Monday, 18 June 2012

Agriculture goes beyond food and business

Jamal Othman   
WE often come across local billboards and various media outlets that declare "Agriculture is Business". No doubt it is but has it ever crossed our minds that agriculture has a lot more to offer than just food or a mere income-generating activity among farmers or agro-based entrepreneurs?

Where are our farms normally located? Surely in the rural areas. Rural areas imply the habitat for rural dwellers and our very traditional sociocultural attributes.

How about the allure of rural landscape and agro tourism? Consider the traditional settlements in the lush greenery of padi fields, the so-called "green grass of home" when the padi plants are growing and the "golden field of home" when the padi is ripening. Further, think of the glowing gold of rubber leaves during "wintering", which has aroused a lot of tourist interest of late. Don't we sense the warm glow in our hearts at the sight of them?

Imagine too the abundant flora and fauna in agricultural and rural areas. Ever wondered how those in padi fields mitigate against the tropical heat and air pollution? And how they help mitigate against floods during heavy rains?

What about the employment sheltering function of rural areas where thousands obtained temporary relief in the face of job crises during a macro economic downturn? Hence, it's clear that agriculture and rural resources are a symbiosis. Indeed, agriculture is a resource with multiple functions.

Thus far, much of our thoughts about agriculture have centred on the marketed goods, for example, rice, fruit, vegetables, rubber and palm oil. In short we always relate agriculture with farming and its associated downstream activities. Our national policies have for a long time focused on augmenting agribusiness and income generating strategies. Most of our agricultural-based agencies were established in the early 1970s and still operate along such domains.

Such policies naturally stemmed from our traditional view of agriculture and especially on the urgent need to eradicate the high rates of rural poverty at the time. However, the agricultural economy is now taking a new notion. Many countries have acknowledged the role of agriculture in the production of non-marketed, sociocultural environmental attributes that constitute a more holistic view of societal well-being. Such non-marketed goods and services are known as agricultural externalities or simply agricultural co-benefits.

We can comprehend the economic value of marketed agricultural output such as rice, fruit and vegetables based on observed market prices and employment benefits. This enables us to appreciate the scale of its economic importance. But, how about the economic values of agricultural externalities?

Studies in many countries have shown the economic values of co-benefits attributed to padi areas can be highly substantial. Studies in South Korea and Japan for instance have shown the values were pronouncedly higher relative to the marketed goods (rice) itself.

We have attempted to quantify the economic values for some selected agricultural externalities in Malaysia. It was hypothesised that agricultural areas, especially padi farms, create cooler and more pleasant air in the surrounding areas. The cooling effects naturally vary according to the size of the padi area and distance from the urban environment. This cooling effect of agriculture is known as the heat mitigation function.

Our study of selected padi areas near Alor Setar found that padi areas were effective in lowering the average daily temperature by as much as 1.3°C during the planting season. A reduction of heat implies less reliance by residents on the use of electricity for cooling purposes. The decline in electricity use was estimated at some RM207,000 (based on 2006 tariff rates) per year for all rural households in the Muda Agricultural Development Authority (Mada) area. This represents the annual cost savings to the said residents by relying on the ecological function of padi fields to mitigate against heat, rather than using electric cooling appliances.

During the economic crisis of 1997/98, many urbanites in Malaysia lost their jobs. We estimated that some 12,500 of them managed to secure temporary jobs in the agricultural sector, particularly in the oil palm sub-sector. We define such job opportunities as the job sheltering function of agriculture. We estimated the value of the said function at RM240 million for the two years of relative macroeconomic instability in Malaysia.

Another important co-benefit of padi areas is the provision of employment opportunity benefits. This refers to the benefits derived by padi farmers and hired labour that have not been able to obtain any employment elsewhere due to the lack of access or adequate skills. For the Mada granary area, the value was estimated at RM118 million annually.

The rice self-sufficiency level in Malaysia is about 75%. This assures the general public of adequate and timely supply of the staple food at any time. Such awareness may well translate into reduced anxiety or increased sense of security in the minds of consumers. The economic values of such intangible attribute — defined as benefits of food security function, estimated using a procedure known as contingent valuation, was some RM350 million in present value terms.

A pertinent and emerging issue is whether our farming community has been well acknowledged for producing an array of agricultural co-benefits which are highly regarded by society. On this, our study found that respondents overwhelmingly agreed that the notion of agricultural co-benefits be explicitly recognised by the government and they further support the provision of support measures for its enhancement.

Interestingly, such measures technically are not inconsistent with the World Trade Organisation provisions on freer trade as long as they emanate from a clear country agri-environmental programme.

In view of the role of the Malaysian agriculture as an engine of economic growth along with the growing importance of sustainable agriculture, the multi-functionality aspects of agriculture are expected to feature more prominently in future agricultural development, social and environment policy discourses.

Inevitably, the jurisdictional scope and policies of the line ministries affecting agriculture, plantation crops, rural development and the environment ought to be more streamlined and better coordinated. This will ensure that our agriculture sector operates in a way that serves not only the small farmers, but also the broader interest of the country to include food security and the vitality of rural areas including its very sociocultural and environmental attributes.

Jamal Othman is professor of resource and environmental economics at Universiti Kebangsaan Malaysia. This story appeared in The Edge Financial Daily on June 18, 2012.
Original Article Here

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