The Malaysian Economy
The Malaysian economy grew by 4.7% in the fourth quarter of 2018 (3Q 2018: 4.4%), supported by continued expansion in domestic demand and a positive growth in net exports. Private sector expenditure remained the main driver of domestic demand, while a 1.3% rebound in real exports of goods and services (3Q 2018: -0.8%) contributed towards the positive growth of net exports. On a quarter-on-quarter seasonally-adjusted basis, the economy grew by 1.4% (3Q 2018: 1.6%).
Domestic demand expanded at a more moderate pace of 5.6% during the quarter (3Q 2018: 6.9%). Growth was weighed down by a moderation in gross fixed capital formation.
• Private consumption growth remained robust at 8.5% (3Q 2018: 9.0%), despite the frontloading of purchases during the tax holiday period in the previous quarter. Income and employment growth continued to drive household spending. Government measures to alleviate cost of living, such as special payments to civil servants and pensioners, also provided some support to consumer spending.
• Private investment growth moderated to 4.4% (3Q 2018: 6.9%), attributed to slower capital spending across major economic sectors. However, ongoing multi-year projects particularly in the manufacturing sector continued to provide support to overall growth.
• Public consumption expanded at a slower pace of 4.0% (3Q 2018: 5.2%), attributable to a more moderate growth in supplies and services.
• Public investment remained in contraction during the quarter (-4.9%; 3Q 2018: -5.5%), due mainly to a decline in capital spending by public corporations.
• Gross fixed capital formation (GFCF) expanded marginally by 0.3% (3Q 2018: 3.2%), as private sector capital expenditure moderated amid a contraction in public sector investment. By type of assets, capital spending on structures expanded by 0.8% (3Q 2018: 1.8%), while investment in machinery and equipment declined by 1.5% (3Q 2018: 5.9%).
On the supply side, major sectors continued to expand, while growth in the commodity-related sectors improved.
• In the services sector, the wholesale and retail trade sub-sector remained supported by continued strength in consumer spending.
• The information and communications sub-sector benefitted from continued demand for data communication services and the positive impact on fixed broadband demand following the implementation of the Mandatory Standard Access Pricing (MSAP) mechanism.
• Growth in the transport and storage sub-sector improved marginally in line with better trade activity.
• Activity in the finance and insurance sub-sector expanded at a moderate pace as higher growth in insurance claims and lower fee-based income weighed on the performance of the sub-sector.
• Growth in the manufacturing sector remained driven by continued strength in the electronics and electrical (E&E) and transport-related production. Relatively strong growth in the E&E cluster was attributed to the frontloading of exports globally in anticipation of higher trade tariffs between the US and China.
• Growth in the transport-related production was supported by the manufacture of passenger cars and auto parts, as a result of aggressive promotional campaigns by car dealers as well as the replenishment of vehicle stocks after the end of the tax holiday.
• Performance of the mining sector rebounded, supported by higher oil and natural gas production following the maintenance shutdown in the previous quarter.
• Despite weak palm oil harvesting and rubber tapping activities due to adverse weather conditions, the agriculture sector recorded a smaller decline.
• The construction sector registered lower growth due to a moderation in the civil engineering and special trade sub-sectors. The civil engineering sub-sector was impacted by near completion of large petrochemical projects and delays in highway construction. Support from early works activity on the special trade sub-sector waned, as projects transitioned to mid-phase. Growth in the non-residential sub-sector improved slightly, while growth in the residential sub-sector remained weak amid the high number of unsold residential properties.
Amid escalating trade tensions and tighter global financial conditions, the Malaysian economy recorded a respectable growth of 4.7% in 2018. Growth in 2018 was further affected by unanticipated supply disruptions in the commodity-related sectors. For 2019, as supply disruptions recede and new production facilities commence, the Malaysian economy is expected to continue to expand at a steady pace. Private sector demand is expected to remain the main driver of growth amid fiscal rationalisation while the external sector would be weighed down by weaker global demand. Although sentiments have moderated from recent highs, private sector expenditure will continue to be supported by fundamental factors such as continued income and employment growth. Risks to growth remain tilted to the downside, stemming mainly from further escalation of trade tensions and tightening of global financial conditions.
Food & Beverage Manufacturing Updates
During the Budget 2019 reading, the Malaysian government announced that a sugar tax will be imposed effective from April 2019, in an attempt to reduce the nation’s sugar consumption in light of rising obesity and diabetic rates. A RM0.40 tax per litre will be imposed on soft drinks with more than five grams of sugar or sugar-based sweetener per 100ml, which includes carbonated drinks, flavoured and other non-alcoholic beverages. For juice or vegetable-based drinks, a RM0.40 tax per litre will be imposed on drinks with over 12 grams of sugar per 100ml.
Many expect the proposed tax to primarily hit Fraser & Neave Holdings Bhd (F&N) because an estimated one-fifth of its sales are derived from soft drinks. Chief executive officer, Lim Yew Hoe, said F&N is ready to absorb additional cost incurred from the proposed sugar tax and is also expecting to incur extra cost in reformulating drinks to match the taxable sugar level. Any move to increase beverage prices would be the group’s last resort.
Currently, about 90% of F&N’s products are taxable under the threshold, including its top-selling isotonic drink 100PLUS Original and various other regular fruit juices. By reformulating its products to reduce sugar content and with portion control packs, the company hopes to halve the number of products exposed to the tax. F&N also hopes to speed up its healthy product innovations in order to alleviate the impact of the upcoming sugar tax. The group has allocated RM30 million for its capital expenditure in its financial year ending September 30, 2019 (FY19), to ramp up capability in new product offerings and packaging formats in its Shah Alam beverage plant.
For the first quarter ended December 31, 2018 (1QFY19), F&N reported a 15% increase in net profit to RM122.86 million from RM106.83 million in the previous corresponding quarter, supported by higher contributions from its operations in Malaysia and Thailand. Group revenue for the quarter grew 0.8% to RM1.01 billion from RM1 billion a year earlier. While F&N Malaysia's revenue fell 0.5% to RM553.4 million amid lower export revenue, operating profit improved 27.5% to RM52.5 million, helped by favourable input costs for sugar, palm oil and dairy-based commodity. This was partly offset by higher packaging material costs and manufacturing related costs.
Meanwhile, F&N Thailand's revenue grew 2.5% to RM456.5 million, driven by higher export revenue amid market expansion and execution of promotional campaigns in the Indochina region, despite domestic revenue being flat due to intense competition in the sweetened beverage creamer market. Operating profit for F&N Thailand grew by 36.5% to RM99.3 million. For 2019, the group expects the overall domestic market for both Malaysia and Thailand to remain challenging with continuing competitive price pressures and intensifying competition.
For the fourth quarter ended December 31, 2018 (4QFY18), Carlsberg Brewery Malaysia Bhd's net profit rose 34.9% to RM67.45 million, from RM50 million a year ago. Revenue for the quarter rose 22.3% year-on-year to RM525.65 million from RM429.94 million. In its filing with Bursa Malaysia, Carlsberg said the improved profitability was attributable to stronger performance in Malaysia and Singapore operations, coupled with higher share of profit from associate company, Lion Brewery (Ceylon) PLC.
The group said the Malaysia operations sustained its growth momentum, driven by double-digit improvements across its main product segments, particularly its premium brands, despite higher commercial related investments during this quarter. Carlsberg Smooth Draught continued its robust growth riding on the POP Cap innovation and successful execution of consumer promotions. In Singapore, the improvement was due to various negative trade offer adjustments in the previous corresponding quarter.
For the financial year ended December 31, 2018 (FY18), the group's net profit increased 25.3% to RM277.15 million, from RM221.17 million in FY17, backed by a revenue growth of 12.1% to RM1.98 billion, from RM1.77 billion a year ago.
Carlsberg expects consumer sentiment in the country to remain dampened in 2019 amid the uncertainty in the macro economic situation. In addition, the group said rising prices for raw and packaging materials will have a negative impact on production costs going forward. In Singapore, Carlsberg said the anticipated introduction of the European Free Trade Agreement in the third quarter of 2019 will pose a further challenge from cheaper imports. Despite the challenging market conditions and intense competition, the group said it will continue its focus in product innovation and quality execution of its SAIL'22 strategy to deliver satisfactory performance in 2019.
Heineken Malaysia Bhd saw its net profit boosted by a fifth to RM78.9 million in the third quarter ended September 30, 2018 (3QFY18) compared with RM65.9 million a year earlier. Revenue rose by 3.3% to RM512 million from RM495.5 million previously due to an increase in sales volume ahead of the implementation of sales and services tax (SST) in September. Heineken Malaysia managing director Roland Bala said the company’s performance in the quarter reflected improved consumer sentiment in the market. The reintroduction of SST and subsequent price adjustments resulted in higher sales volume.
For the cumulative nine-month period, Heineken Malaysia’s net profit grew by 3.5% to RM182.5 million from RM176.4 million a year ago, on the back of a 6.5% improvement in revenue to RM1.4 billion. The group steadily improved its performance through effective execution of commercial strategies, supported by a sharper focus on cost management initiatives.
Looking ahead, Heineken Malaysia expects the business environment to remain challenging given the intense competition and the continued presence of contraband beer in the market. The group commended the extensive efforts of the government and the Royal Malaysian Customs Department for stepping up enforcement against contraband alcohol and illicit trade, which represent a significant loss of revenue to both the government and industry. It also urged that there be no increase in excise duties on beer to ensure the price gap between duty-paid products and contraband is not widened further. The group said it will continue to strengthen its commercial strategies and execution to drive performance with a focus on improving operational efficiencies across the business to achieve a commendable performance.
October last year, Nestlé (Malaysia) Bhd agreed to offload its Malaysian chilled dairy business and its Petaling Jaya Milo factory to French dairy company Lactalis, and will use the proceeds to expand its Milo factory in Chembong, Negeri Sembilan. As a result of the divestment, Nestlé will invest RM100 million to expand its Chembong Milo production facility, which will establish the site as the world’s largest Milo factory. It will also move all existing Milo manufacturing operations from its Petaling Jaya plant to consolidate and expand Milo production at the Chembong plant.
In terms of performance, for the third quarter ended September 30, 2018 (3QFY18), Nestlé’s net profit expanded 15.7% to RM137.7 million from RM119.01 million in the same period a year ago. This was mainly due to higher sales within the zero-rated Goods and Services Tax (GST) period from June to August. Its revenue rose 8.3% to RM1.4 billion in the quarter from RM1.3 billion in the corresponding period last year. The higher turnover coupled with an improved margin contributed to an additional gross profit of almost RM100 million. Nestlé said the favourable price trend in major raw materials and its continuous drive for efficiency increases along the supply chain led to this margin improvement. The quarter also saw strong marketing and promotional activities supporting the higher sales and this was reflected in the higher operational expenses recorded.
Biscuits manufacturer Hup Seng Industries Bhd’s net profit for the fourth quarter ended December 31, 2018 (4QFY18) fell 11.5% to RM12.74 million from RM14.38 million a year ago mainly due to poorer margin in certain segments coupled with higher incentive and promotional sponsorship activities given to the distributors during the current quarter. Group revenue for the quarter decreased slightly by 0.4% to RM85.85 million from RM86.22 million in the previous corresponding quarter as domestic sales registered a drop of 2%.
For the full-year period (FY18), Hup Seng’s net profit fell 3.3% to RM42.96 million from RM44.45 million a year ago, with revenue increasing 2.6% to RM307.37 million from RM299.67 million. The group witnessed some margin compression arising from costs pressures amid continued growth in revenue. Nevertheless, the group will continue its efforts to enhance operating efficiency to mitigate as much as possible the impact of higher input costs. The group will continue to focus in improving performance by innovating products portfolio, broadening the distributor network to safeguard the group’s revenue and profitability.
Hup Seng said the operating environment over the next six months will see weak domestic growth, uncertainty in global demand and prudent investment in business expansion. Faced with uncertain global and domestic economic prospects, consumers will once again be expected to be more prudent with their spending, leading to weaker sentiment on retail consumption for 2019.
Ajinomoto (Malaysia) Bhd's net profit for the second quarter ended September 30, 2018 (2QFY18) fell 6% to RM15.53 million from RM16.52 million a year ago, on the back of higher expenses arising from advertising and increased sales deliveries. This resulted in earnings per share for the quarter falling to 25.55 sen from 27.17 sen last year. For its quarterly revenue, the group recorded 2.1% year-on-year growth to RM117.84 million from RM115.42 million.
The food and seasoning manufacturer said sales volume and revenue in the Consumer Business segment improved during the quarter, mainly led by “Aji-no-moto” retail during the tax holidays before SST implementation. For its industrial business segment, the group said it recorded lower revenue due to depreciation in US dollar exchange rate in the quarter compared with the previous corresponding quarter. For the cumulative six months ended September 30, 2018, net profit rose 9.41% to RM26.7 million or 43.92 sen per share from RM24.4 million or 40.14 sen per share. Revenue was marginally up 0.58% to RM213.07 million from RM211.84 million.
Ajinomoto said market conditions are expected to continue to be challenging in view of uncertainties in the global economy and fluctuations in foreign currency. The group will continue to monitor closely sales action plans as well as cost management and at the same time focus on increasing sales and profits.
FGV Holdings Bhd recently signed a memorandum of understanding (MoU) with South Korea-listed Samyang Foods Co Ltd to establish a halal ramen manufacturing facility in Malaysia for local and global markets. FGV group chief executive officer Datuk Haris Fadzilah Hassan said the collaboration is part of the group’s strategic direction to expand its downstream business via wholly-owned subsidiary Delima Oil Products Sdn Bhd, by diversifying its product offerings and penetrating new markets. FGV’s logistics and support businesses sector will also benefit from this partnership by providing a total logistics supply chain solution.
Under the MoU, Delima Oil Products can leverage on Samyang Foods’ strong research and development and global distribution networks to improve quality and expand the reach of its Saji products regionally and globally. Delima Oil Products will benefit from Samyang Foods’ experience in the ramen and instant noodle industry to strengthen its own products and brand positioning. The collaboration will also give FGV access to Samyang Foods supply chain, which includes cooking oil, vegetable fats and sugar for their existing ramen plant in Wonju, South Korea. On the other hand, Samyang is excited about the prospect of expanding its line of products to the vast and growing global halal market by collaborating with FGV to tap into its valuable experience in producing high-quality and halal food products.
Agriculture & Farming Updates
Malaysia had succeeded in sealing an export protocol with China for frozen whole fruit durians August last year. Previously, Malaysia had obtained export access into China for frozen durians in the form of pulp and paste since November 2007. In order to fulfil the requirements of the export protocol, Malaysia needs to submit a list of durian plantations which complied with the Malaysian Good Agricultural Practices (MyGAP) together with a list of processing facilities, as well as other details contained in the protocol for China’s approval before exports can begin.
Subsequently, Chinese e-commerce giant Alibaba Group entered into a strategic cooperation with a local durian supplier for the export of frozen whole fruit premium grade ‘Musang King’ to China. Alibaba's online shopping platform, Tmall, together with its global aggregated sourcing platform for perishable food, Win-Chain, signed a MoU with BEHO Fresh, as well as China Certification Inspection Group Malaysia (CCIC) for the initiative. Under the strategic cooperation, durian supplier BEHO Fresh will supply Win-Chain with frozen whole Musang King durians for distribution on Tmall and other Chinese retail marketplaces owned by Alibaba. CCIC, an independent third-party inspection company, will provide product traceability inspection services to ensure fruits supplied to Win-Chain meet the country's quality control standards.
With the latest agreement, the export of premium durians to China is expected to jump to “triple-digit” by end-2019 from 5.8% currently. Deputy Agriculture and Agro-based Minister Sim Tze Tzin said the optimism was based on the fact that more local companies were dealing with China for the export of the fruits and were positioning themselves to target the largest durian market in the world. According to Sim, Malaysia produced 300,000 tonnes of durians annually, and that the premium grade Musang King accounted for 23% (69,000 tonnes) of the output. 5.8% or 17,000 tonnes of the premium durians were exported to China.
Malaysian pineapples also made a breakthrough in 2017 when they were first exported to China. As at August 2018, a total of 202 tonnes of fresh pineapples valued at RM1.5 million have been successfully exported to China. This, together with the growing demand in China for Malaysian pineapples, signify a massive export potential for Malaysian pineapple suppliers whereby Malaysia targets RM320 million in export value with the total output of 700,000 tonnes of pineapples by 2020.
One of the player’s eyeing the share of pineapple exports to China is Naza Agro, the agro business arm of Naza Group of Companies. Established in 2014, it is involved in the production of tropical fruits using high technology agro systems with cutting-edge biotechnology, green house fertigation system, bio-fertilisers and commercial farming methods. It owns and manages 921.4ha of sprawling plantations in Pahang, Perak, Perlis and Negeri Sembilan, producing premium Milie Dilard (MD2) pineapples under the Tropicale brand for local distribution and export. Naza Agro’s long-term vision is to establish strong presence in the China market and continue to explore other export markets such as Japan, South Korea and the Middle East for its tropical fruits business. Plans are also in the pipeline to expand the company’s tropical fruits plantation land bank by another 809.3ha which includes planting of pineapple, melon and durian for export market within five years’ time.
Malaysian pineapples are also making inroads into the Middle East, where the Malaysian Pineapple Industrial Board (MPIB) targets to export up to 100 tonnes of Josapine pineapples to Dubai in the first half of 2019. MPIB Director-General Datuk Mohd Anim Hosnan said the projection was realistic as the Josapine variety of pineapples had attracted encouraging demand from the emirate and possessed high commercial value. The Josapine variety was selected for export after MD2 due to its durability, resistance to diseases and shorter harvesting period of only 12 months.
Moving on to poultry developments, Japanese food processing group NH Foods Ltd and poultry and eggs firm Lay Hong Bhd, officially opened their new food manufacturing plant in Pulau Indah November last year. The plant is operated by NHF Manufacturing (Malaysia) Sdn Bhd, owned 51% by NH Foods and 49% by Lay Hong. With a production capacity of 1,200 tonnes per month in Phase 1, this halal frozen food manufacturing facility was designed to cater not only to the local market, but to export markets such as Middle East countries, Singapore and Japan. The plan is to start exporting the products in the second half of 2019, with a ratio of 60% export and 40% domestic. The plant covers a total area of 4.58 acres, with expansion to 2,000 tonnes per month in Phase 2. Products under the Pulau Indah plant will be branded as Nippon Premium NutriPLus, which consist of Chicken Karaage (boneless diced thigh meat), Chiki-Chiki Bone (cut middle wing), Amakaraage (boneless whole thigh meat), Tebamoto Amakaraage (chicken drumette) and Chicken Menchi Katsu (boneless chicken meat and vegetables).
In terms of performance, Lay Hong slipped into the red in the second financial quarter ended September 30, 2018 (2QFY19), posting a net loss of RM10.96 million, its first loss-making quarter in two-and-a-half years, compared with a net profit of RM12.17 million a year ago due to higher feed cost, resulting from the stronger US dollars. The group also attributed the loss to the one-time early retirement of the layer's amortisation cost for a flock of birds. Quarterly revenue was down 8.6% to RM187.03 million from RM204.56 million a year ago, weighed down by lower revenue from its integrated livestock business as a result of lower quantity of poultry products being sold and the booking in of goods returned of deteriorated processed chicken products.
For the cumulative six months ended September 30, 2018, Lay Hong posted a net loss of RM8.68 million compared with a net profit of RM16.59 million a year ago, while revenue fell by a marginal 0.34% to RM386.28 million from RM387.59 million in the previous corresponding period.
On prospects, Lay Hong said the average egg price is expected to rise in the coming quarters after industry players have decided to reduce production in order to regularise the oversupply situation experienced in the recent quarter. For the liquid egg business, the commissioning of the equipment in the new plant in Johor is progressing as per schedule. With these in place, the financial performance of the group going forward would be given a boost. However, it also noted that the continuous strengthening of the US dollar against the ringgit have caused all imported raw and packing materials particularly the feed cost to rise, which will impact profitability going forward.
Competitor CAB Cakaran Corp Bhd also saw its net profit for the fourth quarter ended September 30, 2018 (4QFY18) plunged 98% to RM508,000 from RM27.18 million a year ago, on lower average selling price of broilers as well as an increase in feed and distribution costs. Its supermarket division also suffered a small loss compared to a profit a year ago, mainly due to the lower margin achieved by certain outlets as a result of promotional activities undertaken to increase sales during the quarter under review.
Group revenue increased by 13.3% in the quarter to RM465.83 million from RM411.2 million in the previous corresponding quarter, owing to strong sales growth in its integrated poultry division. For its full financial year ended September 30, 2018 (FY18), CAB Cakaran reported a 49.5% decline in annual net profit to RM29.39 million, although revenue grew by 17.3% to RM1.75 billion. Despite the challenging landscape, CAB Cakaran is confident that with its market presence and economies of scale in production, the integrated poultry division will continue to be the main contributor to the group’s profit. The supermarket division is expected to face intense competition and will most likely continue to undertake promotional activities to maintain its market share.
Analysts are expecting strong recovery in Sarawak’s CCK Consolidated Holdings Bhd’s (CCK) prospects after having suffered from a double whammy in recent times due to a steep decline in egg prices and an increase in feedstock cost.
Established in 1996, CCK is a fully integrated poultry player encompassing feed mill, hatchery, breeder, broiler, layer, slaughtering house and retailing, with all its core chicken products sourced internally. Today, it has a broiler production of 1.5 million birds per month and table egg production capacity of 250,000 eggs per day. Its abattoir, which processes 50,000-55,000 birds/day, is the only poultry abattoir in Sarawak with a Hazard Analysis and Critical Control Point (HACCP) certification from the Malaysian government and has also received the halal certification by the Islamic Development Department of Malaysia and Sarawak Islamic Council, allowing the group to supply its chicken products to the local and international markets. Being an integrated poultry player allows the company to fetch better profit margins with less middle-men involved and its focus on East Malaysia also means less competition and better market positioning.
CCK is also set to ride on the gains from the stronger sales growth backed by the expansion of retail stores in East Malaysia the commissioning of a new nugget production line in Indonesia and stronger egg and chicken prices due to tight supplies in local market. In addition, a recent slump in feedstock cost, which mainly consists of soymeal and corn as well as strengthening of the ringgit will help ease cost pressures. The group has set aside an annual capital expenditure of RM2.5 million to RM3 million for the current financial year, which is to be internally funded. The funds will be used mainly on replacing old equipment, expanding its retail outlets and building logistics facilities for its chilled and frozen products as well as warehouses.
Meanwhile, DBE Gurney Resources Bhd is partnering Thailand-based Farmmesh Foods Co Ltd (FFCL) to jointly open and operate a trading and distribution agency in Malaysia. DBE Gurney said its subsidiary DBE Poultry Sdn Bhd has entered into a MoU with FFCL, where both companies will be operating the trading and distribution channel in Malaysia through a joint venture company, with 70% ownership by DBE Poultry and 30% by FFCL. The MoU will form another strategic alliance with FFCL to establish distribution and supply chain between Thailand and Malaysia, mainly to import FFCL live chicken from Thailand to Malaysia for processing, as well as distribution of fresh and frozen poultry products in Malaysia. Other trading and distribution channels might also be established between the parties, including but not limited to DBE Poultry feedmill products, HARUMi products and FFCL processed poultry products (fresh and frozen). This strategic alliance will further expand DBE Poultry’s retailing business in poultry products and sustain the group’s business competitiveness locally.
Towards Food Security and Improving the Agriculture Sector
A promise by the new government to guarantee the basic food needs of the nation and safeguard the welfare of farmers is indeed timely. This is consistent with the United Nations Sustainable Development Goals (SDGs) that focuses explicitly on food by seeking to “end hunger, achieve food security and improved nutrition and promote sustainable agriculture”. To achieve this, the government needs to address the issues and challenges presented by agriculture and food security from the supply and demand side of the equation.
On the supply side, Malaysia’s agricultural sector is divided into two sub-sectors: commodity and food. In general, commodity crops (such as palm oil) have grown rapidly and contributed significantly to national development. For instance – in 2016, the agriculture sector contributed 8.1% of the gross domestic product (GDP) with oil palm alone contributing 43.1% of the GDP of the agriculture sector, followed by other agriculture (19.5%), livestock (11.6%), fishing (11.5%), forestry and logging (7.2%) and rubber (7.1%). Commodity crops such as oil palm are dominated by plantation sector with good management practices.
On the other hand, the food sub-sector consisting of food crops, livestock and fisheries is yet to match the commodity crop performance and faces many issues that prevent it from developing rapidly. At present, the country is still facing production shortfall: rice (72%), vegetables (72%), beef (23%), goat meat (8%), and milk (5%). This has led Malaysia to record a trade deficit for some years now. For example, in 1990, the food trade deficit was RM1.1 billion. In 2006, it increased to RM8.5 billion due to higher import growth, and in 2016, the trade deficit was RM16.5 billion. Some of the causes for the food sector’s underperformance are underinvestment in agricultural research, small scale farms with low level of technology, agro-entrepreneurship, climate change and depleting resources.
On the demand side, Malaysia has seen a greater variety and volume of higher value and higher protein food (such as meat, fish and milk). The demand for staple food among the lower quintile of the population, however, has increased as the income elasticity of this group is high. Consumers also demand new food products, new packaging, more convenience, new delivery systems as well as safer and more nutritious foods.
Other than supply and demand parameters, global mega trends are also affecting the domestic landscape of agriculture and food security. These include accelerating urbanisation, climate change and resource constraints, demographic shifts and income growth, technology breakthrough, knowledge exploitation and techno-entrepreneurship and changing food distribution system.
The Agriculture and Agro-based Industry Ministry recently unveiled a five-point plan geared towards ensuring national food security and boost revenue in the agriculture sector. Its minister Datuk Salahuddin Ayub said the document, which centres on food security, rural economic development as well as spurring domestic investment and international trade, among others aims to free farmers, fishermen and livestock breeders from the shackles of poverty. The government’s mission via the five points will be achieved through the execution of 18 strategies and 51 initiatives to ensure that the agricultural industry becomes even more competitive.
The first point covers efforts to modernise and increase agricultural production to ensure supply stability and the nation’s food prices by stressing on the paddy, ruminants as well as fisheries sub-sectors. The second point will see the ministry spur private sector investment in agriculture commercially, as well as increase agricultural trade export. The third point covers efforts to make agriculture a solid, sustainable and profitable revenue source for farmers, livestock breeders, fishermen and young agropreneurs. The fourth point involves improving the agricultural industry ecosystem to support agriculture modernisation, domestic private sector investment and expansion activities for farmers, livestock breeders and fishermen. The document concludes with the fifth point, which is to strengthen the organisational structure of the ministry’s departments and agencies to improve the delivery system and administration.
In executing the plan, the ministry aims to make agriculture a key contributor to the economy, thus freeing its players from the B40 segment. The ministry has devised several measures to strengthen the nation’s agro-food sector, including establishing a national agro-food database, with a view towards ensuring that all plans are carried out precisely and effectively. The ministry will also work with state governments to develop a comprehensive master plan on land development for agricultural purposes, as well resolve land-related issues. It will also review all counterproductive policies which could stunt the planned changes, and replace them with agricultural-friendly policies which could transform the country’s agro-food industry landscape.