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Third
National Agricultural Policy ( 1998 - 2010 )
Introduction
This document outlines the Third National Agricultural Policy (NAP3) which
sets the strategic directions for agricultural and forestry development to
the year 2010. This policy has been formulated to ensure that the capability
of the agricultural sector to play its strategic role in national development
is sustained and enhanced in light of new and emerging challenges facing
agricultural development. Towards this end, NAP3 will focus on new approaches
to increase productivity and competitiveness, deepen linkages with other
sectors, venture into new frontier areas as well as conserve and utilize
natural resources on a sustainable basis. The policy aims to set in place the
enabling and supportive measures as well as a conducive environment to
promote growth in the agricultural sector. The policies and strategies
formulated will continue to emphasis productivity and market driven growth.
Background
The implementation of the previous two National Agricultural Policies since
1984 has enabled the agricultural sector to attain a growth rate of 3.2 per
cent per annum for the 1985-1995 period. In absolute terms, the total
value-added of the sector increased from RM11.9 billion in 1985 to RM16.2
billion in 1995. The relative contribution of the sector to employment
generation and export earnings, however, declined from 31.3 per cent and 36.7
per cent in 1985 to 18 per cent and 19.2 per cent in 1995 respectively. Oil
palm, saw logs and fisheries remained as the major contributors to the
sector's growth. The share agricultural industrial commodities to total
agricultural value-added declined from 72.1 per cent in 1985 to 71.0 per cent
in 1995 while that of food commodities increased from 25.3 percent to 26.2
per cent for the same period.
Structural changes in the economy have brought forth new issues and
challenges in the agricultural sector in particular acute labour shortage,
limited availability of suitable land and increasing cost of production
arising from inter sector competition for resources as well as intense
competition in the global market resulting from trade liberal.
The recent financial crisis in the country and the region resulting from the
further liberal of the financial market has made the currency market highly
vulnerable to speculation. The volatility and resultant decline in the
exchange rate of the Ringgit was major currencies has negatively affected the
stability and security of the country's food supply. This instability and
insecurity, if left unchecked, can have serious economic, social and
political implications.
Issues And Challenges
The country's food import bill is continuously increasing. Total food imports
has increased from RM3.5 billion in 1985 to RM7.7 billion in 1995 and RM 10.0
billion in 1997. The instability and volatility of the exchange rate has put
a strain on Malaysia's foreign exchange reserves and has led to imported
inflation. The high demand for food has led to increases in food prices. In
1997, increased prices of food accounted for 51.9 per cent of the increase in
Consumer Price Index (CPI).
This
was 28 percentage points higher than 1991, where increase in food prices only
accounted for 38.4 per cent of the increase in CPI. In addition, increasing
per capita income and awareness of a balanced diet and health consciousness
of the populace will also bring about changing tastes and preferences for
food. Thus, there is a need to ensure adequate supply and accessibility of
safe, nutritious and high quality food at affordable prices.
There is now acute shortage of labour leading to high employment of immigrant
workers in agriculture and forestry sectors. Due to this shortage, it is
estimated that about 300,000 hectares of rubber holdings are untapped and
30,000 hectares of oil palm are not fully harvested. Productivity gains in
agriculture have also not matched up to increases in factor prices.
Currently, labour productivity in agriculture is only about 60 per cent of
the labour productivity in the manufacturing sector. This necessitates
measures to reduce labour requirement in agriculture and increase labour
productivity.
The smallholder sector continues to experience problems of low productivity
and uneconomic size of holdings. Labour shortages and low commodity prices
have further led to substantial idle agricultural land and abandoned
holdings. It is estimated that there are about 400,000 hectares of idle
agricultural land. In addition, land for agricultural activities is becoming
more limited owing to conversion for other uses such as industrial, residential
and urban uses.
The implementation of the agreements under the World Trade Organization (WTO)
and the Common Effective Preferential Tariff (CEPT) Scheme of the ASEAN Free
Trade Area (AFTA) has created greater competition for Malaysia agriculture.
Main export commodities such as rubber and palm oil face increasing
competition from emerging lower cost producers and continue to face
discriminatory tariff and non-tariff barriers.
The development of high value-added resource- based products is still limited
and exports mainly consist of primary and intermediate products. Seventy per
cent of the total raw materials used in the food processing industries are
imported. Lack of domestic production coupled with inconsistent supply
resulted in many small and medium scale agro-based firms to operate below
capacity. There is a need to further strength inter and intra-sector linkages
especially with support and downstream industries. Concerns for the
environment at both domestic and global levels require more innovative and
efficient agricultural and forestry practices for the sustainable development
of the sector.
The Third National Agricultural Policy (NAP3)
The further growth of the agricultural sector requires the nation to address
the challenge of efficient and optimal utilization of existing resources in
order to further improve competitiveness. Resource constraints and rapid
changes in the global trading and investment environment necessitate the
development of a resilient agricultural sector and the enhancement of its
global competitiveness. In addition, the concern over the availability and
stability of food supply requires the nation to enhance its competitive
capabilities in food production. These challenges require new strategic
approaches and policy thrusts to enhance the economic contribution and growth
of the agricultural sector.
Objectives
The over riding objective of NAP3 is the maximization of income through the
optimal utilization of resources in the sector. This includes maximizing agriculture's
contribution to national income and export earnings as well as maximizing income of producers.
Specifically, the objectives of the Policy are :
a)
to enhance food security;
b) to increase productivity and competitiveness of the sector; c) to deepen linkages with other sectors; d) to create new sources of growth for the sector; and e) to conserve and utilize natural resources on a sustainable basis.
Macroeconomic Framework
During the NAP3 period, the sector is expected to achieve a growth rate of
2.4 per cent per annum. The contribution of the agricultural sector to Gross
Domestic Product(GDP) is expected to further decline from13.5 per cent in
1995 to 7.1 per cent in 2010. Contributions to total agricultural value-added
from rubber, cocoa and saw logs are expected to decline while contributions
from oil palm and food commodities are expected to increase. New sources of
growth are expected to emerge in agriculture resulting from various
initiatives to promote new products and emerging industries such as agro
forestry, biotechnology products, specialty natural products, bamboo and
rattan, floriculture and aquarium fish.
Total workforce in agriculture will decline from 1,524,000 workers in 1995 to
930,000 workers in 2010. With the current land and labour shortages and
increasing cost of production, it is envisaged that future expansion in
hectar age would be limited during the plan period. Therefore, the increase
in output will emanate mainly from increasing productivity. Labour productivity
is expected to increase from RM10,650 per worker to RM24,730 per worker
within the same period. This reflects the emphasis given on labour saving
technology, innovations and more efficient farm management practices.
NAP3 will continue to pursue agricultural growth through moderate expansion
of land and further intensification of land use. There will be substantial
reduction in the rubber and cocoa areas. Rubber, paddy, coconut and cocoa
holdings are expected to be reduced by 494,000, 303,000, 73,400 and 30,700
hectares respectively. Most of these areas will be replaced by agro forestry,
oil palm, fruits and vegetable cultivation. In Sabah and Sarawak where there
is substantial area, new land development will be undertaken. As such as land
utilization for agriculture during the plan period is expected to marginally
increase by about 0.5 per cent per year from 5.7 million hectares to 6.2
million hectares.
Strategic Approaches And Policy Thrusts
Increasingly scarce resource including land availability requires a strategy
that optimize resource use for agricultural and forestry development. Towards
this end, an agro forestry strategy to integrate agriculture and forestry
development outside Permanent Forest Estates (PFEs) is adopted for NAP3. This
agro forestry approach views agriculture and forestry as mutually compatible
and complementary and therefore provides a scope for joint development that
can bring about mutual benefits. The approach will bring about a larger
productive base for agriculture and forestry, allow for a wider range of agro
forestry enterprise mix, optimize resource utilization, particularly land
outside the PFEs and enhance the income generating potential of agro forestry
investments. The agro forestry approach will, thus, enable policy formulation
to address resource constraints such as land and labour.
Consumers world-wide are increasingly demanding products that are more
specific to their needs and preferences. They are now accessible to
information technology which support their ability to seek, identify and
procure these products. Current commodity-based strategies limit the
effectiveness to serve markets that are of higher value and more segmented.
This requires a new orientation for agricultural development to serve the
needs of these markets and secure higher value- added in agriculture and
forestry. A product- based approach for commodity development will therefore
be employed in the policy formulation of NAP3. In this approach, key products
and markets are identified based on market demand, preferences and potential.
This market demand and preferences are translated into strategies for
upstream primary agricultural production to enhance production and marketing
of the agricultural and forestry products. The product-based approach will
enable a more effective formulation of policy thrusts to meet the challenges
that have been identified. This approach is adopted to reinforce and
complement the cluster-based agro industrial development as identified in the
Second Industrial Master Plan 1996-2005 through strengthening both inter and
intra-sector linkages including the development and expansion of intermediate
and supporting industries. These approaches together with the policy thrusts
will provide the enabling environment to sustain and enhance the growth of
agricultural sector and become more globally competitive. The policy thrusts
of the NAP3 are:
Meeting national food requirements
Domestic food production will be enhanced through large-scale food production
by the private sector. This necessitates the strengthening of critical
support services and institutional arrangements. Reverse and offshore
investments for strategic sourcing will be encouraged and udiciously pursued.
Enhancing competitiveness and profitability in agriculture and forestry
Enhancing competitiveness and profitability in the agricultural sector will
require focusing in promoting globally competitive industries in agriculture
and forestry. This will require the development of a world competitive
outlook within the sector and an export culture with commitment to provide
what the market wants at competitive prices. The competitiveness of the
sector will be enhanced through productivity improvement, developing and
strengthening markets, removal of market and trade distorting protective
measures, formulation and implementation of high quality and safety standards
and selective development of agricultural and forestry enterprises based of
present and potential competitive strengths. Further strengthening of
competitiveness and profitability will be achieved through the development of
new and innovative products and capitalizing on the product value chain that
will generate sources of future growth and create new higher value
industries. Reducing labour inputs in agriculture and forestry will also
strengthen competitiveness and profitability of the sector.
Capitalizing on the product value chain requires reorientation from
commodity-based to product-based production and marketing. This approach to capture
higher margins and increasing farm incomes will involve vertical integration
and internalizing of value-added activities at farm level. In addressing
labour constraints, the thrust will be on capital and technology intensive
agricultural production systems which will utilise labour saving techniques.
Agricultural and forestry development will also be geared towards less
labour-intensive enterprises such a agro forestry and the cultivation of
high-value crops and forest species that require less labour.
Enhancing the integrated development of the food and industrial crop
sub-sectors
There are resources within the industrial and food crop sub-sectors that can be exploited for an integrated development of both sectors. These resources include land, labour and waste as well as by-products that can be used to produce value-added products. An illustration of this integrated development is shown in Chart 1. This thrust requires further enhancement of R&D in waste and by- product utilization as well as increase defforts to commercialize research findings.
Strengthening requisite economic foundation
A strong requisite economic foundation is necessary to support and sustain the development of existing core agricultural an forestry industries and initiate the growth of new ones. These include continuous upgrading the quality of human resources, development of indigenous R&D capability and technology including information technology, adequate and modern physical infrastructure, efficient business support services, financing and incentives and an enabling institutional framework.
Adopting sustainable development
Sustainable management and utilization of resources will be the guiding principle in pursuing agricultural and forestry development. Rules, regulations and incentives will be strengthened to encourage environment-friendly agricultural and forestry practices and minimize the negative impact of these activities on the environment. Research and application of appropriate technologies and innovations for this purpose will be emphasized.
Policy Directions For The Development Of
Product
Food product group
This group which consists of paddy, livestock, fisheries, fruits and vegetables primarily serves, though not exclusively, the domestic market. The production structure, except for poultry, comprises mainly of small and medium scale production units. This agricultural industry group, however, is showing signs of consolidation to larger scale operations and is becoming increasingly more commercialized.
Local production of food has increased at about 4.2 per cent per annum during
1985-95 period. This increase has not been able to match with domestic demand
resulting in increasing imports especially during 1990-95 period. The
increasing deficit between domestic demand and local production is expected
to continue. It is not in the long-term interest of the country to be
increasingly dependent on external sourcing for food as there is uncertainty
in its long- term international supply. However, economic factors limit
Malaysia's capabilities in enhancing domestic supply to fully meet her total
food requirements. Against this scenario, NAP3 will focus policy formulation
to enhance domestic production and strategic sourcing to ensure adequate supply
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