• What is the economic contribution from the agricultural sector?
• What is the employment situation in the agricultural sector?
• What is the agricultural income trend?
Increased agricultural output and productivity contribute substantially to the economic development of the country. Agriculture creates employment and generates income for the entire state because it is also a means of subsistence for the low-income group.
Out of Malaysia’s GDP of RM1.2 trillion in 2015 (at current prices), the agricultural sector accounted for RM94.1 billion. As shown in Figure 1, 10.7% of this figure comes from Perak. The states of Perak, Pahang, Johor, Sarawak and Sabah were the top contributors in the agriculture sector with a total share of 71.6 %.
PERAK AGRICULTURAL TREND
The agricultural sector plays a strategic role in economic development, including creating a spill-over effect into other sectors. Perak’s agriculture is currently the third-largest contributor to its GDP, thus there is no denying its significant role. In fact, its contribution of 17.3% was almost equal to that of manufacturing (18.3%) in 2015. As it represents a sizeable portion of the state’s GDP, the strengthening of the agriculture sector spurs overall economic performance.
In 2010 the sector contributed 19.9%, and the figure fell to 17.3% by 2014, remaining unchanged in 2015 (Figure 3).
This can be attributed to the decline of global commodity prices. For instance, the price of a commodity such as palm oil, which is for export and not local consumption, have fallen significantly in the last 5 years. Its pricing mechanism is subject to commercial forces on a global level which are out of our control.
Agriculture’s lack of trading continuity is another factor. It is not a preferred vocation among the young, and the average age of farmers in Perak is 54. Moreover, climate hazards such as El Nino have had a negative effect on the sector’s output between 2015 and 2016. Other factors include low-crop yield, and the painstaking processes of replanting and switching to faster- and higher-yield crops.
Despite the declining trend, the actual value of output and productivity in agriculture has increased from RM8.6 million in 2010 to RM9.5 million in 2014 (Figure 4). This indicates that the sector is growing but its contribution to the state GDP is contracting. This is due to the fact that contribution from other sectors such as manufacturing and services is growing at a faster rate.
AGRICULTURE AND EMPLOYMENT
Figure 5 shows increasing recruitment from 2010 (119,000) to 2015 (121,500). However, these figures fluctuated between 2014 and 2015. There is a significant drop in employment from 2013 to 2014. This can be attributed to the use of technology, which reduces the dependency on manpower. Moreover, the plummeting commodity prices of and rising cost of production resulted in job cuts.
AGRICULTURE AND HOUSEHOLD INCOME
The number of households in Perak that derive their income from agriculture provides a more accurate assessment of how this field benefits the locals. The percentage that benefited was 14.4% in 2007, then 15.9% in 2012 before declining to 13.9% in 2014. This is still a sizeable percentage that depends on agriculture for their livelihood.
Figure 7 shows the steady rise of income from RM1,886 in 2007 to 3,214 in 2014 despite the fall in contribution to GDP. This indicates the versatility of Perak’s agriculture sector in adapting to external shock. As the market price of the commodity falls the state is able to grow revenue with other activities in the same sector.
THE WAY FORWARD
In order to improve the sector’s performance in Perak, we suggest that the state should move in line with the 11th Malaysia Plan, which covers the country’s development from 2016 to 2020.
This Plan involves a seven-pronged strategy, starting with improving productivity and ending with the intensification of performance-based incentive and certification programmes.
There is also emphasis on the training and development of youth entrepreneurs in the sector, the strengthening of institutional support, the improvement of market access and logistical support, and a scaling up of access to agricultural financing.
Some of the steps that the state can act on and pay special attention to are:
1. Encourage locals to become agroprenuers, to choose agriculture as an income generating vehicle;
2. Support and promote technological innovation in agriculture;
3. Find new markets and distribution channels to increase the export of agricultural products;
4. Attract domestic and foreign investment, and promote commercial farming in partnership with local communities;
5. Introduce integrated farming systems that maximise land use (achieved through incorporating short- and medium-term cash crops during the perennial crop stage); and
6. Strengthen institutional support for small and medium (SME) agriculture developments.