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Effects of Trade Liberalization on Agriculture in Malaysia: Institutional and Structural Aspects by Tengku Mohd Ariff Tengku Ahmad

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Effects of Trade Liberalization on Agriculture in Malaysia: Institutional and Structural Aspects by Tengku Mohd Ariff Tengku Ahmad The CGPRT Centre The Regional Co-ordination Centre for Research and Development of Coarse Grains, Pulses, Roots and Tuber Crops in the Humid Tropics of Asia and the Pacific (CGPRT Centre) was established in 1981 as a subsidiary body of UN/ESCAP. Objectives In co-operation with ESCAP member countries, the Centre will initiate and promote research, training and dissemination of information on socio-economic and related aspects of CGPRT crops in Asia and the Pacific. In its activities, the Centre aims to serve the needs of institutions concerned with planning, research, extension and development in relation to CGPRT crop production, marketing and use. Programmes In pursuit of its objectives, the Centre has two interlinked programmes to be carried out in the spirit of technical cooperation among developing countries: 1. Research and development which entails the preparation and implementation of projects and studies covering production, utilization and trade of CGPRT crops in the countries of Asia and the South Pacific. 2. Human resource development and collection, processing and dissemination of relevant information for use by researchers, policy makers and extension workers. CGPRT Centre Working Papers currently available: Working Paper No. 33 Effects of Trade Liberalization on Agriculture in Pakistan: Institutional and Structural Aspects by Muhammad Ramzan Akhtar Working Paper No. 34 Effects of Trade Liberalization on Agriculture in Malaysia: Institutional and Structural Aspects by Tengku Mohd Ariff Tengku Ahmad Working Paper No. 35 Effects of Trade Liberalization on Agriculture in the Republic of Korea: Institutional and Structural Aspects by Myung-Hwan Sung Working Paper No. 36 Effects of Trade Liberalization on Agriculture in Japan: Institutional and Structural Aspects by Hiroaki Kobayashi Working Paper No. 37 Effects of Trade Liberalization on Agriculture in the Philippines: Institutional and Structural Aspects by Minda C. Mangabat Working Paper No. 38 Effects of Trade Liberalization on Agriculture in India: Institutional and Structural Aspects by Ramesh Chand Working Paper No. 39 Effects of Trade Liberalization on Agriculture in Thailand: Institutional and Structural Aspects by Kajonwan Itharattana (Continued on inside back cover) Effects of Trade Liberalization on Agriculture in Malaysia: Commodity Aspects The designations employed and the presentation of material in this publication do not imply the expression of any opinion whatsoever on the part of the Secretariat of the United Nations concerning the legal status of any country, territory, city or area of its authorities, or concerning the delimitation of its frontiers or boundaries. The opinions expressed in signed articles are those of the authors and do not necessarily represent the opinion of the United Nations. WORKING PAPER 46 Effects of Trade Liberalization on Agriculture in Malaysia: Commodity Aspects Tengku Mohd Ariff Tengku Ahmad and Ariffin Tawang CGPRT Centre Regional Co-ordination Centre for Research and Development of Coarse Grains, Pulses, Roots and Tuber Crops in the Humid Tropics of Asia and the Pacific CGPRT Centre Jalan Merdeka 145, Bogor 16111 Indonesia © 1999 by the CGPRT Centre All rights reserved. Published 1999 Printed in Indonesia National Library: Cataloguing in Publication Tengku Mohd Ariff Tengku Ahmad Effects of Trade Liberalization on Agriculture in Malaysia: Commmodity Aspects /Tengku Mohd Ariff Tengku Ahmad and Ariffin Tawang -- Bogor: CGPRT Centre, 1999. xxii, 69 pp.; 25.5 cm. -- (Working paper series; No. 46) Bibliography: 3 pp ISBN 979-9317-00-2 1. Malaysia - Trade, free and protected 2. Agriculture - economic aspects I. Title II. Ariffin Tawang III. Series 382.710.959.5 Table of Contents Page List of Tables ........................................................................................................................... ix List of Figures ......................................................................................................................... xi Glossary of Acronyms ............................................................................................................. xiii Foreword .................................................................................................................................. xv Acknowledgements ................................................................................................................. xvii Executive Summary ................................................................................................................ xix 1. Introduction 1.1 Institutional and structural aspects of agricultural trade liberalization in Malaysian agriculture .............................................................................................. 1 1.2 Scope and objectives of the study ............................................................................. 2 1.3 Organization of the study ......................................................................................... 3 2. Overview of the Malaysian Agriculture Sector 2.1 Introduction .............................................................................................................. 5 2.2 Contribution of the agricultural sector ...................................................................... 5 2.3 Composition of Malaysia’s agricultural ................................................................... 5 2.4 Agricultural trade ...................................................................................................... 7 2.5 Composition of agricultural trade ............................................................................. 7 2.6 Policy intervention in the agricultural sector ............................................................ 8 2.6.1 Tariff and non-tariff barriers ............................................................................ 9 2.7 Issues and challenges facing Malaysian agriculture ................................................. 10 2.7.1 The financial crisis and its impact on Malaysian agriculture ........................... 11 3. Palm Oil 3.1 Introduction .............................................................................................................. 13 3.2 The Malaysian palm oil industry .............................................................................. 13 3.2.1 Area and production ......................................................................................... 13 3.2.2 Marketing of palm oil ...................................................................................... 15 3.2.3 Trade ................................................................................................................ 15 3.2.4 Milling, refining and other downstream industries .......................................... 15 3.3 Policies and programs in the palm oil industry ......................................................... 17 3.4 Impacts of liberalization: a review of past studies .................................................... 18 3.5 The effects of trade liberalization on the Malaysian palm oil industry ..................... 19 3.5.1 Conceptual framework ..................................................................................... 19 3.5.2 Impact on export demand of palm oil .............................................................. 20 3.5.3 Impact on domestic prices................................................................................. 21 3.5.4 Effect on domestic demand............................................................................... 22 3.5.5 Effect on domestic supply................................................................................. 22 3.6 Effects on specific location ....................................................................................... 23 3.6.1 Background of the smallholder land scheme ................................................... 24 3.6.2 FELDA Gedangsa today................................................................................... 24 3.6.3 Cost and return ................................................................................................. 24 3.6.4 Liberalization effects ....................................................................................... 25 v 3.7 Policy implications and recommendations ........................................................................ 25 4. Paddy 4.1 Introduction .............................................................................................................. 27 4.2 The paddy subsector ................................................................................................. 27 4.2.1 Economic and socio-economic contributions of the rice sector ....................... 27 4.2.2 Area, yield and production ............................................................................... 28 4.2.3 Consumption and self-sufficiency level (SSL) ................................................ 29 4.2.4 Rice marketing and distribution ....................................................................... 32 4.2.5 Cost of production ........................................................................................... 32 4.3 Policy measures in the paddy and rice industry ........................................................ 34 4.3.1 Fertilizer subsidy .............................................................................................. 35 4.3.2 Price support ...................................................................................................
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