October 11, 2015
The Deplorable State of Malaysian Agriculture
by Murray Hunter
The agricultural sector is crippled by mismanagement, lack of planning, featherbedding, says Murray Hunter
Over the past 30 years, Malaysia has grown into a middle income country, transforming itself from a primary producer of minerals and commodities, to a multi-sector economy. However, the country’s agriculture sector is characterized by missteps that have cost lost opportunity in better food security, rural, community and regional development, development, employment and poverty alleviation, and missed some of the great agro-based sunrise industry opportunities of this millennium.
Political considerations have dominated investment and research, with government-linked companies receiving lavish funding in areas that often made no sense and which have resulted in the waste of hundreds of millions of US dollars and left a range of defunct programs scattered across the landscape. Politicians and staff have flown around the world on lavish “research” jaunts that appeared more an opportunity for government-paid holidays than attempts to seek proficiency.
According to statistics cited in various Malaysian Plans, agriculture in 1970 represented 28.8 percent of national GDP against only 9.33 percent in 2013. However in some states like Perlis, Kelantan, and Sabah, agriculture still makes up 20-30 percent of the economy.
Employment in the sector has fallen from 13 percent of the workforce in 2007 to only 9.3 percent in 2014. However 66 percent of the people involved in working within the agriculture sector are over 50 years old. The plantation sector is primarily staffed with foreign laborers, bringing little income benefits to local communities.
The push to industrial crops in the 1960s, although rapidly developing the agricultural sector, decreased diversity. Even settlement schemes like the Federal Land Development Authority (FELDA) and the Federal Land Consolidation Authority (FELCRA) shied away from food and cash crops towards the palm oil and rubber because of the relatively large returns available with little need to market and sell their crops.
If drawbacks are factored in such as poor basic infrastructure, inadequate access to irrigation and roads, the poor level of education of most smallholders, conmen taking advantage and promising big returns to smallholders if they buy seeds from them, and the condescending attitude many government bureaucrats have towards small holders, it’s not hard to understand why this sector is so much in decay.
There is little evidence that local communities have benefited from the presence of GLCs, yet state governments have been eager to transfer state land to them for development with virtually no transparency. Virgin forest is still being ripped up to make way for new palm plantations to replace those developed into housing and industrial estates, where the GLCs are making mega-profits.
Agricultural direction was planned through a series of 5-year plans. The political and bureaucratic elite have always presented rosy forecasts and gained publicity through staging MOU ceremonies to announce projects which never happen, or fail through mismanagement.
Part of the problem is that the politicians and bureaucrats have been thinking big at the cost of thinking small. For example, the Ministry of Agriculture has developed a list of agro-based industries that should be national priorities. The Malaysian Agricultural Research and Development Institute (MARDI) and the Forest Research Institute of Malaysia (FRIM) restrict their research to these national priorities, while leaving a void in research on crops needed to spur on the growth and development of small local communities.
Consequently, research efforts have benefitted few communities, which still remain in relative poverty today, particularly in agriculture-dominant states like Perlis, Kelantan, Sabah, and Sarawak. Institutions like MARDI and FRIM have become showpieces to please the politicians.
Further, the bureaucrats involved in implementation have appeared to lack the zeal and commitment to see plans progress into reality. Managers on the ground have focused on building hard infrastructure where favored contractors can be employed, rather than ploughing resources and money into education and extension. The result has been a number of white elephants that litter the country. Corruption via land grants, misallocation of funds and building irrelevant facilities is a major issue hampering effective rural development in Malaysia today.
As an economy skewed towards state planning and intervention, Malaysia has attempted to pick winners and develop them through the state apparatus. In the case of herbs and biotechnology, massive funds were allocated in the pursuit of achieving success in these “sunrise” industries, where the funds were predominantly channeled into developing ineffective and costly bureaucracy.
The Malaysian Herbal Corporation was formed in 2001 with much fanfare, considered within the bureaucracy to be the driver and “flag bearer” for the industry. The corporation undertook many initiatives, with the staff travelling widely and luxuriously around the world. Today, the Malaysian Herbal Corporation is defunct.
With former Malaysian Prime Minister Abdullah Ahmad Badawi’s focus on biotechnology as a “sunrise industry” midway through the last decade, the Malaysian Biotechnology Corporation (MBC), along with various state funded biotechnology companies such as Melaka Biotech, J-Biotech in Johor, K-Biocorp in Kedah, and Kelantan Biotech, were all well-funded with hundreds of millions of ringgit in grants, but have little, if anything to show for it.
Most of, if not all of the grants given out by MBC to commercial companies failed to produce any commercialized intellectual property, as did university research.
Technology Park Malaysia (TPM) built biotech labs around the country in places like Perlis, which are mostly empty. The East Coast Economic Regional Development Council set up herbal parks in Pahang and Terengganu which are basically inactive in regards to their original purpose.
FELDA opened up the FELDA Herbal Corporation, which now has been replaced with another attempt at developing biotechnology through Felda Wellness. Biotropics was set up by Khazanah Corporation and is basically only producing some cosmetic and herbal products. The Ministry of Health set up NINE BIO to produce Halal vaccines and herbal products.
The arrangement between Malaysian University of Science and Technology and Massachusetts Institute of Technology partnership hailed as an example of a smart partnership, came unstuck after five years in 2011 and cost the Malaysian taxpayer US$20 million with absolutely nothing to show. The government, rather than being a driver of the industry, became a participant with disastrous results.
What is tragic is that there has been no transparency in the way the government handed over responsibility to personnel within these GLCS with no accountability.
Top-down planning with no consultation with local industry, communities and scientists has led to the sector falling well behind its neighbors within the Asian region. Top-down planning has allowed bureaucracy to overrun market considerations in Malaysia’s agricultural and agro-based industry development.
Development programs like the agropolitan schemes in Sabah are conceptualized and developed within the bureaucrats’ paradigms. GLCs are asked to take up large swaths of land, plant palm oil and develop small corridors for local villagers. They have been of large benefit for these GLCs, but local villagers have been shortchanged as the GLCs fail to live up to their responsibilities.
Likewise, other bureaucrat concepts such as combining fragmented land holdings into paddy estates run by anchor GLC companies as promoted by the Performance Management Delivery Unit (PEMANDU) within the Prime Minister’s Department disempower local land owners who are expected to work as laborers on their own land. These types of projects have failed in their conceptualization, let alone during implementation. As a consequence, opportunities to alleviate poverty in rural communities have been missed, and opportunities to develop new crops, and create new industries have been ignored.
Many successful programs like entrepreneurship mentorship schemes run at Agricultural Institutes around the country are starved of funds because of the preference for the bureaucratic white elephants that benefit policy implementers financially.
The country imports up to 60 percent of its current food needs including rice, milk, beef and mutton, flour and fruits. With the level of national debt, falling foreign reserves due to a declining ringgit and a potential slowdown in exports due to a sluggish international economy, food security appears likely to become more important than ever.
Malaysian agriculture needs new farming practices, business models, and reinvented supply/value chains. The decline of the value of the ringgit will help Malaysian farmers find a new era of competitiveness that the sector has never had.
Murray Hunter is an Australian academic and development specialist living in Thailand.