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The Malaysian Economy



According to the latest statistics released by Bank Negara Malaysia (BNM), the Malaysian economy recorded a stronger growth of 6.2% in the third quarter of 2017, compared with 5.8% in the previous quarter.

Domestic demand expanded by 6.6% in the third quarter of the year (against 5.7% in the second quarter), supported by continued expansion in both private sector expenditure (3Q 2017: 7.3%; 2Q 2017: 7.2%) and public sector spending (3Q 2017: 4.1%; 2Q 2017: 0.2%). Private consumption grew by 7.2% (2Q 2017: 7.1%), underpinned by better labour market conditions. In particular, private sector wages were sustained amid stronger employment growth. Private investment registered a stronger growth of 7.9% (2Q 2017: 7.4%), mainly in the services and manufacturing sectors. Within the manufacturing sector, both export- and domestic-oriented sub-sectors undertook higher capital spending during the quarter. Business sentiments also remained above the optimism threshold, in line with favourable external and domestic demand conditions. Public consumption expanded by 4.2% (2Q 2017: 3.3%) following faster growth in emoluments amid continued prudence in spending on supplies and services while public investment turned around to register positive growth of 4.1% during the quarter (2Q 2017: -5.0%). This was due to higher fixed assets spending by both the Federal Government and public corporations.

Gross fixed capital formation growth was higher at 6.7% (2Q 2017: 4.1%), driven by higher growth in private investment and the positive turnaround in public investment. By type of assets, capital spending on machinery and equipment improved to 11.5% (2Q 2017: 4.4%) while investment in structures moderated to 3.6% (2Q 2017: 5.1%). Investment in other types of assets was higher at 7.2% (2Q 2017: -3.7%).

On the supply side, growth was supported by continued expansion across all sectors. The services sector registered a higher growth in the third quarter of 2017. Growth of the wholesale & retail trade sub-sector was supported by continued growth in household spending. The information and communication sub-sector remained strong, driven by higher demand for data communication services, while the transportation and storage sub-sector benefited from the robust trade activities. The manufacturing sector grew at a faster pace during the quarter, supported by broad-based improvements in both export- and domestic-oriented industries.

Export-oriented industries gained from robust global demand for semiconductors and higher petroleum-related refinery activity. Domestic-oriented industries were supported by continued demand for food-related products and construction-related materials, in addition to stronger growth in transport equipment driven by auto parts and ship building activities. The mining sector recorded stronger growth during the quarter, supported by higher natural gas production, particularly in Sabah and Sarawak. However, growth in the agriculture sector moderated, reflecting mainly lower rubber and crude palm oil production due to adverse weather conditions. Growth in the construction sector moderated during the quarter, particularly due to lower non-residential activity in the commercial sub-segment.

According to the 2017/2018 Economic Report issued by the Finance Ministry, the Malaysian economy is expected to remain resilient in 2018, with real gross domestic product (GDP) to expand between 5% and 5.5%, led by domestic demand. Private sector expenditure will stay vibrant, growing by 7.3%, in line with the anticipation of sustained spending in private consumption and investment activities. Private consumption is projected to grow 6.8%, supported by higher income with stable labour market conditions, higher exports earning and firmer commodity prices. Private investment is anticipated to expand 8.9%, accounting for 18.1% of GDP. Public sector expenditure is expected to decline by 0.4% due to lower capital outlays by public corporations in 2018 while public consumption will grow marginally by 1.3% in 2018, in line with government’s effort to reprioritise and rationalise non-critical expenditure. On the supply side, all major sectors will continue to expand in 2018. Malaysia is on track to become an advanced and high-income nation by 2020, doubling the size of the economy to RM2 trillion in 2025 and joining the ranks of top 20 countries by 2050.

Food & Beverage Updates
Nestlé (M) Bhd posted a 4.8% growth in revenue to RM1.32 billion in the third quarter ended 30 September, 2017, from RM1.26 billion in the previous corresponding period. The food and beverage giant said the good growth momentum was well supported by domestic and export sales which grew 4.2% and 6.8%, respectively. Effective marketing and trade activities on selected product categories helped to deliver the desired growth for domestic sales while the strong export performance was supported by good growth from Nestlé affiliated companies, especially in the Asean region. While net profit fell by a quarter year-on-year (y-o-y) to RM119.75 million, Nestlé expects to record a satisfactory profit for the full year. The lower earnings for the quarter was mainly due to the anticipated increase of raw material prices (sugar, milk powder and coffee beans) and the continued weaker ringgit.

For the cumulative nine-month period, Nestlé’s turnover grew 4.3% to RM4.0 billion y-o-y. Chief executive officer Alois Hofbauer said the commendable growth was driven by the solid domestic and export performance, which grew at 4.0% and 5.5% respectively. Despite the continued weak consumer sentiment, the group has invested in effective marketing and trade promotions, thus generating the demand for its products and strengthened the leading position of many product categories. Continuous focus on innovation/renovation projects had also been a key growth driver for Nestlé. During the year, it successfully launched products such as Milo Nutri-up Ready to Drink beverage, Mat Kool Fruity Bug, Milo Cone, Maggi Hot Mealz, Nestum Pet and Nescafe Latte Hazelnut, and re-launched Nescafe Blend & Brew. External headwinds led to the group’s net profit slipping 10.2% to RM512.25 million for the January - September period, which it had anticipated. The group remains confident that its balanced approach of proactive cost management and effective trade and marketing investment would lead to a solid profit level for the full year 2017.

Nestlé recently launched its global procurement hub in Malaysia. As a key Asian market for Nestlé, Malaysia was selected to host one of the group’s three Global Procurement Hubs, known as Nestrade (the two other hubs are located in Switzerland and Panama). The hub in Malaysia will source required ingredients, materials and services from around the world to supply the needs of over 100 countries globally and provide a wide range of services, including the management of global procurement for specific raw materials such as cocoa and coffee, packaging materials, services as well as other procurement-related support for all markets. The latest hub will provide Nestlé with enhanced strategic procurement support, delivering competitive and innovative solutions to help drive the group’s overall objective for sustainable growth.

Higher revenue lifted Ajinomoto (Malaysia) Bhd’s net profit in the second quarter ended 30 September, 2017 by 37.53% to RM16.52 million from RM12.01 million in the same period last year. According to Ajinomoto, the increase in revenue was due to higher sales in the consumer and industrial business segments while stronger US dollar exchange rate in the current quarter was beneficial to export sales. Quarterly revenue grew 16.22% to RM115.42 million from RM99.3 million a year ago. For the cumulative six months ended 30 September, 2017, the group's revenue rose 6.98% to RM211.84 million from RM198.02 million a year ago. However, net profit slipped 2.26% to RM24.4 million from RM24.97 million in the previous corresponding period.

Moving forward, higher sales in the group’s consumer and industrial segments will continue to contribute to better earnings, while also placing focus on cost improvement. The group is embarking on diversifying its product offerings with food-based products to be introduced over the next two financial years. With 25% of revenue contributed by its export markets in the Middle East, Ajinomoto is also looking forward to grow this segment.

Hup Seng Industries Bhd’s net profit for the third quarter ended 30 September, 2017, shrank 5% to RM9.46 million from RM9.96 million in the corresponding quarter last year, due to higher promotional expenses incurred. Quarterly revenue came in at RM70.34 million, up 9% from RM64.59 million in the previous corresponding period, mostly contributed by stronger growth in domestic sales, offsetting the decline in its export market mainly from Myanmar. Despite an improvement in turnover, margins were compressed due to escalated input cost during the quarter under review.

For the cumulative nine months of 2017, net profit is 11.5% lower at RM30.06 million compared with RM33.98 million last year. Cumulative revenue, meanwhile, increased 5.2% to RM213.45 million from RM202.85 million previously. Commenting on its year-to-date performance, the group said growth in its export sales were stronger as compared to domestic sales, propelled by higher demand from existing distributors and contribution from a new distributor in China. However, besides margin compression, higher promotional expenses and other operating costs, including fuel, depressed the profit performance. Hup Seng expects the operating environment to remain highly competitive going forward. It will continue to focus in improving performance by innovating products portfolio, broadening the distributor network to safeguard the group's revenue and profitability.

Fraser & Neave Holdings Bhd (F&N) is on track to achieve its target of half a billion ringgit worth of exports from its Malaysian operations, F&N Malaysia Sdn Bhd, by 2020 after raking in RM300 million in export sales in its last financial years. In the financial year 2018, F&N expects to repeat its revenue growth attained during its financial year 2016 despite high input costs (especially sugar) and intense pricing pressure. For its financial year 2016, F&N registered 1.5% growth in revenue to RM4.16 billion and 9.2% margin in net profit to RM385.4 million.

F&N’s net profit dropped 60.39% to RM19.65 million in its fourth quarter ended 30 September, 2017, from RM49.59 million last year, mainly due to one-off organisational restructuring costs of RM48.4 million. For the full year ended 30 September, 2017, net profit decline 16.09% to RM323.38 million, from RM385.37 million a year ago. Its robust export revenue however helped mitigate impact from lower F&N Malaysia domestic revenue. It recorded 26% growth in export from Malaysian operations, more than 10% contribution, both from Malaysian and Thailand operations, to the group’s revenue and over 30% growth in export volume to Africa and Middle East, which is the halal core market.

Chief executive officer Lim Yew Hoe said moving forward, the company aims to accelerate growth strategies with the launch of new products as well as more market penetration especially into the halal core market, China and Southeast Asian region. As its cost restructuring exercise completed, the company also expects some RM40 million in cost savings annually starting financial year 2018, he added. For 2018, the group expects to register over 20% in export growth from its Malaysian operations.

Mineral water bottler Spritzer Bhd reported a net profit of RM8.03 million for its third quarter ended 30 September, 2017. Revenue stood at RM83.24 million, supported by higher demand for bottled water due to the SEA Games and Asean Para Games, which Malaysia hosted during the quarter. Cumulative nine-month net profit for FY17 totalled RM18.18 million, while revenue came in at RM234.4 million. Spritzer said the current year is expected to be challenging amid global and domestic economic uncertainties and volatility, while consumer sentiment is expected to remain soft, due to higher cost-push inflation and the impact of depreciation of the domestic exchange rate. The group is also experiencing higher input and operating costs. Its strategy entering FY18 is to continue with market development and brand awareness activities in China, as well as taking steps to improve business operations in China. Spritzer remains confident that sales of bottled water products will be sustainable in the domestic market.

Dutch Lady Milk Industries Bhd saw its net profit slipped nearly 20% to RM32.58 million for the third quarter ended 30 September, 2017, from RM40.66 million in the previous corresponding quarter. Its quarterly revenue, however, increased marginally to RM281.84 million from RM279.59 million a year ago. Higher raw material costs and the weak ringgit ate into the dairy product manufacturer's profitability. For the cumulative nine months of the year, its net profit dipped 13.05% to RM96.74 million from RM111.25 million last year while revenue rose about 2.5% to RM795.48 million against RM776.06 million. Entering 2018, Dutch Lady expects the overall domestic market to remain challenging with weak consumer sentiment, higher material prices and weak Malaysian ringgit. Despite the headwinds, the company has initiated continuous marketing campaigns leveraging on the strength of the Dutch Lady and Friso brands to protect and expand its market share with quality and nutritious product offerings.

Brewer Heineken Malaysia Bhd’s net profit for the third quarter ended 30 September, 2017, came in at RM65.87 million, up 15.7% from RM56.92 million recorded in the previous corresponding period while revenue rose 32.4% to RM509.59 million, benefiting from easier comparatives in the third quarter of 2016 when the market was still recovering from the excise increase in March 2016 and subsequent price increase in July 2016. Its revenue in the quarter also received a boost from the cider category, with the successful launch of its new mainstream cider brand Apple Fox and the commencement of the sale of locally made Strongbow Apple Ciders.

For the nine months ended 30 September, 2017, Heineken reported an improvement in revenue, profit before tax and net profit compared with the first nine months in 2016. Revenue in the nine months increased by 1.1% to RM1.31 billion from RM1.30 billion while profit before tax was up 6.8% to RM240 million from RM224.7 million during the same period in 2016. Performance was driven by the successful execution of strategic initiatives and cost optimisation in the third quarter, which mitigated the softer results in the first half of the year. Commenting on the outlook, its managing director Hans Essaadi said the group remains committed to the long-term growth of its business with a focus on strengthening commercial strategies and execution, as well as improving efficiencies through cost optimisation measures.

Carlsberg Brewery Malaysia Bhd’s net profit for the third quarter ended 30 September, 2017, fell 1.75% to RM42.85 million from RM43.61 million a year ago due to trade offer adjustments by its subsidiary Carlsberg Singapore Pte Ltd. Excluding trade offer adjustments, the group’s organic net profit grew 19.8% to RM54.7 million, driven by strong performance in Malaysian operations. Revenue for the quarter rose 7.68% to RM423.51 million from RM393.31 million a year ago due to higher sales volumes.

In Malaysia, the total external revenue rose 17.9% y-o-y driven by higher sales of the group’s flagship brand Carlsberg Green Label and Carlsberg Smooth Draught. Premium brands like Kronenbourg 1664 Blanc, Somersby Cider and Connor’s Stout Porter continued to deliver double-digit growth in sales. Profit from operations grew 47.9% due to better product mix and effective cost management. In Singapore, revenue fell 8.9% while profit from operations plunged 83.5% due to the trade offer adjustments. The group registered a share of profit from its associate company in Sri Lanka, Lion Brewery (Ceylon) PLC of RM600,000 during the quarter compared with a share of loss of RM1.7 million a year ago due to the floods in May 2016. Profit in the associate company improved by RM2.3 million due to the recovery in its operational performance. For the nine months ended 30 September, 2017, Carlsberg’s net profit rose 8.39% to RM171.16 million from RM157.91 million a year ago while revenue rose 7.51% to RM1.34 billion from RM1.24 billion a year ago.

Agriculture Developments
Cocoa
The Malaysian Cocoa Board (MCB) expects cocoa export value in 2017 to surpass the RM5.8 billion recorded in 2016. The cocoa industry was the fourth largest contributor to the main commodity export value in 2016, after palm oil, rubber and timber, having increased by 14% to RM5.74 billion from RM5.02 billion recorded in 2015.

Although the industry has been facing numerous challenges, especially in decreasing plantation area and yield, export revenue was able to grow through MCB’s continuous efforts. The main contributors to cocoa export revenue were its downstream products, such as cocoa fat and cocoa powder, contributing RM3.4 billion or 58.9% of total export value. Malaysia’s cocoa export was mainly to Asian countries such as Japan, China and the Middle East. Malaysia is currently the eighth largest cocoa processing country in the world but is highly dependent on imported cocoa beans. As such, MCB has identified a need to increase cocoa plantation areas and cocoa production effectively to reduce reliance on imported cocoa beans. MCB has been actively involved in the development of the Cocoa Cluster project in three areas – Ranau (Sabah), Kota Samarahan (Sarawak) and Pahang Cocoa Belt, encompassing Raub, Kuala Lipis and Jerantut.

A highland cocoa cluster centre costing RM6.4 million will be built in Ranau to coordinate cultivation of the crop through an integrated effort in line with the “farms to table” concept. The centre would undertake activities ranging from cultivation and processing of cocoa to manufacturing and marketing of the products. Ranau was chosen for the centre as it has a highland cocoa cluster project, it is a main cocoa-growing district, has active groups of cocoa farmers as well as land suitable for cocoa cultivation. The highland cocoa cluster centre project is aimed at helping cocoa farmers increase production and income of clusters or cooperatives through the production of cocoa finished products. Through the project, MCB provides agricultural input incentives to enhance productivity by increasing areas under cocoa to 800 hectares involving 754 farmers, with 175 hectares cultivated with new crops every year until 2019. Currently, 37 villages in Ranau are supplying cocoa pods for the project involving 366 participants, and so far, 368 hectares of mature cocoa plants had already been harvested. In 2016, cocoa-growing areas in Ranau produced 61 tonnes of cocoa seeds and MCB expects total production to reach as much as 80 tonnes in 2017.

Cocoa manufacturer Guan Chong Bhd continues to perform as its net profit for the third quarter ended 30 September, 2017, leaped 92% to RM29.7 million from the RM15.48 million recorded in the same quarter last year, mainly due to lower bean prices. However, quarterly revenue slipped 9.1% to RM542.86 million compared to RM597.51 million, mainly due to decrease in sales volume of cocoa cake and overall selling price of cocoa products. For the cumulative first nine months of 2017, net profit rose by 46% to RM58.33 million from RM39.84 million in the same period last year. In contrast, revenue for the cumulative nine months fell 6.5% to RM1.66 billion from RM1.77 billion in the previous corresponding period.

On its outlook for the rest of the year, Guan Chong said the business environment for the financial year ending December 2017 is expected to be challenging, as the demand for cocoa solids remain uncertain amid continued volatility in cocoa bean prices. The group will continue to focus on turnaround efforts which include reducing inventory level, exploring new markets for its wide range of cocoa ingredients and optimising production according to market conditions.

Poultry
For the financial year ended 31 March, 2017, Lay Hong Bhd registered an increase in revenue from RM645.82 million to RM675.96 million (growth of 4.7% y-o-y). Profit before tax for the year under review was higher at RM21.94 million compared to that of RM9.94 million recorded in the previous year. Lay Hong is principally involved in two businesses – integrated livestock farming (which accounts for over 80% of the group’s revenue) and retail operation. The integrated livestock farming business is further broken down into three separate segments namely layer, broiler and food processing.

For its layer business, the group produced and sold 626 million eggs for the year, up 6.3% from 589 million eggs in the previous year. Of the total, 148 million eggs were functional eggs compared to 136 million eggs recorded last year. Functional eggs are eggs laid by hens enriched with health properties. The increase of 12 million eggs represents an increase of 8.8% year on year. Total functional eggs sold currently accounted for 23.6% of the grand total of table eggs sold. Health conscious consumers have spurred the continual increase in the demand for functional eggs branded under NUTRIPLUS. During the year, a 20-year old farm was closed due to poor productivity and two new farms with latest automations, each capable of producing approximately 480,000 table eggs per day are currently under construction to replace the discontinued farm.

During the financial year under review, Lay Hong produced a total of 31.62 million kilograms of broiler compared to 31.07 million kilograms recorded in the previous year. This represents a marginal increase of 0.55 million kilograms or 1.8% y-o-y. To improve efficiency, the group refurbished its older structures, replaced outdated equipments as well as implemented an automated rearing system. To cater for growing demand for broilers, the group acquired two pieces of land near its existing farms in Tanjung Karang (Selangor) to build two automated farms.

Under food processing, the group has one large chicken processing facility in Tanjung Karang, which is capable to slaughter up to 1.8 million broilers monthly. Next to the plant, a new facility has been built to manufacture up to 3,000 metric tonnes of downstream chicken products (frankfurters, nuggets and fried chicken) per month. Lay Hong also operates three mini slaughtering plants in Sabah, with a combined capacity to slaughter up to 500,000 broilers per month. The group produced 22.09 million kilograms of chicken meat and 9.78 million kilograms of processed chicken products compared to 23.5 million kilograms and 8.72 million kilograms recorded in the previous financial year. Lay Hong also operates a pasteurized liquid egg plant in Meru, Klang, with a capacity to pasteurize up to 600 metric tonnes of liquid eggs per month. During the financial year ended 31 March, 2017, this segment produced 4.10 million kilograms compared to 3.68 million kilograms in the previous year. The higher production was due to larger off take by a large multinational company manufacturing mayonnaise.

After chalking up a record high revenue for the financial year ended 30 September, 2017 (FY17), CAB Cakaran Corp Bhd is confident about posting an even higher top line in FY18 thanks to its expanded capacity. The poultry supplier’s managing director, Christopher Chuah, expects FY18 revenue to be about 7% higher than FY17. For FY17, CAB’s unaudited net profit more than doubled to RM58.18 million from RM26 million in FY16, while revenue grew 35.5% to RM1.49 billion from RM1.1 billion.

The company’s financial performance is largely dependent on average selling price of broilers (determined by market supply and demand) as well as its capacity. CAB’s current capacity for broiler meat is seven million birds a month (for day-old chick it is nine million birds a month), which is about 12% of Peninsular Malaysia and Singapore’s total market share of 60 million birds per month. This market accounted for 99.52% of CAB’s total revenue in FY17. Over the past few years, this market had been growing at about 2.5% to 3% per annum; and the trend is expected to continue for 2018. In response to the growing demand, the group intends to increase its broiler meat capacity to about 7.5 million birds per month, and up to 11 million birds a month for day-old chick. For FY18, CAB has allocated RM50 million as capital expenditure to upgrade its facilities and machinery.

CAB is setting up a poultry slaughtering facility in Singapore, along with a dormitory for its workers. CAB’s 51%-owned unit, Tong Huat Poultry Processing Factory Pte Ltd, has inked a shareholder agreement with four parties to subscribe for stakes in Singapore Poultry Hub Pte Ltd, which will operate and manage the facility. The four parties are Kee Song Holdings Pte Ltd, Sinmah Holdings (S) Pte Ltd, Tysan Food Pte Ltd and Tan Chin Long. The group derives 14% of its revenue from its operation in Singapore, while the remaining 86% is generated by its Malaysian business.

Meanwhile, LTKM Berhad recorded a total revenue of RM168.87 million in FY17, relatively unchanged compared to RM168.99 million in the previous financial year. The poultry segment remained the main contributor of group revenue at RM166.38 million with the remaining revenue coming from the sale of sand. Overall average egg prices have remained relatively unchanged as the poultry segment’s revenue continued to be dampened by the continuous price pressure. Increased capacity in the industry had caused an oversupply situation that adversely impacted the group’s revenue and profit margins for the past years. Group profit before tax increased to RM18.60 million in FY17 as compared to RM16.88 million in FY16. Poultry segment profit improved by 18.4% from RM18.37 million to RM21.75 million. Earnings increased mainly due to lower costs of major raw materials particularly soybean while egg prices remained relatively unchanged on the full year average. Contributions from the other segments remained insignificant.

Fruits
Durian trees are planted on nearly half of the land cultivated for fruits in Malaysia in 2016, according to the agriculture and agro-based industries ministry. The fruit generated a sales volume of RM1.97 billion from the 66,038 hectares of land planted with the fruit, or 47% of the total 139,476 hectares of land cultivated with premium fruits.

With China’s demand for the pungent fruit skyrocketing, Malaysia is eyeing to export fresh durians to China, on top of the existing processed and frozen products. On average, China’s imports of fresh durians grew 26% per year over the past decade and this market is currently dominated by Thai durians. Fresh durians worth some US$1.1 billion (RM4.5 billion) was brought into China in 2016 but Malaysian farmers were unable to export their whole fresh-fruit due to non-compliant harvesting practise. Farmers wait for the fruits to ripen and drop to the ground rather than climb up the tree to collect them and this is deterring China from accepting fresh Malaysian durians out of fear of pest and dirt contamination. However, after some negotiations with the Chinese authorities, fresh Malaysian durians will be making their entrance into the Chinese market within a year. The agriculture and agro-based industries ministry is working with farmers to use nets and ropes to catch the fruit before they hit the ground to meet China’s biosecurity and food safety regulations.

Pineapple is also gaining popularity in China, where demand for fresh pineapples is currently at 100 tonnes per week but Malaysia is only able to provide about 60 tonnes. China had only recently opened its pineapple market to Malaysia, with the first batch of fruits arriving back in October 2017. In view of the great demand for pineapples, the Malaysian Pineapple Industry Board (MPIB) embarked on five initiatives to boost the country’s pineapple production by 20% annually, beginning 2018. The initiatives are the Premium Entrepreneur Development (Individual/Groups), Sustainable Pineapple Production Cluster Development, Premium Integrated Development, Seedling Entrepreneur Development and Export Promotions. Under these initiatives, existing pineapple plantations would be expanded, farmers would be provided with initial capital and grants and in-depth studies would be conducted to produce seedlings which are pure. Under the 2018 Budget, the government allocated RM30 million for the development of the pineapple industry and to boost exports.

Putting Malaysia on the map with its fragrant MD2 pineapples, Rompin Integrated Pineapple Industries (RIPI) was appointed by the East Coast Economic Region Development Council as the anchor company in developing, operating and managing a 607-hectare pineapple plantation. From sapling and planting research and development to upstream and downstream activities, RIPI oversees the operations to maintain the highest production quality. It exports 70% fresh fruit and 30% processed products such as fruit snacks and juices. The company primarily caters to China, Japan and South Korea – export markets where consumers have very discerning tastes when it comes to products.

RIPI is preparing to serve the biggest consumer market in China as the company is the export permit holder in Malaysia that complies with China’s stringent health standards and the requirements under the country’s General Administration of Quality Supervision, Inspection and Quarantine. With such accreditations, RIPI envisions greater brand and product awareness internationally. With this development, the company plans to expand its pineapple plantation in Malaysia to 5,000 hectares within five years.

The coconut industry was also recently parked under the purview of MPIB with the hope that the industry will have opportunity to derive synergy and rely on MPIB’s expertise in boosting production and productivity. MPIB will also assist in marketing, branding and manufacturing coconut downstream products to remain competitive and penetrate global markets. The coconut industry also received a RM30 million development fund under the 2018 Budget.

Sabah, Sarawak and Johor are the three largest coconut producers in the country but supply is still insufficient for export due to huge demand for the fruit domestically. Annually, Malaysia produces about 700 million coconuts and imports about 100 million coconuts to meet domestic demand. Among the issues and challenges faced by the country’s coconut industry include the age factor of both the coconut farmers and trees as well as low income due to the size of their plantation, which ranged from 0.2 to 2 hectares. Majority of the trees planted were old varieties such as the Malayan Tall and other problems faced by the farmers were pest and diseases that destroy the trees. On top of that, many farmers were still using the conventional and not systematic farm management method. To address these problems, the agriculture and agro-based industries ministry is encouraging the planting of shorter trees or dwarf species as the coconuts are easier to produce, trees stronger and can produce fruits as early as in three years. The department is also keen on providing services like technical and agronomy advice in efforts to increase the quantity and quality of coconuts in the country.