Restoring Malaysia's competitive advantage in agriculture


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

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Restoring Malaysia's competitive advantage in agriculture

  1. 1. "Restoring Malaysias Competitive Advantage in Agriculture:Taking an opportunity based approach" Murray Hunter University Malaysia Perlis 8th Malaysian International Agro-Bio Business Conference 2012
  2. 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. 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. 4. Crop DiversityTable 2: Agriculture Land Use, Overall Value & Growth Land Use Overall Value Growth Crop/Activity (%) (%) (%)Palm Oil 29.29 34.40 5.5Rubber 44.00 6.70 (1.4)Cocoa 3.29 5.90 (4.6)Rice/Paddy 11.6 3.50 0.2Livestock 0.6 7.60 ?Coconut 4.33 1.69 (2.9)Fruits 4.50 8.60 5.6Fisheries/Aquaculture N/A 14.40 ?Misc. Crops/Activities* 2.40 17.21 1.2 *Includes mixed horticulture, shifting cultivation, sugar, pepper, vegetables, tobacco.
  5. 5. Competitive AdvantageApproximate 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. harvestPalm Oil 3000+ 6500 9500+ 2-3Rubber 3000+ 14000 17000+ 5-7Cocoa 3000+ N/A N/A 2-3Approximate Cultivation, Harvesting and Handling Costs for Palm Oil, Rubber & Cocoa. Palm Oil Rubber Cocoa RM/Ha. RM/Ha. RM/Ha.Fertiliser Costs 702 134 541Other Upkeep Costs 252 281 893Total Upkeep Costs 954 415 1434Collection Costs 721 2046 901General Charges 479 608 969Manufacturing & Despatch 217 67 320Total Costs 2371 3135 3624
  6. 6. The Issues
  7. 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
  8. 8. Obtaining Finance
  9. 9. Technology
  10. 10. The Necessary Skills
  11. 11. Finding New Business Models
  12. 12. Farmers
  13. 13. “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.
  14. 14. “Knowledge Trap” Professor Hans-Dieter Evers of the University of Bonn The process begins when data, knowledge and information is taken over withoutunderstanding of the corresponding local and site specific issues involved and this data becomes the basis to copy solutions into the local context
  15. 15. general optimism bias – overconfidencemetaphoric idiom as ‘berlagak pandai’ and/or ‘segan bertanya sesat jalan’ (if we feel shy to ask, then we may go unguided)
  16. 16. The World has become a somewhat integrated market over the last fewdecades 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’
  17. 17. 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
  18. 18. 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 changesPassive/Reactive ©Hunter (2012) The forms of opportunity
  19. 19. 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
  20. 20. Success in the global market would depend upon……Competitive advantage grows fundamentally out of value afirm is able to create for its buyers that exceeds the firm’scosts of creating it. Value is what buyers are willing to pay,and superior value stems from… providing unique benefitsthat more than offset a higher price.According to Professor Michael E. Porter
  21. 21. Restoring Competitive advantage Must move from this: Branding Promotion To this: New & efficient technologies Novel new products
  22. 22. Its all about value (both industrial and consumer products)
  23. 23. 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 influencesSesame, 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 ItalianFruit, spice and toasted nuts, chutney, quince Frenchpear, roasted coriander, pistaschio,almond & walnut Blue and goat cheese Mexico Tarmarind, squash flowers, huitlacoche (corn mushroom),portobello mushroom, duck meat
  24. 24. Heaven Strategy (Dan Hill 2010) High More More negative/high positive/highe response r responseResponse Rate More More negative/lower positive/lower response Low response Negative Positive Emotional Response
  25. 25. Industrial products with potential for growth
  26. 26. Cocoa in Samoa: Disadvantaged by distance and sea
  27. 27. 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
  28. 28. Australian Wildflower Industry global supply chain This industry developed OUTSIDE the traditionalBanksia Telopea Grevillea Protea Leucospermum LeucadendronSerruria
  29. 29. Western Australia Queensland 100 Growers New South Wales150 – 180 GrowersSouth Australia Tasmania Victoria 150 – 200 Growers30 Growers 20 Growers 60 Growers
  30. 30. Victoria227,600 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
  31. 31. New South Wales811,428 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
  32. 32. Queensland1,787,200 sq km Stenocarpus Chamelaucium Tropical foliage Stenocarpus Leucadendron 30 -100 Growers Domestic and export Good govt support Anigozanthos Chamelaucium Ozothamnus Leucadendron Protea Leucospermum
  33. 33. South Australia984,000 sq km30 Growers10% Adelaide domestic market20-40% export50-75% Eastern states domestic marketSome large growers >20ha Protea Leucadendron Leucospermum Banksia Protea Leucadendron Leucospermum
  34. 34. Western Australia2,525,500 sq km150 – 180 GrowersExport to Europe and JapanSmall local domestic market2 active associationsGovt support Chamelaucium Anigozanthos Leucadendron Banksia Protea Leucadendron Leucospermum Brunia
  35. 35. Australian Wildflower Industry Barriers to Entry•Labour costs and Challengesavailability•Exchange rate•Fuel and freight costs •Value chain• Water issues development•Developing new supply Competitive Advantage •Product value creationchains •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)
  36. 36. SeekInnovation through novel means
  37. 37. Microwave Oven Pressure CookerChemicals & Spoons, etc. Glassware
  38. 38. Tissue Culture
  39. 39. • Minimise Production scale to account for initial low sales/production quantities and lower capital investment• Mobile GMP Facility • Simplified Technology
  40. 40. Conclusion: Integrated Competitive Advantage
  41. 41. 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
  42. 42. Summary• The “good times” of palm oil and rubber demand and prices has causedgreat complacency• The sector is heavily reliant of foreign labour where sources may dry uprelatively 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 businessdoes 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” arecritical• Agro-entrepreneurship pedagogy and delivery needs to be re-examined.