Chapter 5

Agricultural practices in Malaysia

 Today’s lecture
• Historical development of agriculture

• Characteristics of Malaysian agriculture

• Industrial crops

• Livestock

• New source of growth

• Agricultural marketing
 Introduction
• Agriculture contributions in economic growth:
• 1957 : 46% GDP
• 2016 : 8.1% GDP
• Declined as Malaysia transformed from an agricultural into an
industry country
• Despite that, it is still important in earning foreign exchange through
exports of palm oil, rubber and fruits, contributing to employment
and ensuring food security
 Introduction
• 9th Malaysia Plan (2006-2010)
• Third engine of growth
• Revitalize agriculture by adopting commercial and large
scale agriculture through new technology

• 10th Malaysia Plan (2011-2015)

• Development for high income nation
• Agriculture = one of the National Key Economic Areas

• 11th Malaysia Plan (2016-2020)

• Modernizing agriculture sector
• Agro-food and industrial commodity sub-sectors will be
transformed and modernized into a high-income and
sustainable sector
 National Key Economic Area (NKEA)
• An important driver of economic activities that potentially and
directly contributes towards the Malaysian Economic Growth
measurable by the National Gross Income (GNI) indicator
• Creates job opportunities and attracts best of talents
Historical development of Malaysian agriculture

• Pre-independence (interest of British colonist):

• Rubber plantations
• Ex: Dunlop; Guthrie; Harrisons and Crossfield
• Other plantations: Tea, cocoa, coffee (commercial agriculture)
• Malays: rice, fruits and other crops (subsistence agriculture)

Coffee plantation
Tea plantation Rubber plantation Paddy
Historical development of Malaysian agriculture

Post-Independence (1957-1970)
• Government set up : FELDA and FELCRA
 Huge land to be cultivated with plantation crops
 Smallholders : switch subsistence crops => cash crops

• The Federal Land Development Authority (FELDA)

• To handle resettlement of rural poor into newly
developed areas and to organize smallholder
farms growing cash crops

• The Federal Land Consolidation and

Rehabilitation Authority (FELCRA)
• To develop rural sector by helping its community
to participate in national economic activites
 New Economy Policy

New Economic Policy (1970-1984):

• Address income disparity between races :
=> emphasize smallholder agriculture development

1) Intensifying and expanding FELDA & FELCRA program

(emphasis on oil palm)
2) Setup of own rice mills by Lembaga Padi & Beras Negara
3) Rubber smallholding organized by RISDA

• 1984 -Malaysia was top producers for natural rubber (39.8%) and
palm oil (58.8%)
 National Agricultural Policy
• 1st National Agricultural Policy (NAP) (1984- 1991)
• Objective: Linkage of agricultural production with agro-based
industries
• 2nd National Agricultural Policy (NAP2) (1992-2010)
• Issues: labour and capital competition with other sectors
• Need to increase efficiency and productivity

• 3rd National Agricultural Policy (NAP3) (1998-2010)

• = revised NAP2
• Introduce product-based approach and ensuring food security

• End of 2004 (NAP2/NAP3)

• Agriculture land use
• 6.4 million ha for agriculture
1) 61% for oil palm
2) 20% for rubber
 National Agro-food Policy
• National Agrofood Policy (2011-2020)
1) Ensure adequate food security that is safe to eat
2) To make agro-food industry as a competitive & sustainable
industry
3) To increase agro-based entrepreneur's level of income
 Characteristics of Malaysian agriculture
1. Estate
• Highly commercialized
• Efficiently managed by professionals
• Land larger than 40.5 ha
• Owned by private companies or public land development
agencies
• Palm oil, rubber & cocoa

Rubber estate in Tanjung Tualang, Perak Palm oil estate in Malaysia

 Characteristics of Malaysian agriculture

2. Smallholder
• Less commercialized
• Average farm size 1.45 ha
• Crops: rice, fruits and vegetables
 Industrial crops
Oil Palm (Elaeis guineensis)
• Largest planted crop in Malaysia
• Biggest foreign exchange earner
• 39% of the world’s palm oil
production & 44% of world’s exports
• Origin: Sierra Leone, Africa
• Brought around 1870s as ornamental
plants
• First planted in Malaysia in 1917
• Harvested at 25-30 months after
planting
• Economic life span: 20 years
 Industrial crops
• Fruit’s pulp (palm oil) & kernel (palm kernel oil)
• For every 100kg of fruit bunches, typically 22kg palm oil & 1.6kg
palm kernel oil can be extracted
• 60% grown by large plantation companies, 40% small holders
(FELDA, FELCRA, RISDA)
• Contribute 10% of Malaysia’s total export value
 Industrial crops
Rubber (Hevea brasiliensis)
• First major plantation crop
• Introduced in 1877, from Amazon Basin of
Brazil
• Dominant plantation for 80 years
• Second major crop in the country
• Factors causing a switch to oil palm:
• Declining price
• Increasing production cost
• Declining labour availability
• 97% planted by smallholder
 Industrial crops
Rice (Oryza sativa) – highly subsidized
• 3rd largest planted crop in the country
• Mainly in Peninsular Malaysia at 8 granary areas:
I. Kuala Muda in Kedah/Perlis (MADA)
II. Kemubu, Kelantan (KADA)
III. Seberang Perai, Penang
IV. Kerian/ Sg Manik, Perak
V. Barat Laut, Selangor
VI. Kemasin Semarak, Bachok / Kota Bahru
VII. Besut, Terengganu (KETARA)
VIII. Seberang Perak
 Industrial crops
Coconut (Cocos nucifera) Value-added products
• 4th largest crop in the country • To rejuvenate the coconut
• 1981: 409,348 ha industry:
• 1995: 248,380 ha  Virgin coconut oil(VCO)
• 2007: 172,000 ha  Demand from local &
• Factors for declining area overseas
• Palm oil for cooking  High price = RM40-150/kg
• Low income  Used for skin care, hair care
• Small farm size  Antioxidant, antimicrobial
• Limited labor requirement properties
 Industrial crops
Cocoa (Theobroma cacao)
• Most planting areas are situated in Sabah
• But grinding and manufacturing are based in Peninsular Malaysia
• Over the years, planting sector has been slowing down, but processing
is increasing
• Malaysian cocoa special characteristic: high melting point (beneficial for
chocolate products in warm countries)
• 5th largest cocoa processor in the world

Workers pruning cocoa plants in Sabah Malaysia

 Other industrial crops
Coffee
• Smallholder in Johor and
Selangor
• Types: Liberica; Robusta;
Arabica
Sugarcane Coffee plantation in Johor
• In Perlis and Kedah
• Need distinct dry season
• Only fulfilled 10% local
consumption
• Import from Australia, Fiji and
Thailand
Sugarcane farm in Chuping Perlis
 Other industrial crops
Tea
• In Cameron Highlands,
Selangor and Perak
• Type grown: Assam

Tea plantation in Cameron Highlands Pahang

 Fruits
• Small holders industry with 270,000 farmers
• Area planted is increasing since 1985 until now
• Types of fruits exported:
• Watermelon; papaya; star fruit and banana
• Factors for increases in area and production:
• High demand for local and export
• Value-added processing (down-streaming activities)

Pineapple (Ananas comosus)

• Smallholders (38%) and plantations (62%)
• Areas are declining

A worker collecting pineapples from Ayer

Hitam Pineapple plantation in Johor
 Vegetables
• Smallholders, average farm size < 1 ha.
• Main areas: Johor, Perak, Kelantan, Pahang.
• Export value: RM160 million (cucumber, spinach, long beans,
chili, kailan, sawi)
• Import value: RM242 million (onion, shallot, pototo, chilli,
cabbage)

A worker works in a small scale vegetable

farm in Kampung Air Panas Malaysia
 Floriculture
• Net value RM290 million in 2010
• Cut flowers; orchids; non-orchids
• Area planted is increasing
• Important areas: Johor, Cameron Highlands, Selangor
• Most planted commodity in 2010:
• Orchids (RM104.1million), non orchid (RM129.5 Million)
 Livestock
Non-ruminant: Poultry and swine
• Highly commercialized = large corporations
• High technology = Closed housing, computerized ration
formulations, feeding method
• Contribute to country’s livestock production
• More than sufficient to meet domestic demand
 Livestock
Ruminant: Cow, dairy, goat etc.
• Smallholders and low technology
• Contribution: 8% in livestock production
• Self-sufficiency level is not achieved – 28% for beef, 10%for
mutton, 5% for milk
• Government target - 40% SSL by 2015
• How? Integrating cattle in farm and use feedlot system
 Fisheries and Aquaculture
• Aquaculture: farming of aquatic organisms including fish,
mollusks, crustaceans and aquatic plants
• Important supplier of animal protein
• Important commodity: Prawn & seaweed
• Steady growth since 2000
New source of growth for Malaysian agriculture

Herbs & Spices, Pharmaceuticals, Natural Products

• Currently experiencing rapid growth
• It is expected to grow at 10-15% per annum
• Government has targeted as growth sector after ICT
• Market value in 2010: RM7 billion
• Expected value in 2020: RM29 billion
• Reason high value: Awareness on health care with natural
products
• Currently, been planted by small holders
• Government target: large scale herbal plantation
• East Cost Economic Regional Herbal Plantation Project
• Expected to generate a gross national income (GNI) of RM
3.25 billion by 2020
 ECER Herbal Plantation Project
Dukung anak:
Treat kidney stone; malaria; asthma;
increase appetite; treat diabetes;
hypertension; itchiness

Mas Cotek:
Help womb contraction; aphrodisiac
(reproduction system) for women and men;
reduce cholesterol and blood sugar level
 ECER Herbal Plantation Project
Tongkat Ali Hempedu Bumi
Antimalarial; aphrodisiac; Treatment for gastro-intestinal tract
anti-diabetic; antimicrobial Fever, herpes, sore throat
 ECER Herbal Plantation Project
Kacip Fatimah:
Facilitate childbirth; post-partum medication; rheumatism (pain at joints)

Misai Kucing: Pegaga:

Analgesic; diuretic; Heal wounds; improve mental
bronchitis; small pox; clarity; treat skin; high blood
diarrhea pressure; rheumatism; fever
 Agricultural marketing
1) Export Crop Sector
• Oil palm: 3 main types oil palm producers:
• Independent small holders: Low productivity and sell
through middleman
• Producers in land development scheme: production and
marketing follow the parent institution e.g., FELDA, FELCRA,
RISDA
• Private estates: Very organized. Processed own produces
 Agricultural marketing
2) Food Sector:
• Characterized by small farm size with minimal involvement of the
private or corporate sectors
• Marketing usually through middlemen / wholesaler
• Except rice – a lot of government interventions as it is the staple
food of the country
• Interventions include input subsidies, cheaper water irrigation
rates, price subsidies, government-owned milling activities, price
control, monopoly of rice imports
Conventional Agri-food marketing
Input
Import Local Producer

Input supplier

Assembler/Transporter/
Commission Agent

Wholesalers Import

Small scale Large scale

retailers Retailers

Consumers
 Agri-food new supply chain
• Transformation due to external and domestic drivers
• External driver - rapid development of large retail chains
• In 2005: 81 hypermarkets in Malaysia, 83% are foreign-owned
• Domestic driver - changes in consumer income, consumption and
lifestyles
 New food supply chain
Producers

Contract Packing
farming house Wholesalers Import

Large scale retailers

Consumers
Federal Agricultural Marketing Authority (FAMA)
• Agency under MOA
• Responsibility: supervision; coordination; regulation and
improvement of the marketing of agricultural products for
domestic, export and import markets
• Marketing strategies
• Farmer’s market
• Business on wheels