SEEK NOT THY FORTUNE ON AN EMPTY STOMACH

Malaysia 2017 | AGRICULTURE & PLANTATIONS | REVIEW

The agriculture sector remains strong despite the focus on more high-tech areas of the economy, with palm oil continuing to drive real growth.

Malaysia's strong agricultural output in 2016 mirrored its other successes in the political, economic, and diplomatic fields. Whilst the total economy grew by 5% in 2015, agricultural output did so even more, with 16.6% increase in paddy production and 6.9% in chickens, and 1.9% in total marine fish landings that year. Moreover, total employment in the sector increased by 3.5% to 1.75 million people. Though there were slight dips in sheep, brackish aquaculture, beef, mutton, pork, and cocoa beans, the country saw major increases in goat, buffalo, chicken and duck egg production (6.5%), natural rubber (8%), kenaf (52.6%), marine fish, freshwater aquaculture, cattle milk, and palm oil. Accounting for 8.9% of total GDP, agriculture was the fourth-largest economic sector in 2015, second only to services, which accounted for 53.5% of all economic activity that year, manufacturing (23%), and mining and quarrying (9%).

Much of this growth was driven by increasing demand in both local and export markets. While Malaysia's population only grew by 1.4% in 2015 to 29.7 million, increasing demand in China and India for healthier foodstuffs continued to drive demand for products like marine fish and freshwater aquaculture. Hence freshwater production increased from 1,458 tons in 2014 to 1,486 in 2015 and freshwater aquaculture from 106.7 tons to 112.1 tons during that same period. As global trends only point toward an increasing interest in healthier lifestyles, and hence higher fish consumption, these agricultural sectors are only likely to thrive all the more. That being said, real growth in Malaysian agriculture remains driven by palm oil, which rose yet again in 2015, this time by 2.4% to 19.9 million tons in 2015. This made Malaysia the second-largest producer in the world that year, well behind Indonesia (35 million tons) but also far ahead of the next largest producer in the world, Colombia (1.1 million).

The other big story of 2015 was the increase in rice production by 443,000 tons, or 16.6% to 3.32 million tons, making Malaysia the eighth largest paddy producer in the world. Again, this left it far behind its neighbors Indonesia, which also topped world production in this category with 74.9 million tons, followed by Vietnam (45.2 million), Thailand (31.6 million), and Myanmar (28.1 million), but still prodigious all the same. Valued at MYR1.06 billion, the country's agricultural sector was dominated by palm (46.9% of total agricultural output), livestock (10.7%), fishing (10.7%), rubber (7.2%), and forestry and logging (6.9%). Increasing by 6.9%, the country produced a stunning 308.1 million chickens in 2015, while rubber increased by 53,500 tons, or 8%.

While the labor market for agriculture was dominated by men, who accounted for 75.7% of agricultural laborers, the number of foreign workers in the sector also grew by a considerable amount, 16.2%, to 646,400 people in 2015. In the cool highlands north of Kuala Lumpur, migrant workers grow premium lettuce, tomatoes, and herbs for wealthier city-dwellers; across the country they toil in palm oil plantations. By the end of 2014, there were over 2 million foreign workers in Malaysia across every economic sector, up massively from the 800,000 recorded in 2000. Though manufacturing accounts for the largest share of migrant employment, agriculture comes in at second, followed by construction. Among those who are registered, 39.4% are from Indonesia, 23.6% from Nepal, and 14.3% from Bangladesh, but there are also sizeable amounts from Vietnam and Myanmar. At a time when local unemployment is on the rise in a country whose total workforce is only 15 million, the uptick in foreign workers has been no small cause for controversy.

Hence the public backlash in February 2016 when Malaysian Human Resources Minister Richard Riot and Bangladesh Expatriate Welfare and Overseas Employment Minister Nurul Islam signed a Memorandum of Understanding that would bring in 1.5 million Bangladeshi workers in stages over the next three years. Though public debate about the issue had been simmering before the announcement, it reached a fever pitch in its wake. Apart from the more flustered and xenophobic of these charges, labor unions also worried these would only further depress local wages. The solution, they argued, lay in normalizing or legalizing those foreign workers already in the country and then increasing wages rather than continuously relying upon cheaper, imported labor.

Despite these tensions, the government continued to press ahead with its larger effort to boost agricultural production across various sectors. First established in 1969 to carry out large-scale irrigation projects suitable for paddy planting, the bank has been the largest source of credit to the rural agricultural sector since 1980. On July 1, 2015, Agrobank first began operations as a fully-fledged Islamic bank in a move to continue boosting the country's Islamic banking assets. Though Islamic banking only accounted for 23% of total banking assets in 2014, the government wants to increase this stake to 40% by 2020. As things stand, Agrobank provides 32% of all loans dispersed to Malaysia's food production sector, and managed to convert USD94.2 million worth of deposits from conventional into Islamic holdings, Agrobank Chairman Faizah Mohd Tahir said in July 2015. This is part of Malaysia's broader efforts to become a global Islamic financial hub.

Nonetheless, Malaysia still suffers from a disproportionate need to import food, which is driven at least in part by the country's devotion of so much arable land to rubber and palm oil production rather than foodstuffs for domestic consumption. Thus while the country exported RM7 billion worth of food in 2015, it had to import MYR40 billion. As such, the government has launched various schemes to boost local production, which would not only meet an increasing local demand but also create much-needed extra income for small-scale “agropreneurs." Thus, the government has offered various incentives and assistance programs such as the Palm Oil Smallholders Replanting Scheme, the Cantas Discount Scheme, and the Farm-level Quality Improvement and Increment Scheme to enhance the revenue of smallholders and reach the public target income of MYR4,000 per month by 2020.

In this vein, the Ministry of Modernization of Agriculture and Rural Economy is also working on building a complete supply chain to give farmers and agricultural producers adequate facilities to produce, move, and market their produce more efficiently, thereby boosting production, livelihoods, and living standards all in one fell swoop. In this capacity, it is also working with the Federal Land Consolidation and Rehabilitation Authority (FELCRA) to develop “food zones" in provinces such as Sarawak, the country's largest.

Here, FELCRA has already designated 1 million ha of land as having native customary rights (NCR), i.e. lands that fall under the jurisdiction of indigenous communities under the Malaysian Constitution's plural legal regime, which allows for diverse and sometimes contravening bodies of law (whether native or post-colonial) to overlap or at least run into one another. As such, while these lands have customarily been set aside for just that purpose—to be left aside—some federal bodies are now arguing their suitability for boosting the small-scale production of foodstuffs such as pineapples, bananas, vegetables, and even livestock. This might be somewhat difficult, however, as both the biggest obstacle and prerogative for those reclaiming their native customary rights have been the widespread deforestation of states like Sarawak due to intensive palm oil planting.