Agriculture to Malaysia

Trends and opportunities

The market

There are many opportunities for Australian agriculture companies wanting to enter the Malaysian market. There are also opportunities for companies providing agricultural services.

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 8.5 per cent to the nation’s gross domestic product (GDP) as of 2016 - a slight reduction by 0.3 per cent to the value of A$27.5 billion in 2015 (Source: Economic Planning Unit and Department of Statistics Malaysia 2016). Malaysian farmers also produce high quality fruits and vegetables for domestic market consumption.

The agriculture sector in Malaysia is divided into the estate sub-sector and smallholders’ sub-sector. The former focuses on the production of industrial crops such as cocoa, rubber and palm oil and is owned by private companies, public-listed corporate entities or public land development agencies. The latter is less commercialised and is mainly for food crop productions such as fruits and vegetables.

The Ministry of Primary Industries (KPU) is responsible for industrial commodities, which includes 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 has spent A$1.35 billion on food imports from Australia in 2015. Food imports included cereals and pulses (A$283 million), animal derived products including beef, veal and sheep-meat (A$388 million), sugar derived products (A$133 million), dairy (A$193 million) and alcohol including wine (A$65 million). Raw produce such as cereals and dairy products are brought into the country for further processing. Malaysia is self-reliant for poultry, swine and eggs, but is significantly dependent on importing 14 per cent of its beef demands from Australia (Source: Trade Map 2015).

The Malaysian Government 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 foods with high-growth potential. The other agriculture (includes paddy, fruit and vegetables) and livestock sub-sectors are important to Malaysia in ensuring national food security and food self-sufficiency, contributing 38.5 per cent and 28.4 per cent respectively of agriculture production in 2015 (Source: MPC and Department of Statistics Malaysia 2016).

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. Under the Agriculture NKEA, the Malaysian Government aims to improve productivity by centralising and consolidating smaller paddy farms to increase farmers’ income.

Livestock and dairy

The government provides funding for anchor companies to purchase cattle and equipment to increase the production and quality of milk and of meat. The government is encouraging dairy clusters and integrated rearing in palm oil estates, production of in-house ruminant feeds for own consumption or as supply to other breeders, and promotion of artificial insemination to improve breeding and milk production performance.

Opportunities

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 5.23 per cent of that domestic demand. With an annual growth rate of dairy demand of 2.9 per cent from 2016-2020, Malaysia is focusing its agricultural strategy on improving its dairy farming and production, and reducing its dependency on imports (Source: FAMA 2013).
  • Successful dairy clusters have recently been established in Sabah and West Malaysia. These clusters are estimated to contribute RM326.3 million (A$97.7 million) to the gross national income (GNI) (Source: Malaysia’s Economic Development Unit 2015).
  • 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 15.6 per cent from 2012 to 2013 (Source: FAMA). Malaysia aims to reduce its imports and improve its self-sufficiency, which is at a low 27.5 per cent in 2014 (Source: Department of Statistics Malaysia 2016). It is focusing on integrating and consolidating its downstream processing.
  • Malaysia is expanding its feed lot industry by setting up satellite farms. These farms are expected to contribute RM182.9 million (A$54.8 million) to the GNI.
  • Opportunities for Australian business exist in beef cattle and genetics, vocational training, machinery and abattoir set-ups, and animal feed and nutrition.
Establishment of the National Seed Council to reduce government expenditure on seed imports
  • 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 RM466.6 million (A$139.7 million) to the GNI (Source: Economic Development Unit Malaysia 2015)
  • Opportunities for Australian business exist in services (training in food security, products related to seed coating and identification), and 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 neighbor.

  • Opportunities exist for agriculture suppliers and service providers as 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 while it builds the framework towards increasing self-sufficiency. Australia has been successfully supplying cattle and goats for breeding 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. Beef meat is predominantly sourced from India for common consumption while premium quality Australian meat is sourced for high-end retail and foodservice institutions.

Strategies for market entry

Dairy cattle and 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
  • ensure ESCAS (Exporter Supply Chain Assurance System) is in place for all feeder and slaughter livestock exports.

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:

  • Assist livestock importers to be proactive in using more efficient animal husbandry techniques.
  • Encourage livestock importers to liaise with local media to feature their livestock in tabloids and industry-specific magazines such as Mardi News published by the Malaysian Agricultural Research and Development Institute (MARDI).
  • Participate in major industry-related trade fairs, such as Livestock Asia and MAHA in Kuala Lumpur.
Distribution channels

The distribution and marketing of livestock follow these channels:

  • overseas suppliers to livestock importers (also act as distributors)
  • livestock importers to butchers or small feedlots or smallholders.

Tariffs, regulations and customs

Livestock

There are no import duties, quotas or restrictions on the imports of live cattle, buffalo, oxen, sheep or goats.

Links and industry contacts

Government, business and trade

Australia Malaysia Business Council
Bursa Malaysia (Stock Exchange)
Central Bank of Malaysia (Bank Negara)
Department of Statistics Malaysia
Department of Veterinary Sciences
Federal Agriculture Marketing Authority (FAMA)
The International Monetary Fund
Malaysia Australia Business Council
Malaysian External Trade Development Corporation (MATRADE)
Malaysian Government Official Portal
Malaysian Investment Development Authority (MIDA)
Ministry of Agriculture and Agro-Based Industries
Ministry of Foreign Affairs
Ministry of Trade and Industry (MITI)
OECD
Royal Malaysian Customs Department
The World Bank

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