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GAIN Report Global Agriculture Information Network Foreign Agricultural Service GAIN Report Global Agriculture Information Network Voluntary Report - public distribution Date: 5/2/2003 GAIN Report #MY3019 Malaysia Market Development Reports Fresh Produce Market in Malaysia 2003 Approved by: Bonnie Borris U.S. Embassy, Kuala Lumpur Prepared by: Spire Research Sdn Bhd Report Highlights: This report provides background on the Malaysian fresh produce market and its future prospects; consumers’ taste and preferences and distribution patterns. It also provides recommendation for US fresh produce exporters on market penetration. Includes PSD changes: No Includes Trade Matrix: No Unscheduled Report Kuala Lumpur [MY1], MY GAIN Report #MY3019 TABLE OF CONTENTS 1.Country Profile ............................................. Page 1 of 18 1.1 Country Overview .................................... Page 1 of 18 1.2 Malaysian Economy ................................... Page 2 of 18 1.3 Demography of Malaysia ............................... Page 3 of 18 1.4 Malaysia’s Agriculture Industry .......................... Page 3 of 18 2. Consumption of Fresh Produce in Malaysia ...................... Page 4 of 18 3. Import of Fresh Produce ..................................... Page 6 of 18 4. Major Exporters of Fresh Produce ............................. Page 8 of 18 5. Consumer Preference ....................................... Page 11 of 18 6. Government Import Requirements and Tariffs ................... Page 12 of 18 7. Distribution of Fresh Produce ................................ Page 12 of 18 8. Recommendations for US Fresh Produce Exporters ............... Page 13 of 18 9. Best Prospects for US Fresh Produce Exporters .................. Page 14 of 18 10. APPENDIX 1 ........................................... Page 16 of 18 10.1 Retail Prices of Fresh Fruits ........................... Page 16 of 18 10.2 Retail Prices of Fresh Vegetables ...................... Page 17 of 18 10.3 References ........................................ Page 18 of 18 GAIN Report #MY3019 Page 1 of 18 1.Country Profile 1.1 Country Overview Table 1: Summary of Malaysia Location of Malaysia Southeast Asia Malaysia’s land area 329,735 square km Estimated population in 2002 24.5 million (estimated Form of government Parliamentary government under constitutional monarchy Ethnic composition Bumiputera (63%), chinese (24%), Indians (7%) Religious composition Islam (56%), Buddhism/Confucianism/Taoism (29%), Hinduism (7%), Christianity (6%) Major languages used Malay, English, various Chinese dialects, Tamil Major festivals Eidil Fitri, Chinese New Year, Deepavali, Christman and Harvest Festival (East Malaysia only) Malaysia is located in Southeast Asia and comprises of Peninsular Malaysia and East Malaysia with a combined land mass of 329,735 square kilometers. Malaysia is located just north of the equator and experiences a tropical climate all year round with seasonal monsoon rains. The capital of Malaysia is Kuala Lumpur and the king is the constitutional head of the country, whose role is mainly ceremonial. The country practices parliamentary democracy and is led by the prime minister. Malay is the official language but English is commonly used in commerce. Other common languages include the various Chinese and Indian languages. Malaysia's population is estimated to be 24.5 million in 2002. The major ethnic group classified as Bumiputera (consisting of Malays and indigenous minorities such as Kadazans, Melanau, Murut and Dayaks) account for 63% of the total population of which Malays account for 52% and indigenous minorities account for 11% of the total population. Other major ethnic groups are the Chinese and Indians, who account for 24% and 7% of the total population respectively. Slightly more than half of the population follows the Islamic faith while other religions include Buddhism, Hinduism and Christianity. Major festivals celebrated include the Muslim festival of Eidil Fitri, Chinese New Year, Deepavali (for Hindus), Christmas and the Harvest Festival UNCLASSIFIED Foreign Agricultural Service/USDA GAIN Report #MY3019 Page 2 of 18 celebrated only in East Malaysia. 1.2 Malaysian Economy Table 2: Malaysian Economy 1999 2000 2001 2002 2003 fcst 2004 fcst Real GDP (billion) 50.7 55.1 55.4 57.7 61.2 63.8 Real GDP Growth (%) 5.8 8.3 0.4 4.2 4.0-5.0 5.0-6.0 GDP Per Capita (US$) 3,480 3,852 3,814 3,916 3,959 3,963 Exchange Rate (US$1) 3.8 3.8 3.8 3.8 3.8 3.8 Total CPI(%) 2.8 1.6 1.4 1.9 3.4 4.0 CPI - food (%) 4.6 1.9 0.6 0.7 1.0 1.3 Umemployment (%) 3.4 3.1 3.6 3.5 2.7 2.4 Analysis based on data sourced from 2001 & 2002 Economic Report, Malaysian Ministry of Finance, Malaysian Statistics Department, and Economist Intelligence Unit. Malaysia's major economic activity is the service industry and accounts for 51% of its GDP. This is followed by manufacturing (32%), agriculture (8%), mining (6%), and construction (3%). Malaysia experienced stagnant economic growth in 2001 as a result of the global economic slow down. In response to the global economic slow down, the government introduced various economic measures beginning in 2001 to stimulate the economy. These included reduction in corporate and personal tax rates, maintaining low interest rates, increase salaries of government servants, and increase in public spending. Together with improvements in exports, Malaysia's GDP grew by 4.2% in 2002 and is expected to continue to grow in the foreseeable future. Malaysia's inflation remained below 3.0% in 1999-2001 and expected to remain below 4.0% in 2002-2004. The CPI for food declined from 4.6% in 1999 to 0.6% in 2001 and is expected to remain stable in 2002. CPI for food is expected to increase marginally in 2003-2004, as the local and global economy gradually recovers. The local currency (the ringgit) has been pegged to the US dollar at US$1.00 to RM3.80 since September 1998. The result of the peg has been stable local currency prices of imported goods paid in the US dollar, which has benefited Malaysian consumers. The government is expected to maintain the current peg to the US dollar in the foreseeable future. Malaysia's unemployment rate has remained relatively low (below 4.0% in the last four years) even during the global economic slowdown. This low level of unemployment is expected to continue or decline further once the global economy recovers and Malaysia continues its economic growth path. UNCLASSIFIED Foreign Agricultural Service/USDA GAIN Report #MY3019 Page 3 of 18 1.3 Demography of Malaysia Table 3: Malaysian Demography 1999 2000 2001 2002 2003 fcst 2004 fcst Population (million) 22.7 23.3 23.8 24.2 24.6 25.0 Private consumption 1,446 1,632 1,684 1,754 1,795 1,817 per capita (US$) Analysis based on data source from Malaysian Statistics Department and Economist Intelligence Unit. Malaysia's population has been growing at 2.3-2.4% per year increasing from 22.7 million in 1999 to an estimated 24.2 million in 2002. The below 10 years age group currently accounts for 22% of Malaysia's total population, while the 10-19 years age group account for 21%. The 20-49 years age group represents an important economic age group and accounts for 44% of the total population, while the proportion above 50 years has been steadily increasing and currently accounts for 13% of the total population. Malaysia's GDP per capita is the third highest in Southeast Asia (after Singapore and Brunei) and has been increasing. As a result, private per capita consumption increased by 21% from US$1,446 in 1999 to an estimated US$1,754 in 2002. Private per capita consumption is expected to increase marginally to US$1,817 in 2004. The number of households increased from an estimated 540,000 in 1999 to 580,000 in 2002. According to the national census, Malaysia's population living in the urban areas increased from 50% in 1991 to 62% in 2000 and the trend is expected to continue. In 1999, the average annual household income in the urban areas was US$9,792 but only US$5,424 in the rural areas. Due to the higher level of income in the urban areas, the annual household expenditure was US$6,132 of which US$1,416 was spent on food including US$288 spent on fresh fruits and vegetables. The average rural annual household expenditure, however, was US$4,008 of which US$1,164 was spent on food including US$216 spent on fresh fruits and vegetables. Income levels also vary among the ethnic groups in Malaysia. The average annual household income among the Chinese was the highest at US$10,908 in 1999 followed by Indians at US$8,532. Though the Bumiputeras are the largest ethnic group, their average annual household income was US$6,264. 1.4 Malaysia’s Agriculture Industry The government's industrialization policy, beginning in the 80s, resulted in a shift in Malaysia's economic activity from agriculture to manufacturing. This resulted in creation of employment opportunities in manufacturing (located in the urban areas) at the expense of agriculture. Therefore the agriculture workforce is expected to decline from 1,524,000 workers in 1995 to 930,000 in 2010. UNCLASSIFIED Foreign Agricultural Service/USDA GAIN Report #MY3019 Page 4 of 18 Malaysia is a net importer of food, including fresh produce, which has been growing at an average of 10% per year and reached an estimated US$2.5 billion in 2001. To reduce dependency on imported food, the government introduced the Third National Agricultural Policy (1998- 2010), which included increasing local cultivation of fruit and vegetable crops. However the response towards increasing local cultivation remains to be seen because of lucrative employment opportunities in the non-agriculture sector. Cultivation of fruits in Peninsular Malaysia increased from 168,000 hectares in 1990 to 262,000 hectares in 1999. Two-thirds of the total fruit cultivation is grown on small plots of land in the villages, while the remaining one-third comprises commercial cultivation.
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