Restoring malaysia's competitive advantage in agriculture Presentation given at the MIFB Agribusiness Conference, PWTC, Kuala Lumpur, 12-13 July 2012

1. "Restoring Malaysia's Competitive
Advantage in Agriculture:
Taking an opportunity based approach"
Murray Hunter
University Malaysia
Perlis
8th Malaysian International Agro-Bio Business Conference 2012

2. Taking Perspective
Agriculture in Malaysia still amounts to almost 12.0%
of GDP
Agriculture employs more than 1.0 million people
(13.0% workforce)

3. Table 1: Crop Areas on Estates, Land Development Schemes and
Individual Smallholdings in Malaysia, 2012 (‘000 hectares)
Oil Palm Rubber Rice Other Total
Estates 2,707 61 .. 10 2,778
97.5% 2.1% 0.35% 40.5%
Land Development 1,243 226 2 8 1,479
Schemes 84.0% 15.2% 0.1% 0.5% 21.5%
Independent 540 960 680 420 2,600
Smallholdings* 20.7% 36.9% 26.1% 16.1% 38.0%
Grand Totals 4,490 1,247 682 438 6,857
65.5% 18.2% 9.9% 6.38%
* Independent smallholders 1-2 Ha. plots managed part time

4. Crop Diversity
Table 2: Agriculture Land Use,
Overall Value & Growth
Land Use Overall Value Growth
Crop/Activity (%) (%) (%)
Palm Oil 29.29 34.40 5.5
Rubber 44.00 6.70 (1.4)
Cocoa 3.29 5.90 (4.6)
Rice/Paddy 11.6 3.50 0.2
Livestock 0.6 7.60 ?
Coconut 4.33 1.69 (2.9)
Fruits 4.50 8.60 5.6
Fisheries/Aquaculture N/A 14.40 ?
Misc. Crops/Activities* 2.40 17.21 1.2
*Includes mixed horticulture, shifting cultivation, sugar, pepper, vegetables, tobacco.

5. Competitive Advantage
Approximate Costs of Plantation Development for Palm Oil, Rubber & Cocoa
Crop Land Costs RM Costs to RM Total No. of Years
RM per Ha. Maturity per Costs to first
Ha. harvest
Palm Oil 3000+ 6500 9500+ 2-3
Rubber 3000+ 14000 17000+ 5-7
Cocoa 3000+ N/A N/A 2-3
Approximate Cultivation, Harvesting and Handling Costs for Palm Oil, Rubber & Cocoa.
Palm Oil Rubber Cocoa
RM/Ha. RM/Ha. RM/Ha.
Fertiliser Costs 702 134 541
Other Upkeep Costs 252 281 893
Total Upkeep Costs 954 415 1434
Collection Costs 721 2046 901
General Charges 479 608 969
Manufacturing & Despatch 217 67 320
Total Costs 2371 3135 3624

6. The Issues

7. Poor appreciation of the growth medium
Heavy use of chemicals.
Leading to declining yields.
Cause of high input costs.
Loss of cover protection.
Leading to residuals in crops.
Carrier of disease (the unrecognized problem)
Loss of humus
Loss of trace elements
Contaminated water Compact (inhibit root growth)
Poor drainage - floods Erosion
Carry away top soils Accumulation of chemicals
Generally afterthought –
poor maintenance

9. Obtaining Finance

10. Technology

11. The Necessary Skills

12. Finding New Business Models

13. Farmers

14. “Mindset Barriers”
(Small Holders)
• market passive
• copy cat approach
• ‘quick-fix approach’
• poor exposure and perhaps resistance to new
ideas,
• practice isolation,
• market isolation
• perception of agriculture as only a fallback
profession
• fixation on a single success.

15. “Knowledge Trap”
Professor Hans-Dieter Evers of the University of Bonn
The process begins when data, knowledge
and information is taken over without
understanding of the corresponding local and
site specific issues involved and this data
becomes the basis to copy solutions
into the local context

16. general optimism bias – overconfidence
metaphoric idiom as ‘berlagak pandai’
and/or
‘segan bertanya sesat jalan’
(if we feel shy to ask, then we may go
unguided)

20. The World has become a somewhat
integrated market over the last few
decades through the phenomena known
as globalization
Traditional economics
would explain this
phenomena in terms of
specialization, comparati
ve and relative advantage
Sociologists would talk in
terms of the ‘cosmopolitan
man’

21. Randomness &
Changes in any of Unexpectedness Interrelated Factors
A random or unexpected
the factors event that creates an
opportunity
Social Economic
Stage of economic
Social and cultural trends
development.
and drivers.
State of the economy.
Reviving historical trends.
Level of disposable income.
Influence of international
Macroeconomic, general
trends.
industry conditions, financial
Changing demographics.
&geographical environment.
Styles, fashions & fads. Product
Opportunity
Gap
Technology Government &
Current state of the art and Regulation
emerging technology.
Government needs &
Re-evaluating and utilizing
priorities.
existing technology in new
Restriction by Government.
areas.
New laws & regulations and
New knowledge.
impact on product markets
Invention.
and supply chains.
Trade liberalization.
Our Inner Self
New Our upbringing, domicile outlook, experiences,
interests, skills & abilities, assumptions, beliefs,
Knowledge or attitudes, perception, cognitive processes, patterning
and biases, our inner psych and emotions, imagination,
Information energy, and passion, etc.
The way we interact and stimulated by the
environment and make connections

22. Degree of ambiguity
Active/Imaginative
Allocative Construction Intuitive
Analytical
Supply/Demand changes New technologies
Demographic changes New Business models
Value
creation n
t io
va
no Locus of change
In
Inductive
Imitation Discovery
Deductive Replication & Extension Incongruities
(Black & white)
Structural changes
Passive/Reactive
©Hunter (2012)
The forms of opportunity

23. Four potential firm opportunity seeking
typologies
Market Orientated Both Market &
Firms Entrepreneurially
High Orientated Firms
High adaptability to the
environment but low
High adaptive and idea
generative idea & strategy
Market Orientation
generative & strategy
ability
development ability
Conservative firms Entrepreneurial
Firms
Low Very low
adaptability to High generative idea
environment & strategy capability
Low High
Entrepreneurial Orientation

24. Success in the global market would depend upon……
Competitive advantage grows fundamentally out of value a
firm is able to create for its buyers that exceeds the firm’s
costs of creating it. Value is what buyers are willing to pay,
and superior value stems from… providing unique benefits
that more than offset a higher price.
According to Professor Michael E. Porter

25. Restoring Competitive advantage
Must move from this:
Branding
Promotion
To this:
New & efficient
technologies
Novel new
products

26. Its all about value (both industrial and consumer products)

27. Cuisines with most potential for growth
North America Europe South America Asia/Pacific
USA Mediterranean influence Fusion style Fusion style
Asian Influence Indian influence Thai, Indonesian, Vietna
Thai/Chinese
mese influences
Sesame, wasabi, ginger, Middle East influence Western/Chinese
noodle and Asian Contemporary cuisine Indonesian/Thai
Slow Food
cabbage American/Mediterranean
Mediterranean influence
Indian Influence
Exotic combinations Italian
Fruit, spice and toasted
nuts, chutney, quince French
pear, roasted coriander,
pistaschio,almond &
walnut
Blue and goat cheese
Mexico
Tarmarind, squash
flowers, huitlacoche
(corn mushroom),
portobello mushroom,
duck meat

33. Heaven Strategy (Dan Hill 2010)
High
More More
negative/high positive/highe
response r response
Response
Rate
More
More
negative/lower
positive/lower
response
Low response
Negative Positive
Emotional Response

34. Industrial products with potential for growth

35. Cocoa in Samoa: Disadvantaged by
distance and sea

42. A contract to grow up to 1400 hectares of Indian Sandalwood outside of Katherine is pending on assurances from the NT Government of enough water.
Boutique crops with potential for growth

43. Australian Wildflower
Industry global supply chain
This industry developed OUTSIDE the traditional
Banksia Telopea Grevillea
Protea Leucospermum Leucadendron
Serruria

44. Western Australia
Queensland
100 Growers
New South Wales
150 – 180 Growers
South Australia
Tasmania
Victoria
150 – 200 Growers
30 Growers 20 Growers
60 Growers

45. Victoria
227,600 sq km
Thryptomene
Wax (Chamelaucium)
Banksia Serruria
Leucadendron
Protea Dryandra
Leucospermum
Leucadendron
Banksia • Possibly 200 growers
• 43 active members of
PWGA
• Exported via Sydney or
Melbourne (Japan)
• Domestic market to
Protea
Leucospermum Sydney or Melbourne
Leucadendron Tasmania
Serruria 67,800sq km
Banksia
Telopea
Bruniaceae
20 Growers

46. New South Wales
811,428 sq km
Actinotus helianthi
Ceratopetalum gummiferum
Banksia plagiocarpa
Ceratopetalum
Leucadendron
Protea Banksia gummiferum
Grevillea plagiocarpa
• 150 -200 growers
Telopea • 2 active associations
Grevillea
• Good govt support
• Large Sydney domestic
market
Protea
Leucadendron
Actinotus helianthi
Grevillea

47. Queensland
1,787,200 sq km
Stenocarpus Chamelaucium
Tropical foliage
Stenocarpus
Leucadendron 30 -100 Growers
Domestic and export
Good govt support
Anigozanthos
Chamelaucium
Ozothamnus
Leucadendron
Protea
Leucospermum

48. South Australia
984,000 sq km
30 Growers
10% Adelaide domestic market
20-40% export
50-75% Eastern states domestic market
Some large growers >20ha
Protea
Leucadendron
Leucospermum
Banksia
Protea
Leucadendron
Leucospermum

49. Western Australia
2,525,500 sq km
150 – 180 Growers
Export to Europe and Japan
Small local domestic market
2 active associations
Govt support
Chamelaucium
Anigozanthos
Leucadendron
Banksia
Protea
Leucadendron
Leucospermum
Brunia

50. Australian Wildflower Industry
Barriers to Entry
•Labour costs and Challenges
availability
•Exchange rate
•Fuel and freight costs •Value chain
• Water issues development
•Developing new supply Competitive Advantage
•Product value creation
chains •Building an industry
approach •Diversity of plants for new
products – min of 270 species
•Market development currently sold
• Research & •Close proximity to Eastern markets
– lower freight costs and good trade
development relations
•National body for cohesive industry
– access R&D $$, local and
international
promotions, information flow
(Industry claims)

54. Seek
Innovation
through
novel
means

57. Microwave Oven Pressure Cooker
Chemicals & Spoons, etc. Glassware

62. Tissue Culture

63. • Minimise Production scale to account for initial low
sales/production quantities and lower capital investment
• Mobile GMP Facility
• Simplified Technology

72. Conclusion: Integrated
Competitive
Advantage

85. The Halal/Toyyib supply chain is another example of
integrated competitive advantage:
Haram
(Those things prohibited by Traceable
Allah in the Al Qu’ran)
Sustainable HACCP
environment, community
& business
Supply GMP
Chain
Community
Benefit
Toyyibaan
Non-exploitive
Ethical Healthy
Clean
Non-Muslim concepts of ethics, sustainability, and goodness are merging with Islamic
concepts

86. Summary
• The “good times” of palm oil and rubber demand and prices has caused
great complacency
• The sector is heavily reliant of foreign labour where sources may dry up
relatively quickly
•New crops initiatives are slow – some hope with “Crops for the Future”
initiative
• Perceptions about university-industry linkages poor
•The paradigm that “agriculture” is a business just like any other business
does not exist
•A risk that the farmer may become “an extinct species”
•The whole “rice” paradigm has to be overturned with a “new approach”
•“New crops” research, knowledge, and dissemination and “extension” are
critical
• Agro-entrepreneurship pedagogy and delivery needs to be re-examined.