Mid Term Review ELEVENTH MALAYSIA PLAN 2016—2020 Strategy Paper on Agricommodities
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Mid Term Review ELEVENTH MALAYSIA PLAN 2016—2020 Strategy Paper on Agricommodities OVERVIEW Delivering ELEVENTH MALAYSIA PLAN, 2016 – 2017: PERFORMANCE Land Use Economic and Yield Smallholders Participation Gross Domestic Product Trade Performance Social Employment ISSUES AND CHALLENGES Prosperity Declining Productivity Demand for Sustainably Produced Commodity Products and Food Safety Concerns Low Value Add through Lack of Technology and Automation ELEVENTH MALAYSIA PLAN,2018-2020: Agricommodity WAY FORWARD Macro Strategies: Enhancing Productivity Building Leadership in Sustainability Accelerating the Shift to Higher Value Added Activities Expanding Exports Strengthening Human Capital INDUSTRY-SPECIFIC: STRATEGIES AND KEY PERFORMANCE INDICATOR Palm Oil Rubber Timber Cocoa Pepper Kenaf NKEA PALM OIL AND RUBBER Performance Way Forward CONCLUSION Eleventh Malaysia Plan Strategy Paper: Delivering Economic and Social Prosperity through Agricommodity HIGHLIGHTS ELEVENTH MALAYSIA PLAN, 2016—2017: AGRICOMMODITY ACHIEVEMENTS 7.4% RM122.6 1.04 RM82.1 billion million billion 15.6% 7.7% RM140.3 1.13 RM90.4 billion million billion 15% Contribution to Export value & Number of GDP in terms of share smallholders percentage and value 1 Eleventh Malaysia Plan Strategy Paper: Delivering Economic and Social Prosperity through Agricommodity 6.89 532,590 2016 million workers hectares 6.93 565,976 2017 million workers hectares Planted area Employment *excluded Sago 2 Eleventh Malaysia Plan Strategy Paper: Delivering Economic and Social Prosperity through Agricommodity I. OVERVIEW 1. The agricommodity sector comprises palm oil, rubber, timber, cocoa, pepper, kenaf and sago, which is under the purview of the Ministry of Plantation Industries and Commodities. This paper presents the performance of the agricommodity sector in 2016-2017 and agricommodity specific strategies for 2018-2020. 2. In 2016-2017, the contribution of agricommodities to real Gross Domestic Products (GDP) remained unchanged. However, exports of agricommodities expanded both in absolute term as well as a share of total exports. The sector continued to support more than 1 million smallholders and witnessed a general increase in their household income. 3. In 2018-2020, the strategy focus will be to enhance productivity, expand exports, achieve sustainable production, promote higher value added products and strengthen human capital. In this respect, strategy focus is alligned directly to three of the strategic thrusts of the Eleventh Malaysia Plan, namely Thrust 1: Enhancing inclusiveness, Thrust 4: Pursuing green growth and Thrust 6: Reengineering economic growth for greater prosperity. Strategic actions proposed will also contribute to the United Nations’ Sustainable Development Goals (SDGs) particularly towards Goal 1: End poverty in all its forms everywhere, Goal 2: End hunger, achieve food security and improved nutrition and promote sustainable agriculture and Goal 15: Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss. II. ELEVENTH MALAYSIA PLAN, 2016-2017: PERFORMANCE 4. In 2017, the agricommodity sector contributed 7.7% or RM90.4 billion to the GDP. This amount constitutes an increase of 10.1% from RM82.1 billion in 2016. Meanwhile, the exports earnings from agricommodity sector in 2017 amounted to RM140.3 billion or 15% of the total product exports. 5. Despite being the third largest exporter after the electric and electronic (E&E) and the oil and gas (O&G) sectors, the agricommodity sector consistently recorded significant positive trade balance and was the largest net exporter. The sector occupied numerous world leading positions across its value chain. In 2017, Malaysia was the world’s largest exporter of rubber gloves, second 3 Eleventh Malaysia Plan Strategy Paper: Delivering Economic and Social Prosperity through Agricommodity largest producer and exporter of palm oil, fifth largest producer of natural rubber and pepper, seventh largest cocoa grinder and eighth largest exporter of wood furniture. Land Use 6. In 2017, agricommodity planted area occupies 6.93 million hectares or 63.3% from total agriculture land and 21% of total land area in Malaysia as in Exhibit 1. Oil palm occupies 83.9% of agricommodity planted area, followed by rubber 15.6%, sago 0.7%, cocoa 0.3%, pepper 0.2% and kenaf 0.03%. Exhibit 1 Agriculture Land Use in Malaysia Yield 7. Yield is an important determinant of output and smallholder income given that the opening up of new land for plantation is limited. In 2017, average yield of oil palm fresh fruit bunches (FFB) and natural rubber increased to 17.89 tonnes/hectare and 1.42 tonnes/ hectare respectively. Average yield of cocoa beans was at 0.27 tonnes/hectare and average yield of pepper increased to 5.8 tonnes/hectare. See Exhibit 2. 4 Eleventh Malaysia Plan Strategy Paper: Delivering Economic and Social Prosperity through Agricommodity Exhibit 2 Average Yield of Agricommodity Smallholder Participation 8. In 2017, there were 1.13 million smallholders involved in the agricommodity sector with a total planted area of 2.96 million hectares, which constitutes 42.7% of total agricommodity planted area. See Exhibit 3. From this, 59% was oil palm smallholders and 38% rubber smallholders. The remaining 3% constitutes pepper, cocoa and kenaf smallholders. 9. The smallholders include independent smallholders and organised smallholders under the purview of Federal Land Development Authority (FELDA), Federal Land Consolidated Rehabilitation Authority (FELCRA) and Rubber Industry Smallholders Development Authority (RISDA). 5 Eleventh Malaysia Plan Strategy Paper: Delivering Economic and Social Prosperity through Agricommodity Exhibit 3 Number and Planted Area of Independent and Organised Smallholders in 2017 Agricommodity Peninsular Sabah Sarawak Total Oil Palm 197,547 40,717 59,597 297,861 MPOB Independent 538,502 Ha 220,208 Ha 220,405 Ha 979,116 Ha 98,240 1,647 99,887 FELDA - 401,622 Ha 9,669 Ha 411,291 Ha 100,055 2,540 12,340 114,935 Organised FELCRA 116,908 Ha 7,560 Ha 27,241 Ha 151,709 Ha 125,634 13,837 14,619 154,090 1 RISDA 378,024 Ha 50,684 Ha 53,316 Ha 482,024 Ha 521,476 58,741 86,556 666,773 Total Oil Palm Smallholders 1,435,056 Ha 288,121 Ha 300,962 Ha 2,024,139 Ha 296,509 55,978 81,468 433,955 1 Rubber 578,886 Ha 174,724 Ha 158,266 Ha 911,876 Ha Cocoa 2,908 5,241 5,577 13,726 175 157 16,393 16,725 Pepper 93 Ha 23 Ha 3,247 Ha 3,363 Ha 646 646 Kenaf - - 1,462 Ha 1,462 Ha 821,714 120,117 189,994 1,131,825 Grand Total 2,018,557 Ha 469,628 Ha 469,294 Ha 2,957,478 Ha Source: Pangkalan Data Pekebun Kecil (PDPK), MPIC FELDA, FELCRA 10. The average income of the smallholders is highly dependent on landholding size, cost of production, yield and ultimately the commodity market price. The average smallholding size varies from 0.25 ha for pepper and 3.9 ha for oil palm. In 2017, the average monthly income for all plantation smallholder increased except for pepper compared with the previous year. See Exhibit 4. 6 Eleventh Malaysia Plan Strategy Paper: Delivering Economic and Social Prosperity through Agricommodity Exhibit 4 Estimated Average Monthly Net Income of Smallholders Key indicator Year Oil palm Rubber Cocoa Pepper Kenaf Average annual 16.00/T 1,380/kg 0.15/T 5.60/T 5.87/T yield per hectare Average small- 3.90 ha 1.90 ha 2.00 ha 0.20 ha 2.38 ha 2016 holding size Average monthly RM2,098.46 RM656.13 RM209.25 RM2,127.07 RM582.11 net income Average annual 17.19/T 1,400/kg 0.27/T 5.80/T 2.1/T yield Average small- 2017 3.9 ha 1.90 ha 2.00 ha 0.25 ha 3.42 ha holding size Average monthly RM2,339.73 RM936.49 RM278.01 RM1,461.29 RM656.25 net income Source: MPIC Note: Average price referred to CPO, SMR20, cocoa beans (Tawau), black pepper and kenaf dried stem Gross Domestic Product 11. The contribution of the agricommodity sector to real GDP was 7.4% in 2016 and 7.7% in 2017. On average, the upstream component contributed about 60% of the agriculture GDP value added while the rest was from downstream activities which accounts for about 12% of the manufacturing value added. The biggest contributor was palm oil 61.8%, followed by rubber 16.3% and timber 15.6%. See Exhibit 5 and Exhibit 6. 7 Eleventh Malaysia Plan Strategy Paper: Delivering Economic and Social Prosperity through Agricommodity Exhibit 5 Agricommodity’s Contribution to GDP Source: Department of Statistics Malaysia Exhibit 6 Agricommodity’s Contribution to GDP by Sector Source: Department of Statistics Malaysia 8 Eleventh Malaysia Plan Strategy Paper: Delivering Economic and Social Prosperity through Agricommodity Trade Performance 12. In 2017, the export value of agricommodities was RM140.3 billion, accounting for 15% of the total merchandise exports. Exports of palm oil and palm-based products being the largest contributor of 55% or RM77.8 billion, followed by exports of natural rubber and rubber-based products at RM32.3 billion (23%). See Exhibit 7 and Exhibit 8. Exhibit 7 Export Earnings of Agricommodity 9 Eleventh Malaysia Plan Strategy Paper: Delivering Economic and Social Prosperity through Agricommodity Exhibit 8 Trend of Trade Balance for Agricommodity Sector 13. In 2017, the agricommodity sector remained the largest net exporter in Malaysia with a surplus trade balance of RM100.8 billion. The biggest component of the trade surplus in 2017 was palm oil with RM68.3 billion followed by timber, RM18.5 billion; rubber, RM12.5 billion;