Global Trends by Martin Khor

Monday 19 January 2004


Revitaling Malaysian agriculture has become a priority  goal, given a new boost by the appointment of Tan Sri Muhyiddin Yassin as Agriculture Minister.  There are, however, a set of complex issues involving trade agreements, domestic structural problems, and appropriateness of techniques, that have to be grappled with. 


Interest on agriculture has been climbing since the Prime Minister Datuk Seri Abdullah Ahmad Badawi announced his intention to revitalize the sector.

With Tan Sri Muhyiddin Yassin shifting to the Agriculture Minister portfolio just over a week ago, even more attention has been aroused.

Last Friday, Muhyiddin said his Ministry would take measures to address the declining prices of seasonal fruits such as the durian, which had harmed farmers.

On the same day, Felcra chairman Datuk Hamzah Zainuddin said Malaysia can be self sufficient in rice production by 2007 by adopting the latest farm technologies.

At present only 60 percent of rice consumed in Malaysia is locally produced.  Felcra’s target is to raise local production from an average of 4.5 tonnes per hectare to 10 tonnes.

It is great that there is such a resurgence of priority given to agriculture.

In recent years, more stress had been placed on manufacturing, which now accounts for the largest share of our export earnings. But in net terms, agriculture is more vital than the figures for gross exports indicate.

This is because almost all the value or earnings in palm oil or rubber exports is locally earned, retained and enjoyed.

In the case of electronic products and components, the gross export earnings are enormous but so too are the payments for imported components, and thus the part of the export earnings that really accrues to the nation is a smaller fraction. 

Thus, the humble agriculture commodity sector is more important than its small share in the country’s gross export figures might indicate.

But it is the food sector that the renewed commitment seems to be focusing on.  And rightly so.

Malaysia imported RM 13 billion of food last year and this is projected to rise to RM 14 billion by 2005.   This is too high as the country can surely produce more of the food it consumes, thus reducing the import bill and increasing food security.

Moreover, many of the country’s poor are in the rural areas, with food production as their livelihood.  Helping farmers increase food output and income is a direct way to reduce poverty.

But while raising food production is a fine goal, there are many complex and difficult issues to resolve.  Which may be why previous attempts to revitalize the sector have encountered problems.

Firstly, international and regional trade rules are putting pressure on countries to reduce their protection against competing imported food products, and to phase out subsidies given to farmers.

Import quotas or bans are not permitted anymore, and the levels of import duties are to be reduced in phases, with separate time tables for imports from Asean countries (under the Asean Free Trade Agreement) and imports from other countries (under the World Trade Organisation).

The WTO agriculture agreement does allow domestic subsidies to farmers up to a limit, whilst there is no discipline on some types of subsidies.

A large group of developing countries are fighting for the right to be exempted from having to further reduce their tariffs and the domestic subsidies given to their local farmers.  It is far from certain they will succeed.

Meanwhile there are fears that Malaysian rice farmers may face more intense competition from rice coming from Thailand and Vietnam, if duties from the Asean countries have to be reduced in future years.

Import competition can also be expected for vegetables, fruits, poultry and meat products.

There are also new bilateral trade agreements in the pipeline, with negotiations to proceed with China, India, Japan and possibly other countries.  Agriculture is likely to be on the agenda.

Thus policy makers whose aim is to expand the local food sector have to pay very close attention to the different trade negotiations and ensure that the interests of this sector are not adversely affected or, in the worst case scenario, wiped out.

Secondly, there are the old structural and institutional problems that face the farmers and the food sector in this and many other developing countries.

These include ownership, access and security of tenure of land;  access to credit for small farmers;  the marketing system and the fluctuation of prices;  and the low share of the retail price that goes to the small producers, as middlemen and retailers have the lion’s share of the revenue.

Many small farmers do not have enough land, and some pay rentals which eat into their income.  The cost of labour and inputs has risen through the years.  Finding a market for products is a big problem in many areas, and even when the produce can be sold, the prices that the farmers get are far too low. 

With housing, road and highway projects as well as industries sprouting up, farmers are also pressurized or forced to make way and give up their land.  Agriculture is thus displaced. 

Thirdly, there is the question of what technology to use.  In the past three decades, there has been a dramatic increase of chemical-based techniques, using pesticides, fertilizer and hybrid seeds.

However, whatever productivity gains there may have been from these have in many cases slowed down or reached a plateau.  There have also been environmental problems which in turn affected productivity.

There is now a worldwide turn away from chemical-based agriculture towards “sustainable agriculture”, with low artificial inputs, and based on the use of biodiversity, natural pest management, traditional seeds and organic farming.      

There is more and more evidence that sustainable agriculture, making use of appropriate methods suited to local climatic and soil conditions and based on local knowledge as well as techniques transferred from other areas where they were successfully used, can be very productive with even higher productivity than conventional farming.

In some European countries, such as Germany, the Agriculture Ministries are setting targets to shift gradually from chemical-based to organic farming.

There is also a large market for organic food products in the West, and growing interest in Malaysia too, as consumers become more health conscious.  

If organic foods can be sold at competitive prices, higher to some degree but not too much higher than non-organic products, then there would be a market and demand-driven basis for the food sector to be based increasingly on sustainable agriculture.

The farming technique based on genetic engineering is at this moment controversial, with increasing evidence of possible adverse environmental effects, as witness the recent United Kingdom government-sponsored report on field trials of genetically-engineered crops.

European countries have generally decided up to now not to allow commercial growing of genetically-modified food crops.  The United States and a few other countries are using genetic engineering for some crops.

There is also a controversy whether the genetically engineered crops are higher yielding.  And of course whether the foods can find a market, if consumers are afraid of the safety aspect. 

Most other countries are cautious about introducing the technique as they are waiting for more scientific information about the environmental impacts of growing and the health effects of consuming genetically-engineered foods.

In considering measures to improve food output, Malaysia’s policy makers will thus have to ponder over the issues and controversies surrounding what are the appropriate approaches to take in future agriculture techniques.

Indeed, there is a myriad of issues and problems to consider - economic, social and technological, some with international and others with domestic dimensions - in the strategy and measures to adopt in the country’s push for better and more successful food production.  

Let’s hope these will be resolved systematically and properly so the goals of revitalizing Malaysian agriculture can finally be achieved.