Encouraging farmers to make better use of technology is perhaps the greatest challenge facing Malaysia’s agriculture authorities. Boosting technology take-up is considered integral to ensuring that Malaysia is food secure for the foreseeable future. Under the National Farm Mechanisation and Automation Plan (NFMAP), which was launched in January 2012 by the Ministry of Agriculture and Agro-based Industry (MOA), the state plans to implement a series of initiatives aimed at addressing a lack of innovation and technology use. Other federal-level plans to modernise the sector and secure Malaysia’s long-term food security situation include the National Agro-Food Policy (NAFP) and the overarching Economic Transformation Programme (ETP), which were launched in 2011 and 2010, respectively. Implementing these ambitious strategies represents a major challenge. With an agricultural workforce of around 1.4m spread over rural areas in Peninsular Malaysia, Sabah and Sarawak, the logistics of rolling out a comprehensive technology transfer and training programme are daunting. The financial implications of encouraging smallholders – many of who earn a low income – to upgrade to new, expensive technologies and adopt new farming practices are also challenging. That said, the costs of not investing in long-term sustainability are much greater than any capital expenditure made now. According to forecasts from the UN’s Food and Agriculture Organisation, by 2030 the world will require 50% more food than today, and by 2050 global food demand will outstrip supply, potentially leaving more than 3bn people hungry. The government aims to ensure that all Malaysians have enough to eat in the years to come. With this in mind, the plans are primarily aimed at boosting production of staple crops, such as sugar, rice, grains, and fruits and vegetables.
THE CURRENT SITUATION: Malaysia is currently a net food importer. In 2011 the country spent around RM34.5bn ($11.12bn) on food imports, compared to RM20.6bn ($6.64bn) worth of food exports (not including commercial crops) the same year, according to the Malaysian Investment Development Authority (MIDA). Fruit and vegetable imports alone cost the government RM4.3bn ($1.28bn) in 2011. In addition to fruits and vegetables, major food imports include rice, cereal and cereal preparations, coffee, tea, dairy products, some spices, beef and animal feed. Malaysia also imports a substantial amount of cocoa, through the great majority is processed in-country and exported at a profit as a commercial crop. Indeed, the continued success of the nation’s commercial crops has in fact had a negative impact on the production of less lucrative staple crops. According to the MOA, around 77% of Malaysia’s total agricultural land is planted with commercial crops. One of the nation’s most challenging tasks in the coming years will be to balance these competing interests.
POLICIES: In the past the government has overseen a number of programmes broadly meant to ensure that the population has easy access to food at all times. The National Food Security Policy (NFSP), which officially ran from 2008 through 2010, for example, was focused primarily on ensuring the availability of rice. In 2011 the country consumed 2.7m tonnes of the grain, up considerably from around 2m in 2000. Annual production, meanwhile, has remained relatively stagnant over the same period, fluctuating between 1.3m tonnes and 1.6m tonnes. Consequently, over the past decade Malaysia has become the seventh-largest rice importer in the world, bringing in 1.1m tonnes in 2011.
The NFSP was introduced during and in response to the global food shortage, which by 2008 had caused food prices to jump dramatically. Under the policy the government introduced a number of subsidies for rice farmers in an effort to encourage increased production and lower prices. The NFSP included subsidies linked to fertiliser prices, seed prices, yield rates, overall production rates and the retail cost of rice. A number of these subsidies continue to be in use even after the NFSP officially ended in 2010. The government also offers subsidies to companies that are active in other agricultural sectors, including aquaculture and livestock. In 2011, according to MOA, the state spent RM5.72bn ($1.84bn) on food subsidies, including RM4.1bn ($1.32) on rice subsidies alone.
RECENT DEVELOPMENTS: The primary goals of the NAFP include turning the agro-food segment into a competitive and sustainable industry, boosting incomes among rural smallholders and agriculture entrepreneurs, and ensuring sufficient food supply. The policy is expected to be funded primarily by private sector players, though some RM1.1bn ($35m) was set aside for agriculture sector development in Malaysia’s 2012 budget. While specific NAFP initiatives had yet to be released at time of publication, initial reports stated the policy would offer detailed development plans for a wide variety of areas, including rice, fisheries, livestock, fruits and vegetables, agro-industry and agro-tourism, among others. Under the policy, the government is expected to shift much of the cost of developing the agro-food industry to the private sector. Encouraging increased cooperation between official state entities and private players is expected to reduce the government’s overall financial burden, in addition to boosting economic activity in small and medium-sized enterprises, which account for a substantial percentage of agro-food activity. For example, the government will partner with financial institutions to offer low-interest credit facilities to farmers and other agricultural workers. “Young entrepreneurs interested in expanding their agriculture work can get as much as RM300,000 [$96,780] in loans without collateral, provided they have two years of experience,” Johari Baharum, a deputy minister at the MOA, told local media in late March 2012. “We also provide loans to fishermen to buy better vessels.
THE NFMAP: The NFMAP is made up of six strategic initiatives. The first is aimed at updating and improving the agriculture industry’s regulatory environment in an effort to streamline oversight and reflect new technological realities (currently in development). The next initiative involves strengthening research and development efforts in the agro-food industry, with the goal of commercialising new, potentially lucrative products and areas. The NFMAP’s third goal involves increasing mechanised equipment ownership and usage among smallholders, and the fourth objective aims to intensify private sector participation throughout the industry. Goal number five involves expanding the agriculture machinery manufacturing industry. The policy’s final initiative involves developing the capacity and capabilities of the agro-food industry’s workforce.
The Special Committee on Mechanisation and Automation (SCOMA), which is overseen by the MOA, will implement the NFMAP. While some of the initiatives laid out in the plan will be funded directly by SCOMA, the committee is working to ensure that the NFMAP’s fourth goal – boosting private sector participation – will play a major role in securing funding. In particular, the MOA is hoping to encourage farmers and other agricultural smallholders to invest in the sector themselves. Farmers will be encouraged to group together into semi-cooperative farms, which will allow them to benefit from economies of scale and share equipment, expertise and supplies.
INCENTIVES: In an effort to encourage private smallholders to participate in the agro-food sector, the MOA plans to offer a 50:50 matching grant of up to RM5000 ($1613) to any farmer that wants to purchase field machinery. SCOMA is also working to get farm equipment onto as many farms as possible in a number of ways. At the 2012 National Conference on Agriculture and Food Mechanisation in Sarawak, Mohd Hashim Abdullah, the secretary-general of the MOA, said, “We will ensure that all agricultural areas have access to machinery or equipment service providers.” The government plans to offer tax incentives to suppliers and manufacturers of machinery and spare parts, with the goal of reducing the cost of equipment. Agrobank, a government-linked Islamic financial institution, will offer favourable interest rates for equipment and machinery loans. Eventually, farmers will also be able to purchase machinery on instalment. Finally, all farm equipment in the country will eventually be registered in a computer database, in order to facilitate machinery auditing, review and sharing amongst farmers.
Read More from OBG
