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In an challenging recent book, ‘Malaysia at a Crossroads. Can we make the Transition?’ (Abdul Rahman Embong and Tham Siew Yean, 2011), colleagues of mine from IKMAS (Institute of Malaysian and International Studies) at the Universiti Kebangsaan Malaysia (UKM) floated the idea of a ‘critical transition’ for Malaysia (p.17). This involves significant changes in social structure and relations, and in the politics, economy and culture of Malaysian society. The impetus for such transition is associated with the reformasi movement and consequent altering aspirations since the 1990s.
As an involved outsider, I see clearly that transition is needed, and agree with my UKM colleagues in their further prescription that this will involve key elements of investment, technology upgrading, institutional reform and changes in state-society relations. These elements are applicable to Malaysian agriculture, which is my personal preoccupation.
Malaysian agriculture has largely missed out in discussions about Malaysia’s future. It does not even get much attention in the 10th Malaysia Plan (2011-2015). But in fact agriculture, along with fisheries and forestry, still accounts for 7-8 percent of Malaysia’s gross domestic product, which is a high level for a country at Malaysia’s stage of economic development. The sector also involves around one million workers, with about half of these being temporary migrants. Parts of the agricultural sector are highly dynamic, and have good potential for the future. But there are also numerous emerging problems needing to be considered in future transformation.
The scope of the agricultural sector is reflected in Table 1, which presents the areas of the main crops in 2012. The Table shows the huge predominance of oil palm in the total estimated crop area of 6.8 million hectares, followed by smaller extents of rubber and rice. It also denotes the relative roles in cultivation of the three main types of Malaysian agricultural entity – the estates, the land development schemes and the independent smallholdings.
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 |
| Land DevelopmentSchemes |
1,243 |
226 |
2 |
8 |
1,479 |
| Independent Smallholdings |
540 |
960 |
680 |
420 |
2,600 |
| Grand Totals |
4,490 |
1,247 |
682 |
438 |
6,857 |
The estates are what many people term ‘plantations’, with individual units being large and commonly covering 2,000-10,000 hectares. The units are often grouped in big estate companies. The biggest of all, Sime Darby, controls 500,000 hectares of which 300,000 hectares are in Malaysia. The land development schemes are also extensive, with those managed by the Federal Land Development Authority (Felda) being the most significant and being frequently managed like estates. In contrast, independent smallholdings are limited to 1-2 hectares, and are managed by family households which often only work part-time.
All agricultural entities involve foreign workers, with those on estates and land development schemes being mainly hired through contractors, while those on independent smallholdings are usually provided through dealers purchasing fresh fruit bunches or latex. A key feature of Malaysian agriculture has been the migration of younger people to urban areas since the 1980s, with numerous estates today having almost lost their original Malaysian workers, and with land development schemes and smallholdings being chiefly inhabited by older people. Harvesting oil palm bunches with long sickles, for example, is difficult for older people, and without the foreign workers would be largely impossible. It is predominantly a job for young males of 20-35, who can easily conduct such work on a regular basis.
Oil palm and rubber
Oil palm and rubber continue to do well, despite their reliance on migrant labour. Palm oil commands relatively high international prices, which are sustained by high persisting demand in both the food and non-food sectors. The latter is especially connected with biofuels, where petroleum is predicted to grow scarcer in relation to burgeoning global consumption. Rubber too remains a vital industrial product, and has seen a quadrupling of price over the last decade. It also has favourable forecasts for the future. Returns to producers from these crops are accordingly high, and there is as well substantial ‘downstream’ development into manufactured products. Hence both estates and Felda have important manufacturing interests, which are also taking in palm oil and rubber produced in neighbouring countries.
Another positive feature of both oil palm and rubber are the associated research facilities, mainly financed by government but also operated by estate companies. These have produced a stream of vital new innovations over the years, enabling crop productivity and quality to be raised and costs to be reduced. Such innovations can be readily absorbed by the estates and land development schemes with their centralised management structure and access to capital, but are more difficult to adopt on independent smallholdings. This research continues strongly, although the emphasis has moved to some extent to facilitating downstream aspects that enable Malaysia to compete effectively on international markets.
Despite this good picture, however, there are major problems for the future, one being the rising cost of labour associated with increasing wages in neighbouring countries from which workers are recruited. It is not unusual in 2012, for example, for workers in West Java to earn Rp1.600.000 ( RM600) per month. This is still below the Malaysian plantation wage, but the rapid expansion of Indonesian manufacturing could push Jakarta wages up to RM1,000 per month within a few years. At that stage Indonesian workers would hesitate to come to Malaysia without wage increases well above this level. Such increases can be absorbed by the Malaysian oil palm and rubber producers, but will reduce profits substantially. This development emphasises the importance of labour-saving technologies, which are easier to secure in rubber than in oil palm.
Another emerging difficulty is the growing scarcity of land for further expansion. The estates have doubled in area over the last two decades, and would like to expand further in a move I personally believe undesirable. But the overall difficulty of scarce land is connected with the need for woodland preservation, where the general Malaysian consensus appears to be that 50 per cent of the land area should be retained as forest. The figure is below that already on the peninsula, but above it in Sabah and Sarawak. Thus while some further expansion may occur, the emphasis will soon shift from extensifying to intensifying production on existing areas. There is good scope for further productivity rises in the intensification process, and research and extension agencies need to concentrate on this.
A further and more severe difficulty entails promoting oil palm and rubber improvements on the large sub-sector of individual smallholdings. Here there are special social and cultural problems to be dealt with, and these are examined below.
Rice
This relatively small sub-sector is a sphere where Malaysia faces continuing problems in promoting change and improvement. It is largely, although not exclusively, a subsector operated by independent Malay family households. The two overweening official policies have been to assist these households in securing better livelihoods, while at the same time obtaining self-sufficiency in national rice consumption. Thus generous policies of financial assistance and technical help have been pursued for 30 years, and have obtained some improvement. But in 2012 only 71 per cent of rice is being produced in Malaysia, while yields are still lower than those under comparable conditions elsewhere. Costs of production, on the other hand, are considerably higher. Many rice producers remain locked in to a relatively unproductive agricultural system, and the gap between their and urban incomes has grown wider.
There seems little doubt that Malaysian policymakers and Malaysians broadly favour the idea of some self-sufficiency. This is because there have been times, as in 2008 and 1974, when international rice shortages severely threatened Malaysian supplies, and such difficulties are likely to re-occur. But it should be possible to improve production facilities in a way that benefits participating farm households, while at the same time achieving part of the self-sufficiency objective. There are difficulties in land tenure which need to be overcome so farmers can get bigger holdings, and an urgent need for improvements in extension along the lines suggested below.
Looking to the future
As already noted, the four elements in critical transition of investment, technology upgrading, institutional reform and changes in state-society relations all have roles in transforming Malaysian agriculture. There is indeed continuing investment and technology upgrading in the cases of the Malaysian estate and land development sub-sectors. The directions of this investment and upgrading nevertheless raise many questions, and there are additional issues of institutional structure and of how the state should act in facilitating progress. These important aspects of transition will be explored in a subsequent contribution.
The focus of the remaining discussion will be on the role of the four elements in critical transition to improving the most backward sector of Malaysian agriculture, the independent smallholdings. These smallholdings, which in different parts of Malaysia are importantly involved in cultivating oil palm, rubber and rice, have big potentials for better performance. They are also in many ways the most important players in the total Malaysian rural scene.
The basic goal in improvement of independent smallholdings is to build a modern dynamic small farm agriculture, based largely on family households and producing returns which at least match those secured from alternative urban enterprises. This goal is not easy to attain, and is attended by needs for change in many social and cultural aspects springing from traditional society. One need is the institutional reform of land tenure, which as suggested above restricts possible increases in holding size. Such tenure is a State matter in Malaysia, and deserves far more attention than it has done to date. Another need is in technology upgrading through providing more information, and this is associated with the further need for investment in funding new innovations.
There is finally the state-society need for government to facilitate the other 3 needs of critical transition. One major vehicle for this is the provision by government of an extension service effectively supplying information and training, and facilitating the provision of appropriate funding. Good extension services have been crucial to small farm development in many countries around the world, with part of this process entailing progressive adjustment by extension personnel to the burgeoning needs of small farmers. A promising recent start to this end in Malaysia was the initiation three years ago of the ‘Tunas’ oil palm extension service of the Malaysian Palm Oil Board, which is now directed to assisting oil palm independent smallholders and administering planting grants for establishing high-yielding materials. This national service of some 200 extension officers, backed up by specialists, is an effective example of what can be done.
Malaysian agriculture is a sphere of major economic potential, whose transformation needs to be underlaid by substantial social change. There are many possibilities of improvement, and these deserve to be actively canvassed. National discussions of agricultural improvement have however, been unduly limited, and that the sector deserves more attention in policy thinking and implementation.
Dr. Colin Barlow has worked on the socio-economic problems of Malaysian agriculture for many years, being especially involved with oil palm and rubber. He is currently CEO of the Nusa Tenggara Association, an Australian NGO engaged in rural development in eastern Indonesia. He is a visiting fellow in the Department of Political and Social Change at the Australian National University.
Reference
Abdul Rahman Embong and Tham Siew Yean (eds, 2011), Malaysia at a Crossroads. Can we make the Transition? Bangi: Penerbit Universiti Kebangsaan Malaysia.
Jati Bening, Bekasi, Indonesia, 27th April, 2012.
This could be all summed up by taking a market orientation towards agriculture. The “industry” has for far too long left matters for the government to take the lead and this “mindset” has failed the nation. Agriculture is a business just like any other and requires business practices just like any other industry sectors, not a centralized planning approach. This approach should have died with the old Soviet Union.
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Murray,
I do agree with you that the level of government intervention in the Malaysian economy is disconcerting.
However, with the “efficient market hypothesis” now clearly relegated to the backwaters of economic theory, how do you explain that markets will force or steer the transformation as argued in this article?
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Who mentioned anything about the “efficient market hypothesis”? This is also a 20th century myth postulated by Adam Smith & co. A market orientation concerns seeking, identifying, & pursuing opportunities just like farmers do in Australia, China, New Zealand and South Africa in “new rural industry” approaches (the old new crops framework). Its about developing new supply chains that create value chains (see Porter and others), and even further than that, putting opportunity at the centre of agriculture strategy. Doing it any other way tends to create new industries that cannot be sustained. History has shown that only entrepreneurs can do that (see Opportunity, Strategy & Entrepreneurship, Vol. 1,Chapt 2). It is the Swifts, the Edisons, the Ford’s the Rockerfellas that created transformation – certainly not the hidden hand of Adam Smith. Malaysian agricultural transformation will only occur through visionary entrepreneurs who become the “champions” of change.
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I would like to see Greg Lopez explain that one a bit. At first, I figured the comment came from one of the random nuts that frequently comment here (or maybe that Land Destroyer), but Greg typically seems like a serious commenter.
Obviously nothing in the article related to the EMH, so maybe Greg could try again using terms he understands.
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Hi Leah,
Will do – give me a little time to provide a more comprehensive take on the role of institutions and entrepreneurs in Malaysia.
But here is the basic argument. I am of the view that governments have an important role in coordinating markets. Therefore creating institutions (the right type) is important in creating and encouraging the right type of entrepreneurship. The Government of Malaysia has been successful to a certain extent in driving certain industries but now have to find a new role (and restructure its current institutions) to allow the private sector to drive the economy. However, simply allowing the markets to do this may not always be the correct choice as there are many formal and informal institutions in Malaysia that provide an unfair advantage to certain groups of people.
Murray notes in #1 that a market orientation towards agriculture would solve the challenges faced by Malaysia’s agriculture sector (investment, technology, institutional reform, state-society relation).
What is understood when the term markets (or market orientation) is used (Leah & Murray, and others – please correct me if I’m wrong) is that there is little or no government intervention. The assumption is that rational individuals would maximise their utility based on perfect information. Institutions are taken as a given, and entry and exit are costless. All of these combines to create an efficient market.
This, everyone knows, not to be true.
Murray in #3 then clarified that he meant entrepreneurs and creating opportunities.
This I find interesting and contradicting for two reason:
(1) anyone is familiar with Malaysia, will know that there are many types of “entrepreneurs” in Malaysia and the larger question of the many types/varieties of capitalism in Malaysia. Murray’s examples of Ford, Rockefeller and Edison are interesting and can be interpreted in many ways including Rockefeller being called a robber baron and Edison accused of stealing the ideas of other inventors. The current turmoil in US (who gets bailed out, what type of tax breaks, what type of regulation, etc) demonstrates the power of certain types of entrepreneurs/capitalists. The same challenges exists in Malaysia.
(2) On developing new supply chains and opportunities. This has largely been driven by government support in the highly successful economies of East Asia (Japan, Korea, Taiwan, Singapore) and to a certain extent Thailand, Indonesia and Malaysia, and are now being emulated by China and Vietnam.
When Porter helped develope the Industrial Master Plan II for the Malaysian government, it was based on the assumption that government’s can change the competitiveness of a nation.
I find this not to be correct as it is firms that are competitive, and not nations. However, going back to my first point, government’s – especially of developing countries – have a critical role in facilitating the right type of entrepreneurs to develop competitive firms.
And this is the central question that Malaysia needs to answer – what kind of institutions should Malaysia have to facilitate “genuine entrepreneurship.”
I see contradiction in what Murray says but I believe this maybe more a case of our different understanding of the terminologies used.
ps: Have a read of the type of entrepreneurs that Malaysia currently encourages.
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Hi Greg,
Thanks for your reply as well as for responding positively to my comment, which could have come off as a bit snarky.
The Efficient Market Hypothesis refers to prices of assets in broadly traded public markets in which transactions are easy to make and information is universally (or broadly) shared. I don’t think it is relevant to this discussion. Whether it has been discredited by recent events or not would be an interesting discussion (and one that I am not sure I have an answer for), but again, not really connected to Malaysia.
http://en.wikipedia.org/wiki/Efficient-market_hypothesis
Increasing the exposure Malaysia’s economy to markets is a completely different, and more important, subject. It is, in my view, more complicated and less of an on-off switch than you appear to believe.
Influential groups are actually anti-market forces and true opening of the economy (although it may not be possible in relity) would hurt them. It is a common misconception that what good for markets and what is good for rich people are the same thing, but this is untrue. Entrenched interests are protected either by institutions or the lack of them, but not necessarily by markets as such.
The role of Malaysia’s government in guiding the country’s economy may well have had positive impacts and could in fact be, as you suggest, net positive. However, it is also clear that it had a major role in creating many of the influential groups that you worry about. I would suggest that they are much more the children of the government than the markets (which they surely fear).
Finally, opening up to markets in a continuum and can (in theory) be done gradually and carefully.
I don’t disagree with most of what you have said in your recent reply. I also agree with what Murray said in comment #1 and think that you have at least partially misinterpreted it. No one is suggesting that Malaysia economy be thrown open and run entirely by “markets”, whatever that would mean.
The point is that while governments and the private sector have roles to play, where the line is drawn between the two is subject to debate.
I tend to agree with Murray that Malaysia’s economy needs to be moved away from state planning and towards the private sector, which is what gave China, Vietnam, and others their fuel for growth.
But I know a lot less about Malaysia than you do and would value your opinion.
I am in the middle of a bunch of things, so this reply is quick and rough. I don’t mean to be too critical as I do think your opinion is important in this discussion (more so than my own in fact).
I would just encourage you to think a bit more about the terms you are using and what they mean. It does seem to me that you have adapted a political view of markets rather than a practical one – but I may be wrong. By the way, one can have a practical view of markets and be against opening an economy to them.
Markets have good and and aspects, but “markets” is not synonymous with letting rich people have their way. Much as capitalism doesn’t necessarily benefit current holders of capital. Markets are one of the most important ways in which the current holder of power and capital are overthrown and replaced by those who are more innovative.
http://en.wikipedia.org/wiki/Creative_destruction
By the way, I don’t think anyone would suggest that we find a husband or wife through any system but the marketplace. When it comes to personal decisions like this we certainly wouldn’t want the state to plan what is best for us. It is not markets that you should fear, but the manipulation of them. I also do think governments have a role to play in guiding (and developing) markets and protecting people from their excesses. The question is balance.
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Appreciate the advice Leah.
I do think of markets in political terms.
The assumptions that under gird the EMH also under gird factor markets in neo-classical (now conventional) economics [rational/utility maximising agents, perfect information, costless exit & entry]
This articles captures how I see institutions.
http://www.newmandala.org/2011/08/22/malaysia-%E2%80%93-a-simple-institutional-analysis/
I agree with your comment on increasing market exposure (economic liberalisation).
My main contention is specific to Malaysia: that with the government being a significant market player, and with an economic and social structure tied to a particular political system – one that rewards political ties, racial and religious heritage, and penalises entrepreneurs with differing views, etc – how does one go about creating genuine entrepreneurs.
Here is a practical example of these discussion – deciding on biofuel support.
http://www.iisd.org/gsi/sites/default/files/final_malaysia_2.pdf
Cheers.
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Leah Hoyt: “Markets have good and and aspects, but ‘markets’ is not synonymous with letting rich people have their way. ”
So true, and their operation can be improved and be made more equitable.
Thanks. Love this article and debate. Takes more than a few seconds to digest, which probably puts it beyond the reach of most, but important nonetheless in this age of the tragic “web traffic = importance” mindset 🙂
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Greetings All,
Sometimes sticking to dogma hides the real issues and the meaning gets lost in the rectric. point well made on Porter’s Competitive Advantage of Nations. But when you open the book one will find out its about industries within nations rather than the nations themselves. If you go back and read Porter you will realize how brillent and ahead of his time the work was. of course he missed some variables, but the beauty about this world is no one is perfect, so it leaves room for others to make incremental improvements. Schumpeter called it creative Destruction.
The case of Malaysia is a very tradegic one. After having risen to a state of competitive advantage over other producers through the estate model in the 1980s, it started to slip away with lack of fundamental research in the cocoa area where pest and diseaese took its toll. Lower cost producers came in and eroded Malaysia’s competitive position. Those in the agriculture sector became complacent and relied upon palm oil and rubber as returns were almost guaranteed. Public servents and agency leaders misunderstood Tun Dr M’s focus on IT and neglected the sector (For example at the time MARDI only had enough funds to run air conditioning twice a week). Tan Sri Dr Yusof’s (MARDI DG at the time) call for crop diversity was ignored. Today the sector is 30 years behind the times – not knowing what direction to go.
One can say many things but that is the fundamental problem. One cannot rely upon the Malaysian Govt to fix the problem. Cabinet level people are too engrossed in sexual issues and politics. Agency leaders are too busy polishing apples, and there is basically very little extension activities left in the country. Research is ad hoc. No one in government has any vision for the future. There is not enough labour and the days of importing labour to satisfy shortages are gone.
One must also look by sector. The average age of small holders is 65+, the image of agribusiness is not very appealing to potential entrepreneurs and school leavers. There is no humus left in soils, the groundwater and dams are full of pesticide residuals, and disease is prevailent in Malaysian soils.
Even with any change of governement it is extremely (but not completely Penang is a shining light of transformation) unlikely that there will be any change in the way the country is governed. In fact there is opinion the country may go back to the dark ages with the “Anuar purge” that may occur if he gets into govt.
The reality on the ground – vis a vis any theoretical pontification – is that the only hope for transformation are from “champions” who develop successful and diverse agricultural business models that work and can be emulated by others.
Finally we do not live in a perfect world and people are not black and white. yes rockerfellow was unscrupulous in business but became the biggest philantropist in history. Your desription of Edision although not totally untrue is emotionally exaggerated to make some point I feel. Its real life just as the peoples’ entrepreneur Tony Fernandes is facing investigation by the Australian legal system for unfair pricing practices. Nothing is perfect and nothing is forever. Greg, markets are far more complex than the biased economic theories you wish to cling to. Markets are about developing brands with emotional pull (organic, ethical, halal, fairtrade, etc), value chains, and successful business models rather than the invisible hand. (Maybe there is opportunity for a massive paradigm change here in adopting a Tawhid economic model to eliminate speculation and riba to create a fair and equatable society to replace the fuedalism that still exists).
You are highly intelligent and winning points in blogs here and there will not do justice to the knowledge you possess. Please use it constructively to solve the problems of nations and Im sure you will gain all the recognition you are yearning. I believe you can do this and have a great future as a scholr ahead of you. Learn from Edison – success is in the application of knowledge not the knowledge itself.
Best Regards
Murray
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Appreciate the feedback Murray.
Not looking for any recognition, or scoring points – just one of the millions of Malaysians trying to put this nation (Malaysia) back on track and New Mandala provides a platform for intelligent debates.
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Greg,
Glad to hear that and Im sure Malaysia needs you. There’s a lot of work to do and the answers to the problems are actually not easy to find.
Look forward to reading your future comments.
Best Regards
Murray
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Colin,
Have you looked into the rice estates that are forming in MADA? I have seen a presentation where officials claim these estates take advantage of economies of scale to increase rice yields up to 6 ton/hectare. From what I understood, the estates act somewhat like a farmer co-op. The officials who presented also said that the estate program also diminished problems of young people leaving for urban areas.
I have no idea how effective they really are, but it appears that there might be some institutional innovation going on in that area.
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Its probably none of my business but I feel passionate enough to say a few things about paddy farming here.
Rice Estates:
If you read the masterplan of the NCER the rice estates are owned by an anchor company who leases the land off the smallholders to consolidate the land together, etc to gain the so called economies of scale and increase yields etc. The smallholders have the privalege of being able to offer their labour back to the anchor companies to earn a wage.
There are a number of reasons why rice yields are low. The NCER masterplan blamed poor seeds and economies of scale. Rice farming is usually undertaken through a number of contractors doing certain jobs on a harvest, tractoring, planting, harvesting, etc. Therefore its difficult for any body to0 make a profit when there maybe three or four contractors involved. In addition it is illegal to utilise different varieties of rice in any area designated for a certain strain. Therefore if there is a market for aromatic rice, one can not legally plant this. The farmers in pattalung in Southern Thailand plant various local varieties and make their own consumer products and are now exporting the finished product making a value added return. In Malaysia however farmers are required to sell their crop to a specified buyer by law, and thus cannot value add their product. i.e, making a brand of rice milk out of a paddy harvest is illegal in Malaysia.
SR rice also could be introduced where yields can go up to 16 tonne per Ha rather than the 7-9 paddy is currently achieveing in Kedah/Perlis.
As the NCER report says – Malaysia’s paddy farming does need reform but not into a fuedal model as proposed. malaysia is certainly business friendly, but needs to become market friendly as well so that farmers could become real entreprenrs rather than bonded wage earners.
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Murray,
Thanks for responding to my comment about the estates. I’ll admit I don’t know much about the set-up of the rice estates. They may truly be feudalistic. I have only seen one presentation on them, and I know very little about Malaysia’s agricultural set up. I was merely interested that there has been some institutional changes.
As for higher rice yields, are you pointing toward the system of rice intensification (SRI)? My experience with SRI implementation in Indonesia has been very mixed, with some farmers preferring not to use it due to the extra labor involved and lack of increased benefit due to low rice prices. In other areas it didn’t work at all due to climate and soil factors.
Although I know very little about the Malaysian situation, you indicate that farmers are tied to specific buyers (who, I assume, are able to control prices). If SRI were introduced wide-scale, wouldn’t farmers there run into the same problem as Indonesia, i.e. increased production fails to outpace the increased labor costs?
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JR,
Thanks for the information on SRI in Indoesia. thats very interesting. It also shows an attitudional change towards the value of labour on the land.
As agricultural is situational, as you have said the results will vary and the markets will also vary. There would of course have to be research before the introduction of new methods (some is being done) and the issues of labour etc, are very critical in malaysia (more so than Indonesia). Therefore process research is also required to look into how this method of farming can be adapted to our situation here. And of course the most important aspect of research is the economic study to model the effects of changes on costs.
But probably before that there needs to be debate about freeing up of the market and particularly the supply chain here in malaysia. If innovation in rice paddy production and marketing is forbidden by law, then it is highly doubtful that any innovation will occur.
This also leads to an even bigger question: Should malaysia actually keep growing rice paddy? I would expect increasing urbanization to cut 20% of the land away now under rice paddy by 2020 anyway. Malaysia certainly has to sit down and determine where their agricultural opportunities are in the future.
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Learning a lot about agricultural policy in Malaysia from this thread as it develops.
The agricultural sector and policy seems to be relatively neglected in Southeast Asian Studies given its real world importance for the people who live in these countries, not and even more so in the past.
Are there any ASEAN-wide bibliographies or review articles? Or for the individual countries?
This area is bound to become more important as ASEAN heads towards integration and the Asean Economic Community (AEC) in 2015.
🙂
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JR,
As far as Malaysia goes maybe a better word is neo-fuedalistic. But this is the paradigm people in Malaysia work under which patterns and directs thinking, even policy. Micro-entrepreneurs expect a handout before they venture into business – this haas become part of the culture for bumiputra entrepreneurs, at least in the rural North of Malaysia.
From my perspective 2015 is a myth. Thailand is yet to determine how it is going to govern itself. malaysia is totally wrapped up in its own domestic politics, Vietnam still bureaucratic, Burma still working on internal reforms, etc. The freedom of labour after 2015 is still a boogyman for countries such as Thailand. This is preventing border crossings using only ICs etc. ASEAN still has so far to go and is so neglected by governments in the region as a body that can achive things.
As far as internal policies, malaysia at this moment is tending to make up policy on the run. Its amazing what they dont have a policy for. There is yet still no bio-diesel policy in the nation, etc. Malaysia’s 5 year plans have become more an academic and document of dogma rather than a working document. Now that PEMANDU is taking over the writing of plans and feasibility studies most documetns tend to be the rectric of MBA wizz kids. This is ironic as malaysia once had one of the best public services and planning mechanisms in the region. Malaysia’s central planning is better than Vietnam’s.
In Thailand the public service with or without elected govt seems to be making up policy and there is one in place. They arent doing too bad on the ground. Their approach is very different than malaysia, more bottom up (initiatives at tambun level) than top-down (all from Putra jaya) as it is in Malaysia.
As far as reading about these policies, most are online, i.e, 10th malaysian plan etc. Proper review articles few because nobody in Malaysia likes to criticise. At any local conference most speakers in agriculture and biotchnology are actually from govt agencies speaking about policy and objectives. In Thailand a lot is in Thai, so diificult for non-Thai readers.
These are just some random thoughts and personal opinions (rightly or wrongly) on your comment above.
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Murray Hunter: “From my perspective [Asean Economic Community in] 2015 is a myth.”
Yes. The obstacles do seem kind of insurmountable and it was certainly interesting to hear you start to enumerate these obstacles because, frankly, not enough critical analysis seems to get written.
I guess what I am really wondering about is the historical background to the policies to put it all in context, wonder whether any PhD dissertations have been written or researchers working in this area?
[Note: The survey of Southeast Asian economic history in Brown, Ian (1997) Economic change in South East Asia c 1830-1980. OUP (Kuala Lumpur) has a little matrix of cross-Southeast Asian research topics that: 1. have been done and that 2. need to be done in the future, wonder how Malaysian and Southeast Asian agricultural sectors fit into it.]
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Murray Hunter,
Thanks for the comments. As you note, the Thai bureaucracy is where most agricultural policy is made. This is due to the fact that the cabinet and parliament are rarely the source of specific policies – instead they provide a great deal of latitude to the Ministry of Agriculture (along with other ministries) to develop on-the-ground policies. For example, the country is still using irrigation law from 1932 as water law revisions have failed to get through the legislative process. Thus the Royal Irrigation Department has a free hand to determine water policies, as long as they don’t run afoul the constitution (or a flood).
I personally think that this approach is part of the reason why the average Thai rice yield (2.9 tons/Ha) is much lower than the world average (4 tons/Ha) and lower than its neighbors.
As I noted earlier, I don’t know the Malay set-up very well, so I appreciate your insights. It is interesting after the Malay government’s ability to upgrade in so many products (rubber for example), that they haven’t been able to exhibit much innovation in rice production. You seem to indicate some negative incentives in the Bumiputra policies and in the rice buyer laws, which would certainly run counter to individual farmer innovation. What about how the civil service acts itself? Is there much innovation going on there?
Like you said, the ASEAN efforts will certainly run into a number of obstacles.
Jonfernquest – I don’t know of any bibliography that puts together all of the agriculture policy work in the region. Most of the dissertations I am familiar with are single country studies on a single sector (i.e. cassava production in Thailand; irrigation in the Philippines).
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“Cassava production in Thailand” was a good hint, yielding immediate background info with one web search: Evolution and organization of cassava value chains… (2010) Julia Tijaja, Development Policy and Practice, the Open University, UK. Agricultural policy is of such importance to the Thai economy and the issues of inequality that red-shirts in particular are concerned with, yet seems to attract little interest, strange.
JR: “…the Thai bureaucracy is where most agricultural policy is made. This is due to the fact that the cabinet and parliament are rarely the source of specific policies – instead they provide a great deal of latitude to the Ministry of Agriculture (along with other ministries) to develop on-the-ground policies. For example, the country is still using irrigation law from 1932 as water law revisions have failed to get through the legislative process. Thus the Royal Irrigation Department has a free hand to determine water policies, as long as they don’t run afoul the constitution (or a flood). I personally think that this approach is part of the reason why the average Thai rice yield (2.9 tons/Ha) is much lower than the world average (4 tons/Ha) and lower than its neighbors.”
Wonder how much objective academic outsider study of irrigation and the rice sector has been done or whether the whole thing is just untransparent with bureaucratic walls around it and therefore not studiable or researchable. With all the non-transparencies in current rice policy this would seem to be the case.
Low productivity must be related to high small-holder participation motivated by equity rather efficiency. Agribusiness and large plantations would no doubt raise productivity but go against the longstanding smallholder policy/philosophy of the government (always expressed, by for example ministers interviewed in newspaper articles, as protecting smallholder Thai rice farmers from foreign intrusion, which seems more ideology than reality since there must be large-holder Thai cultivators in the rice sector).
Wonder if extensive stats are publicly available for irrigation and production and if they’ve been used in microeconomic level analysis of productivity, if not then this has surely been done in China and India (will have to look into this). Thanks for thought-stimulating discussion 🙂
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jonfernquest and Murray –
I too have enjoyed this discussion. Thank you. It has given me food for thought.
The dissertation I was thinking of was Somboon Siriprachai’s “Control and Rent Seeking: The Role of the State in the Thai Cassava Industry.” It is difficult to get a hold of, but it has a very good discussion on policy-making in Thai agriculture (although it is a bit dated). Somboon was an economics professor at Thammasat University; I believe he wrote on rice policies as well. I apologize I couldn’t recall the reference off the top of my head earlier.
As for lower rice yields in Thailand (and other Southeast Asian countries), I don’t know if small-holding can really be blamed. Otherwise Taiwan, South Korea, and Japan would be expected to have lower yields. Instead those countries have average yields at between 6 and 7 tons/Ha.
My opinion is that the policy framework (markets, ministry involvement, price controls/guarantees, and farmer education and agriculture extension) is more of a problem. Some policies create disincentives and obstacles for farmers to increase their yields rather than encourage increased production. This seems similar to what Murray indicates occurs in Malaysia.
About data availability in Thailand, I think a great deal is available, but it is difficult to sift through. Surveys done from year to year don’t necessarily collect the same data, and (most frustratingly for data compilation) village labels used in reports can change from year to year. Data code books are not always clear, either. If you read Thai it is much easier, but still a struggle.
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Thanks so much for all these comments that essentially constitute priceless hints on how to begin research, very tempting. (NB People pay big tuition bills for this sort of thing, also for the piece of paper/diploma that validates that they were able to provide a partial answer, too bad everyone who is capable of doing this, especially poor people, are not able to do it, an artificial scarcity of learning and learning opportunities that doesn’t have to exist).
JR: “My opinion is that the policy framework (markets, ministry involvement, price controls/guarantees, and farmer education and agriculture extension) is more of a problem. Some policies create disincentives and obstacles for farmers to increase their yields rather than encourage increased production.”
This would be very interesting to untangle. Continually thinking about exactly this as I read the frequent articles on Thailand’s rice sector nowadays. Thanks 🙂
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I am sorry to say this. Just want to express some statement. Majority (98%) writings by non-SEA people or non-Asia people (western people) are cannot be trusted. Just let SEA/Asia people write on our perspectives pros and cons about Asia. Your (western)comments are accepted but not your ideas and recommendation. Thank you.
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am happy for the improvement on interesting after the Malay government’s ability to upgrade in so many products (rubber for example), that they haven’t been able to exhibit much innovation in rice production more wisdom.
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