Abstract
While the agricultural sector will not be as hard hit as other sectors, such
as manufacturing, in the current
downturn, falling demand for some of
Malaysia' s key agricultural exports like rubber and palm oil will
see the
value of the sector fall.
As Malaysia' s economy contracts this year and
jobs are lost in the cities, the agricultural sector will see an
influx of
new workers this year as laid-off employees return to their villages. The
agriculture ministry has
launched a programme offering low-interest loans
to new entrants into the sector to begin small-scale
production.
Despite the myriad distractions posed by the economic downturn and political
difficulties currently being
faced by the United Malays National
Organisation (UMNO)-led coalition, support for the agricultural
sector
will remain strong under the new Prime Minister Najib Razak.
Government
interest in improving productivity in the sector was boosted by the ' food
crisis' of 2008 as the
cost of Malaysia' s key food imports of rice and
corn soared. The crisis also moved the focus more onto
food production and
away from Malaysia' s stronger sectors of rubber and palm oil.
While the
food self-sufficiency worries of last year could easily be overshadowed by the
current woes of
the important export sector, the government' s need to sure
up its support should see interest in the sector
continue. The UNMO' s
Barisan Nasional (National Front) coalition is seeing the toughest challenge
yet to
its monopoly on power and Prime Minister Najib knows that he needs
to keep his base among ethnic
Malays on side.
It seems likely that
more funding will be given to agriculture this year following the allocation
of an extra
MYR5.6bn to improving food security in February by the
previous prime minister Datuk Seri Abdullah
Ahmad Badawi. The 10th
Malaysia Plan, beginning in 2011, will also provide more funds to
agriculture.
Though food security has been the main issue for the
agriculture ministry of late, the Malaysian
International Cocoa Fair held
in May brought focus onto Malaysia' s cocoa sector. Malaysian cocoa bean
production has plummeted over the past couple of decades, falling from almost
250,000 tonnes at the start
of the 1990s to under 30,000 tonnes last year.
This has been driven mainly by producers, particularly
large estates,
switching to oil palms which are hardier and have offered better returns.
While primary production has been plummeting, Malaysia' s cocoa grinders have
been growing from
strength to strength and in 2008 the country imported
523,926 tonnes of cocoa beans. The imbalance
between Malaysia' s valuable
grinding industry and its increasingly insignificant domestic cocoa bean
production is causing worries within the industry. Indonesia, Malaysia' s chief
supplier of cocoa beans,
was last year hit by a devastating disease
outbreak, increasing concern about security of the imports
needed to fuel
Malaysia' s cocoa processing.
While the grindings sector will suffer in
2009 as the worldwide recession causes demand for chocolate to
fall, we
expect cocoa bean production to begin to see a turnaround. There is little
chance of the large
cocoa estates being re-established, but the
government, through the Malaysian Cocoa Board (MCB), has
been encouraging
smallholders to move into cocoa growing. Subsidies are on offer for new or
rejuvenated
cocoa plantations and the MCB has been implementing programmes
to improve productivity through
training and the distribution of
high-yielding plants.
While any recovery will undoubtedly be slow, and
production is unlikely to see again the heights of 20
years ago, it looks
like Malaysian cocoa production will be saved from dwindling down to
nothing.
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