Agriculture to Malaysia
(Last updated: 6 Feb 2013)
Trends and opportunities
The market
Agriculture is an important sector to Malaysia’s economic development. Commercial crops such as palm oil, cocoa and rubber are the main agricultural exports. The agriculture sector contributes 7.3 per cent of GDP and is growing at an estimated 3 per cent annually (source: Treasury Department Malaysia, 'Economic Performance and Prospects', 2012). Malaysian farmers also produce high quality fruits and vegetables for domestic market consumption.
The agriculture sector in Malaysia can be divided into the estate sub-sector and smallholders’ sub-sector. The estate sub-sector consists of commercial enterprises generally involved in the production of industrial crops such as cocoa, rubber and oil palm and are owned by either private companies, public-listed corporate entities or public land development agencies. The smallholders’ sub-sector is less commercialised and is mainly for food crop production such as fruits and vegetables.
The Ministry of Primary Industries (KPU) is responsible for Industrial Commodities including the production of pepper, palm oil, rubber, cocoa and wood and timber. The Ministry of Agriculture and Agro-based Industry (MOA) oversees crop production, livestock and fisheries activities. The National Agricultural Policy (NAP) was introduced in an effort to develop and elevate the agriculture sector to compete in global markets. The government has invested large sums of money on infrastructure, advanced technologies, as well as in-situ development to overcome low productivity primarily among small holders and farmers.
Agro-food sector
Malaysia remained a net importer of food in 2011 (RM34.5 billion). Major food imports were cereals and cereal preparations (RM7.2 billion), vegetables and fruits (RM4.2 billion), cocoa (RM3.6 billion), sugar and sugar confectionery (RM3.4 billion) and animal feed (RM2.8 billion). Raw materials such as cereals and dairy products continue to be imported for further processing. Malaysia is self-sufficient in poultry, pork and eggs, but imports about 80 per cent of its beef requirements (source: Malaysian Investment Development Authority (MIDA), 2012).
Malaysia has identified agriculture as one of its National Key Economic Areas (NKEAs) in its efforts to enhance food security and reduce the national food import bill. Sub-sectors of focus include: aquaculture, seaweed farming, swiftlet farming, herbal products, fruits and vegetables and premium processed food which have high-growth potential. The paddy and livestock sub-sectors are important to Malaysia in ensuring national food security and food self-sufficiency, contributing to 10.8 per cent and 17.2 per cent of Agriculture production in 2011.
Paddy, vegetable and fruit
Production has improved due to the introduction of high-yielding paddy varieties, large scale farming and adoption of best agriculture practices as well as improvements in irrigation systems. The Government’s initiative in introducing new varieties of fragrant and organic rice for non-irrigated rice farming is expected to reduce the dependency on imported rice and increase farmers’ income.
Livestock
The Government provides funding for anchor companies to purchase cattle and equipment to increase the production and quality of milk. The government is encouraging integrated rearing in oil palm estates, production of in-house ruminant feeds for own consumption or as supply to other breeders, and promotion of artificial insemination to improve breeding performance.
Opportunities
There are many opportunities for Australian agriculture companies wanting to enter the Malaysian market. There are also opportunities for companies providing agricultural services.
Australian agriculture is recognised by Malaysia for its clean, safe and sustainable farming methods and supply, especially in livestock, aquaculture and horticulture. Taking advantage of the market access gains secured through MAFTA, Australia will have a critical role to play in assisting Malaysia with its initiatives in sustainable agriculture, food Safety and security, and self-sufficiency in agricultural produce and food supplies.
Opportunities based on Australian capabilities and Malaysia’s investment priorities
Malaysia’s National Key Economic Area (NKEA) – Sustainable Agriculture for Food Safety and Security offers opportunities in:
Improvement of dairy farming and production
- Malaysia’s annual dairy consumption is estimated at 1000 million litres and it is only able to self-sustain 5 per cent of that domestic demand. With an annual growth rate of dairy demand of 10 per cent to 15 per cent per annum, Malaysia is focusing its agricultural strategy on improving its dairy farming and production, and reducing its dependency on imports.
- Under the 10th Malaysian Plan, a budget of RM64 million (A$20 million) has been allocated to establish Dairy clusters to produce milk on a larger scale. These clusters are set to contribute an estimated RM326 million (A$103.6 million) to the Gross National Income (GNI). Dairy Clusters have recently been established in Sabah and West Malaysia.
- Opportunities for Australian business in providing dairy cattle, services to the dairy clusters (dairy consultants, genetics, vocational training, management of cluster farms and improvement of milk yield), animal feed and nutrition, and machinery (milking trucks, lab equipment).
Improvement of the livestock industry
- Consumer driven demand for imported beef grew at the rate of 10 per cent per annum. Malaysia aims to reduce its imports and improve its self-sufficiency, which is at a low 28 per cent. It is focusing on integrating and consolidating its downstream processing.
- Malaysia is expanding its feed lotting industry by setting up satellite farms. These farms are expected to contribute RM182 million (A$27.8 million) to the GNI.
- Opportunities for Australian business in beef cattle and genetics, vocational training, machinery and abattoir set-ups, and animal feed and nutrition. The revival of the National Feedlot after the National General Elections is expected to generate opportunities to Australian suppliers for beef cattle, animal feedlot, education in feedlot operation and also, vocational training in beef cattle farming at satellite farms.
Establishment of the National Seed Council to reduce government expenditure on seed imports
- Under the 10th Malaysia Plan, Malaysia aims to be 65 per cent self-sufficient by 2015.
- Several new Acts and Regulations have been established to streamline the industry and increase productivity, such as the Crop Seeds Quality Act, Livestock Seed Regulations and Fisheries Seed Regulations. The seed industry is expected to contribute RM467 million to the GNI.
- Opportunities for Australian business in services (training in food security, products related to seed coating and identification), consultants in food productivity (paddy production).
MAFTA gains for Australian exporters
The Malaysia-Australia Free Trade Agreement (MAFTA) provides a strong basis for increased bilateral trade and investment with Malaysia, an important regional trading partner and neighbour.
- Opportunities for agriculture suppliers and service providers (consultancy, education and training services is required to upskill various levels of human capital in the agriculture supply chain).
- Australian businesses will benefit from business-friendly rules of origin provisions. Australian exporters will not need to supply a certificate of origin, but rather a simpler declaration of origin.
- Skilled Australian workers will find it easier to take up employment opportunities in Malaysia.
Competitive environment
Malaysia is still largely dependent on agricultural imports whilst it builds the framework towards increasing self-sufficiency. Australia has been successfully supplying cattle and goats for breeding and milking to Malaysia due to our clean (disease free) reputation and genetically superior stock (higher production). However, there is increasing competition from Argentina, where cattle are more suited to Malaysian weather conditions. Livestock for meat is mainly sourced from India.
Tariffs, regulations and customs
Livestock
There are no import duties, quotas or restrictions on the imports of live cattle, buffalo, oxen, sheep or goats.
Marketing your products and services
Market entry
Livestock
The options to consider when entering the Malaysian livestock industry include:
- Pre-entry study of market desirability
- Entering a strategic alliance with a Malaysian firm through joint venture or technical transfer arrangements
- Tailoring a training program for local livestock breeders to modernise husbandry methods – spin-offs could result in purchases of livestock, equipment and services
Large feedlot operators and government agencies such as the Rubber Industry Smallholders Development Authority and Federal Land Development Authority, which are involved in integrated livestock programs, source their livestock direct from overseas suppliers or via local importers.
To maintain Australia’s supply position in Malaysia, livestock exporters should:
Distribution channels
The distribution and marketing of livestock basically follow these channels:
- Overseas suppliers to livestock importers (also act as distributors)
- Livestock importers to butchers or small feedlots or smallholders
Links and industry contacts
Government, business and trade resources for Malaysia
Malaysian Government Official Portal – www.malaysia.gov.my/EN/Pages/default.aspx
Malaysian External Trade Development Corporation (MATRADE) – www.matrade.gov.my/
Malaysian Investment Development Authority (MIDA) – www.mida.gov.my/env3/
Ministry of Foreign Affairs – www.kln.gov.my/web/guest/home
Ministry of Trade and Industry (MITI) – www.miti.gov.my/cms/index.jsp
Bursa Malaysia (Stock Exchange) – www.bursamalaysia.com/market/
Central Bank of Malaysia (Bank Negara) – www.bnm.gov.my/
Department of Statistics Malaysia – www.epu.gov.my/home#=e
Royal Malaysian Customs Department – www.customs.gov.my/index.php/en
Australia Malaysia Business Council – www.ambc.org.au/
Malaysia Australia Business Council – www.mabc.org.my/
Ministry of Agriculture and Agro-Based Industries – www.moa.gov.my
Department of Veterinary Sciences – www.dvs.gov.my
Federal Agriculture Marketing Authority (FAMA) – www.fama.gov.my
OECD – www.oecd.org/countries/malaysia/
The World Bank – www.worldbank.org/en/country/malaysia
The International Monetary Fund – www.imf.org/external/country/MYS/index.htm
Please note: this list of websites and resources is not definitive. Inclusion in this list does not imply endorsement by Austrade. The information provided is a guide only.
Contact details
The Australian Trade Commission – Austrade – is the Australian Government’s trade, investment and education promotion agency.
Through a global network of offices, Austrade assists Australian companies to grow their international business, attracts productive foreign direct investment into Australia and promotes Australia’s education sector internationally.
For more information on how Austrade can assist you, contact us on:
Australia ph: 13 28 78 | Email: info@austrade.gov.au
A list of Austrade offices (in alphabetical order of country) is also available.