annum, lower than the targeted 1.9%. The 8 th 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. Among commodities, 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, industrial crop production accounted for 60% of the total value in agriculture with the remaining 40% taken by the food sector, with livestock and fisheries accounted for significant increases (Table 1). Table 1. Agricultural value of major commodities (USD million). Commodity 1990 1995 2000 2005 2010 Oil Palm 1,518 1,943 1,674 2,261 2,877 Forestry & Logging 661 536 873 862 789 Rubber 584 499 534 647 730 Cocoa 351 234 71 24 39 Fisheries 438 571 712 683 1,107 Livestock 173 239 434 597 709 Rice 171 190 169 181 282 Other Agriculture* 340 475 865 914 1,329 Other agriculture: Include coconut, vegetables, fruits, tobacco and pepper Arshad et al.(2008.) Food Commodities The implementation of The third National Agricultural Policy (NAP3) to meet the national food requirements as well as broaden the export capacity of the agriculture sector have positive impacts on food production. As a result, the self-sufficiency levels (SSL) for food commodities except rice have improved (Table 3). 68
Table 3. Self-sufficiency level (%) of food commodities. Commodity 2000 2005 2007 2010 Rice 70 72 72 86 Fruits 94 117 105 106 Vegetables 95 74 89 91 Fisheries 86 91 97 103 Beef 15 23 25 28 Mutton 6 8 9 10 Poultry 113 121 121 122 Eggs 116 113 114 115 Pork 100 107 116 132 The impressive growth in livestock production is mainly attributed to the improvement in animal husbandry and the shifting from traditional to commercial farming practices especially in the non-ruminant subsector. Increase in feedlot and expansion of integrated beef cattle farming in rubber and oil palm plantations have contributed to the increase in beef production. However, Malaysia is still not self-sufficient in the production of beef and mutton, with local production catering 28% and 10%, respectively. Poultry production increase is due to the integrated poultry farming system introduced by fast-food chains such as Kentucky Fried Chicken. Poultry is the most popular meat consumed due to pricing and religious acceptability. The per capita consumption of fruits and vegetables has increased from 40 in 1985 to 65 kg and from 42 to 64 kg in 2005, respectively. The production growth is due to government efforts in consolidating small orchards into larger organized farms and instituting group farming projects. 8.2 International trade in agriculture The agricultural sector contributes significantly to the country in earning foreign exchange through exports. Although the percentage of exports from the sector has relatively declined from a high of 40% in 1980 to about 8% currently the total value of exports has always been increasing. Over the years, agricultural trade has consistently generated trade surpluses. In 2002, against a backdrop of USD7,375 million exports and USD4,300 imports, a surplus of USD3,075 million was accumulated, due mainly to palm oil (Table 4). In fact, in 2002, palm oil exports contributed almost 52% of export share in agriculture. Total Values of Item 1985 1990 1995 2002 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 Agriculture s share of Exports 69
Malaysia is still a food-deficit country. Food imports have continuously far exceeded exports. In 1985, food imports were worth USD0.92 billion, rising continuously to reach USD3.0 billion in 2000. Among the major import items include maize, sugar, wheat, rice, soybean and various food preparations. The major food items that have a large balance of trade deficit are livestock feed, cereals (mainly rice), vegetables and dairy products (Table 5). 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, palm kernel oil, various food preparations, sugar and cocoa butter. These items accounted for at least 78% of the total agricultural exports in 2002. Table 4. Total agricultural imports and exports (USD million). Item Year = 1999 2000 2001 2002 Import 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 Tobacco 89 96 133 199 Cocoa bean 63 77 93 141 Oil palm 92 15 46 137 TOTAL 3733 3792 4028 4300 Export Oil palm 3738 2558 2534 3824 Rubber 521 589 427 580 Fatty acid 422 389 322 430 Pkoil 433 285 212 277 Food prep. 96 106 119 142 Shortening 99 110 111 119 Cigarette 142 141 139 117 Sugar 50 64 76 99 Pastry 87 103 96 96 Cocoa butter 108 83 84 93 TOTAL 7117 5821 5521 7375 70
Table 5. Balance of Trade of Agricultural Products and Commodities 2005( 1 RM million). COMMODITY 2005 EXPORT 1 IMPORT BALANCE TOTAL AGRICULTURAL SECTOR 62,596 36,250 26,346 TOTAL FOOD ITEMS 10,669 17,733-7,065 Live animals 418 156 262 Meat and Processed Meats 85 1,049-964 Dairy Products and Bird s Eggs 622 1,726-1,104 Fish, Crustacean, Mollusks 2,328 1.934 394 Cereals and cereal preparations 912 2,260-1,347 Vegetables 508 1,689-1,182 Fruits 469 707-238 Sugar, sugar products and honey 470 1,339-869 Coffee, cocoa, tea, spices 2,446 2,211 235 Livestock Feed 492 2,868-2,376 Processed Food Products 1,918 1,793 124 Agricultural Inputs 1,543 3,496-1,953 8.3 Agricultural employment Currently the agriculture sector accounts for about 12% of total employment in the country from a high of 42% in the 1980, reflecting the transformation from an agricultural to an industrialized economy Distribution of labour among the sectors 2007 71
The number of people employed in the agriculture sector in 2010 is 1.51 million out of a total work force of 11.5 million. About 80% of the labour in agriculture is employed in crop production while only 9% are in livestock production and 6% are in fisheries. Distribution of agricultural labour among sub-sectors The biggest number of farmers in Malaysia is rice growers (239,000 in 2005) as shown in Table 6. The total number of smallholders in 2005 was 414,000. Table 6. Employment Estimates of Agriculture by Activity ( 000) Category 2000 2001 2002 2003 2004 2005 Rice farmers 306 300 297 287 252 239 Other Farmers 277 254 238 244 222 191 Livestock farmers 39 35 37 36 36 33 Fishermen 116 121 104 103 125 114 Aquaculture Farmers 8 7 3 4 6 5 Smallholders 358 286 305 378 400 414 72