In a
challenging recent book “Malaysia at a Crossroads. Can we make the Transition?”
(Abdul Rahman Embong and Tham Siew Yean, 2011), colleagues of mine from IKMAS
(Institute of Malaysian and International Studies) at Universiti Kebangsaan
Malaysia (UKM) floated the idea of a “critical transition” for Malaysia (p.17).
This involves significant changes in social structure and relations, and in the
politics, economy and culture of Malaysian society. The impetus for such
transition is associated with the reformasi movement and consequent altering
aspirations since the 1990s.
As an involved outsider, I see clearly that transition is needed,
and agree with my UKM colleagues in their further prescription that this will
involve key elements of investment, technology upgrading, institutional reform
and changes in state-society relations. These elements are applicable to
Malaysian agriculture, which is my personal preoccupation.
Malaysian agriculture has largely missed out in discussions about
Malaysia’s future. It does not even get much attention in the 10th Malaysia
Plan (2011-2015). But in fact agriculture, along with fisheries and forestry,
still accounts for 7-8 per cent of Malaysia’s gross domestic product, which is
a high level for a country at Malaysia’s stage of economic development. The
sector also involves around one million workers, with about half of these being
temporary migrants. Parts of the agricultural sector are highly dynamic, and
have good potential for the future. But there are also numerous emerging
problems needing to be considered in future transformation.
The scope of the agricultural sector is reflected in the huge
predominance of oil palm in the total estimated crop area of 6.8 million
hectares, followed by smaller extents of rubber and rice. It also denotes the
relative roles in cultivation of the three main types of Malaysian agricultural
entity — the estates, the land development schemes and the independent
smallholdings.
The estates are what many people term “plantations”, with
individual units being large and commonly covering 2,000-10,000 hectares. The units
are often grouped in big estate companies. The biggest of all, Sime Darby,
controls 500,000 hectares of which 300,000 hectares are in Malaysia. The land
development schemes are also extensive, with those managed by the Federal Land
Development Authority (FELDA) being the most significant and being frequently
managed like estates. In contrast, independent smallholdings are limited to 1-2
hectares, and are managed by family households which often only work part-time.
All agricultural entities involve foreign workers, with those on
estates and land development schemes being mainly hired through contractors,
while those on independent smallholdings are usually provided through dealers
purchasing fresh fruit bunches or latex. A key feature of Malaysian agriculture
has been the migration of younger people to urban areas since the 1980s, with
numerous estates today having almost lost their original Malaysian workers, and
with land development schemes and smallholdings being chiefly inhabited by
older people. Harvesting oil palm bunches with long sickles, for example, is
difficult for older people, and without the foreign workers would be largely
impossible. It is predominantly a job for young males of 20-35, who can easily
conduct such work on a regular basis.
Oil
palm and rubber
Oil palm and rubber continue to do well, despite their reliance on
migrant labour. Palm oil commands relatively high international prices, which
are sustained by high persisting demand in both the food and non-food sectors.
The latter is especially connected with biofuels, where petroleum is predicted
to grow scarcer in relation to burgeoning global consumption. Rubber too
remains a vital industrial product, and has seen a quadrupling of price over
the last decade. It also has favourable forecasts for the future. Returns to
producers from these crops are accordingly high, and there is as well
substantial “downstream” development into manufactured products. Hence both
estates and FELDA have important manufacturing interests, which are also taking
in palm oil and rubber produced in neighbouring countries.
Another positive feature of both oil palm and rubber are the
associated research facilities, mainly financed by government but also operated
by estate companies. These have produced a stream of vital new innovations over
the years, enabling crop productivity and quality to be raised and costs to be
reduced. Such innovations can be readily absorbed by the estates and land
development schemes with their centralised management structure and access to
capital, but are more difficult to adopt on independent smallholdings. This
research continues strongly, although the emphasis has moved to some extent to
facilitating downstream aspects that enable Malaysia to compete effectively on
international markets.
Despite this good picture, however, there are major problems for
the future, one being the rising cost of labour associated with increasing
wages in neighbouring countries from which workers are recruited. It is not
unusual in 2012, for example, for workers in West Java to earn Rp1,600,000
(RM600) per month. This is still below the Malaysian plantation wage, but the
rapid expansion of Indonesian manufacturing could push Jakarta wages up to
RM1,000 per month within a few years. At that stage Indonesian workers would
hesitate to come to Malaysia without wage increases well above this level. Such
increases can be absorbed by the Malaysian oil palm and rubber producers, but
will reduce profits substantially. This development emphasises the importance of
labour-saving technologies, which are easier to secure in rubber than in oil
palm.
Another emerging difficulty is the growing scarcity of land for
further expansion. The estates have doubled in area over the last two decades,
and would like to expand further in a move I personally believe undesirable.
But the overall difficulty of scarce land is connected with the need for
woodland preservation, where the general Malaysian consensus appears to be that
50 per cent of the land area should be retained as forest. The figure is below
that already on the peninsula, but above it in Sabah and Sarawak. Thus while
some further expansion may occur, the emphasis will soon shift from
extensifying to intensifying production on existing areas. There is good scope
for further productivity rises in the intensification process, and research and
extension agencies need to concentrate on this.
A further and more severe difficulty entails promoting oil palm
and rubber improvements on the large sub-sector of individual smallholdings.
Here there are special social and cultural problems to be dealt with, and these
are examined below.
Rice
This relatively small sub-sector is a sphere where Malaysia faces
continuing problems in promoting change and improvement. It is largely,
although not exclusively, a subsector operated by independent Malay family
households. The two overweening official policies have been to assist these
households in securing better livelihoods, while at the same time obtaining
self-sufficiency in national rice consumption. Thus generous policies of
financial assistance and technical help have been pursued for 30 years, and
have obtained some improvement. But in 2012 only 71 per cent of rice is being
produced in Malaysia, while yields are still lower than those under comparable
conditions elsewhere. Costs of production, on the other hand, are considerably
higher. Many rice producers remain locked in to a relatively unproductive
agricultural system, and the gap between their and urban incomes has grown
wider.
There seems little doubt that Malaysian policymakers and
Malaysians broadly favour the idea of some self-sufficiency. This is because
there have been times, as in 2008 and 1974, when international rice shortages
severely threatened Malaysian supplies, and such difficulties are likely to
re-occur. But it should be possible to improve production facilities in a way
that benefits participating farm households, while at the same time achieving
part of the self-sufficiency objective. There are difficulties in land tenure
which need to be overcome so farmers can get bigger holdings, and an urgent
need for improvements in extension along the lines suggested below.
Looking
to the future
As already noted, the four elements in critical transition of
investment, technology upgrading, institutional reform and changes in
state-society relations all have roles in transforming Malaysian agriculture.
There is indeed continuing investment and technology upgrading in the cases of
the Malaysian estate and land development sub-sectors. The directions of this
investment and upgrading nevertheless raise many questions, and there are
additional issues of institutional structure and of how the state should act in
facilitating progress. These important aspects of transition will be explored in
a subsequent contribution.
The focus of the remaining discussion will be on the role of the
four elements in critical transition to improving the most backward sector of
Malaysian agriculture, the independent smallholdings. These smallholdings,
which in different parts of Malaysia are importantly involved in cultivating
oil palm, rubber and rice, have big potentials for better performance. They are
also in many ways the most important players in the total Malaysian rural
scene.
The basic goal in improvement of independent smallholdings is to
build a modern dynamic small farm agriculture, based largely on family
households and producing returns which at least match those secured from
alternative urban enterprises. This goal is not easy to attain, and is attended
by needs for change in many social and cultural aspects springing from
traditional society. One need is the institutional reform of land tenure, which
as suggested above restricts possible increases in holding size. Such tenure is
a state matter in Malaysia, and deserves far more attention than it has done to
date. Another need is in technology upgrading through providing more
information, and this is associated with the further need for investment in
funding new innovations.
There is finally the state-society need for government to
facilitate the other three needs of critical transition. One major vehicle for
this is the provision by government of an extension service effectively
supplying information and training, and facilitating the provision of appropriate
funding. Good extension services have been crucial to small farm development in
many countries around the world, with part of this process entailing
progressive adjustment by extension personnel to the burgeoning needs of small
farmers. A promising recent start to this end in Malaysia was the initiation
three years ago of the “Tunas” oil palm extension service of the Malaysian Palm
Oil Board, which is now directed to assisting oil palm independent smallholders
and administering planting grants for establishing high-yielding materials.
This national service of some 200 extension officers, backed up by specialists,
is an effective example of what can be done.
Malaysian agriculture is a sphere of major economic potential,
whose transformation needs to be underlaid by substantial social change. There
are many possibilities of improvement, and these deserve to be actively
canvassed. National discussions of agricultural improvement have however, been
unduly limited, and that the sector deserves more attention in policy thinking
and implementation. — New Mandala
*
Dr Colin Barlow has worked on the socio-economic problems of Malaysian
agriculture for many years, being especially involved with oil palm and rubber.
He is currently CEO of the Nusa Tenggara Association, an Australian NGO engaged
in rural development in eastern Indonesia. He is a visiting fellow in the
Department of Political and Social Change at the Australian National
University.
* This is the personal opinion of the writer or publication and does
not necessarily represent the views of The Malaysian Insider.
