KUALA LUMPUR: The government wants to revive and refocus Malaysia’s agricultural sector into a growth driver for the “new” economy, helped by the adoption of technology, and with a new approach which will be based on the findings of a census that is expected to be ready by the end of this month.
The sector has undergone significant changes over the decades, with its contribution to gross domestic product dropping from 30% in 1974 to under 10% in 2022, as the sector grapples with mounting challenges of declines in productivity levels which are posing a threat to the nation’s food security.
Economy Minister Rafizi Ramli said challenges in the farming sector currently include a lack of market transparency, with significant disparities between farm-gate prices and consumer prices in supermarkets, while the government’s programmes were ineffective due to a outdated and incomplete information.
This issue is partly due to the agriculture census that was last done in 2005, he said which hampers effective planning by the government. Rafizi said the government hopes to address this with an updated National Census for Agriculture, expected to be completed in October 2024.
“This will allow us to recalibrate many things, from baselines to land use, and give us a clearer picture of the sector’s needs,” he said during his keynote address at the World Bank’s October 2024 Malaysia Economic Monitor titled “Farming the Future: Harvesting Malaysia’s Agricultural Resilience through Digital Technologies”.
“On the one hand, we have this list of recipients of agriculture subsidy every year that goes to the billions of ringgit, but somehow we don’t know how many of these people actually are farmers. So all this will fall into place in October,” he added.
In Budget 2024, RM6.17bil was allocated to the Agriculture and Food Security Ministry to address the challenges facing the agriculture and agrofood sectors. This marked a 14.4% increase compared to the RM5.39bil allocated in Budget 2023.
Rafizi said Malaysia’s dependence on food imports is not just an economic challenge but a security threat. He said the country imported 1.7 times the value of food it exported in 2022, with a food trade deficit of RM31bil.
“With the global trend of protectionism, we must seriously question whether we have the capacity to feed ourselves in the future. Our ambition is to revive and refocus agriculture as a growth driver for the new economy,” Rafizi said.
While about 1.87 million people were employed in the sector in 2023 – accounting for about 10% of the total workforce – the World Bank stated Malaysia’s agriculture faces numerous barriers preventing it from reaching its full growth potential.
World Bank senior agriculture economist Anuja Kar said agricultural labour productivity in Malaysia grew by a mere 0.7% in 2022, compared to the national productivity average of 5.4%.
Other key challenges include low production efficiency, high costs, lack of diversification and external threats like natural disasters and unsustainable farming practices.
She said without addressing these issues, wage growth in the sector may remain low, exacerbating income inequality, particularly in rural areas, despite the sector’s strong employment growth rate of 4.2%.
“Without productivity improvements, wage growth in agriculture may remain low, reducing competitiveness compared to other industries,” Anuja said during her presentation focused on the challenges and opportunity in the Malaysia agricultural sector.
The decline in value added per hour worked, from RM25.20 in 2015 to RM24.80 in 2023 shows potential stagnation or lower worker efficiency. This trend could directly affect agricultural wages, as wages often correlate with productivity, the World Bank highlighted.
These challenges could be addressed through the adoption of digital agricultural technology (DAT).
“By expanding the use of DATs in Malaysia, agriculture can become more profitable for farmers, competitive in global markets, enhance domestic food security, and promote environmental sustainability and climate resilience,” she said.
Anuja said DAT enhances resilient agrofood systems across five key dimensions: efficiency, equity, employment, export, and environment – also known as the “5E’s.”
“Digital technologies process and analyse data to boost production efficiency, support equitable market access, enhance skills for better employment, increase export competitiveness through improved agricultural value chain traceability, and provide tools for environmentally sustainable practices,” she added.
Meanwhile, Rafizi said past efforts, which involved significant national allocations to agriculture, fell short due to ineffective program designs. “For a farming venture to be economically viable, it needs a certain scale,” he said, adding that small-scale handouts of RM20,000 or RM30,000 aren’t enough to modernise the sector.
“We are not just preaching technology adoption without understanding the difficulties on the ground,” Rafizi said, adding that a “minimum viable product” approach took off to test and scale successful digital use cases.
On this front, he said the government has launched a pilot programme using federal lands, focusing on modern farming infrastructure and employment.
“Instead of the participants putting their own money, they actually got employed on site in a way that it functions almost like a cooperative. They are given half an acre plot. They have to meet certain requirements,” he noted.
He said the government looks after the whole value chain and supply chain, from infrastructure to technical expertise, all the way to offtakers.
“We make sure that the offtakers enter into a price agreement to make sure that these farmers are protected from fluctuations in prices. So it is a way that we can combine poverty eradication and building the infrastructure for modern farming across the country,” he noted.
According to Rafizi, some participants are already earning as much as RM5,600 a month, on par or “more than what a semiconductor engineer earns”.
“The beauty of it is that we are no longer confined to the west coast or to the more developed corridors to create these kinds of employment. This is even more suitable in the less developed areas,” he said.
