The slide in commodities prices offers agriculture players and smallholders in Sarawak the opportunity to venture further into the downstream industries.
Despite weak commodities prices, demand for food remains robust with growing population and changing lifestyles of the people.
With healthy demand for food and agriculture produce, smallholders and agriculture players should capitalise on producing more for commercialiastion as they could enjoy higher return from their businesses.
Sarawak, with its vast amount of land and rich in natural resources, has the potential to enhance the development of the downstream industries especially food processing.
Deputy Minister of Rural and Regional Development Datuk Alexander Nanta Linggi said the development of downstream industries especially food processing in Sarawak Corridor of Renewable Energy (SCORE) will create higher value products for sale.
He said the commercialisation of higher value products will enhance the agriculture sector and in turn increase the state’s gross domestic product (GDP) which will also boost Sarawak’s economy.
“Strong global demand, together with on-going efforts to modernise and mechanise processing of food crops such as rice, fresh produce and spices should contribute to sustained growth in the agriculture sector.
“Industrialisation within SCORE will provide greater demand for agricultural inputs as downstream food processing activity expands.
“By prudently managing its natural resources and emphasising on more downstream processing, Sarawak is ensuring higher value from agriculture produce,” he opined.
Sarawak continues to grow its niche economic activities and resource-based industries, Nanta added.
Sarawak also plays a central role in Malaysia’s agriculture sector as a whole producing foodstuffs for local consumption and cash crops for export.
Concurring with Nanta, the Regional Corridor Development Authority (Recoda), the agency tasked with overseeing and managing SCORE believes the development of downstream industries will enable the state to enhance its economic growth.
Its chief executive officer Tan Sri Datuk Amar Wilson Baya Dandot is confident that downstream industries could spur the economic growth of the state in the future.
He remarked, “Downstream industries have the potential to grow the state’s economy. The cluster of downstream industries (to be developed) will be huge.”
At the same time, Samalaju Industries Sdn Bhd chief executive officer Dato Isaac Lugun foresees huge opportunities for downstream industries to set up their businesses in SCORE following the construction of Southeast Asia’s first integrated phosphate complex in Samalaju, Bintulu which will come on stream in the future.
Malaysian Phosphate Venture Sdn Bhd’s executive director Lim Lee Wan was quoted as saying, “The Sarawak phosphate complex will enable Malaysia to both reduce imports of phosphate products and to expand the production of halal animal feed and fertilisers.
“For Malaysia’s food and fertiliser industries, this will enhance both supplies security and price competitiveness as well as establish a platform for future export oriented downstream industries,” Lim said.
Meanwhile, the integrated phosphate complex will have an approximate annual production capacity of 500,000 metric tonne (mt) of phosphate and related products.
Cahya Mata Sarawak Bhd’s (CMS) group managing director Datuk Richard Curtis noted phosphorus is an essential base nutrient for animal and plant growth with no substitute and is widely used in food, feed and fertiliser products.
He believed the demand is growing due to population growth, changing dietary preferences and the increased use of fertilisers in the agriculture sector.
Besides the production of animal feed and fertilisers to be used for the agriculture sector, there are also other categories of food processing, for instance aquaculture.
According to Recoda, aquaculture is the fastest growing form of food production in the world.
Recoda said the value of the global aquaculture industry is projected to increase from US$89 billion in 2011 to US$168 billion by 2016, a jump of 89 per cent.
Citing data from the Food and Agriculture Organisation of the United Nations, Recoda said human consumption of aquaculture products will grow from 30 per cent in 2000 to 60 per cent in 2020.
The aquaculture and fishing industry, which is earmarked as one of the 10 priority sectors in SCORE could enable agriculture producers to reap greater monetary returns in the future if their products are being commercialised for exports.
Recoda noted Asia is the world’s largest fisheries market, estimated to be worth US$32 billion.
Meanwhile, US-based market research and consulting firm Grand View Research Inc said the global market for aquaculture is expected to reach US$202.96 billion by 2020.
China was the largest market for aquaculture, accounting for about 53 per cent of global market share and is expected to demonstrate rapid growth due to favourable climate conditions for aqua farming, availability of resources and labour.
According to a World Bank reportm by the year 2030, aquaculture will produce half of the world’s supply of fish, including fish for food and other products such as fishmeal.
The organisation projected that 62 per cent of the seafood we eat will be farm-raised to meet growing demand from regions such as Asia, where approximately 70 per cent of fish will be consumed.
World Bank added the demand for fishmeal and fish oil will likely become stronger, given the fast expansion of the global aquaculture and sluggishness of the global capture fisheries that supply their ingredients.
During the 2010 to 2030 period, World Bank forecasted that prices in real terms are expected to rise by 90 per cent for fishmeal and 70 per cent for fish oil.
Nonetheless, with significant improvements anticipated in the efficiency of feed and management practices, the projected expansion of aquaculture will be achieved with a mere eight per cent increase in the global fishmeal supply during the 2010 to 2030 period.
The World Bank also believed the rise in seafood demand gives countries the opportunity to expand and improve responsible fish and shellfish farming practices.
There is a major opportunities for developing countries that are prepared to invest in better fisheries management and environmentally sustainable aquaculture.
World Bank’s advisor on fisheries, aquaculture and oceans Jim Anderson said, “Aquaculture will be an essential part of the solution to global food security.
“We expect the aquaculture industry to improve its practices in line with expectations from the market for sustainable and responsible produced seafood,” he said.
Following this train of thought, Sarawak Economic Development Corporation (SEDC) through its wholly-owned subsidiary company PPES Aqua Santubong Sdn Bhd is undertaking prawn farming at Kuala Santubong, Kuching.
A check on SEDC’s website revealed that the farm comprises 75 grow-out ponds with annual production of 1,700 mt.
The corporation said it planned to have a total of 103-grow-out ponds.
SEDC has also applied for new areas at Kuala Santubong and Tanjung Manis to expand its aquaculture development.
Other than that, Sarawak through SEDC is farming livestock to enhance the growth of the agriculture sector.
SEDC has been involved in livestock activities through its subsidiary company PPES Ternak Sdn Bhd (PPES Ternak) for more than 30 years.
The company has been one of the main suppliers of livestock and fresh meat in Sarawak.
The activities of PPES Ternak include supply of beef, goat an deer breeding, cattle feedlotting or fattening and abattoir services.
It has a farm in Miri known as Karabungan Farm which spreaded across 1,500 acres (607.28 hectares) of land and has an abattoir centre in Bintawa, Kuching.
Besides that, SEDC owns a 280,000 hectare cattle breeding station in the Northern Territory, Australia through its Australian registered firm, Rosewood Station Pty Ltd.
The corporation observed that besides cattle fattening, the farm also produces crops such as wheat, oats and sorghum.
Additionally, Recoda said SEDC plans to undertake a larger scale of cattle breeding to help reduce the state’s dependence on the import of cattle and beef from Australia.
The agency noted the plan for the state is to encourage the development of modern smallholder livestock production systems that benefit rural communities and implement more commercial farms under the guidance of SEDC.
The state has established the Tanjung Manis Halal Hub within SCORE as one of the centre of halal industry under which livestock is included as one of the ten priority industries to drive the state development, it said.
The state is looking for private sector participation in the development of both upstream and downstream elements of the livestock industry.
Recoda added Sarawak also plans to integrate livestock with oil palm plantations, believing it provides an excellent source of grazing with many grass variants that grow on oil palm plantations containing nutrients that are useful for livestock farming.
Moving on to oil palm plantation, Sarawak Land Consolidation and Rehabilitation (Salcra) has been tasked to develop more oil palm plantation.
Land Development Minister Tan Sri Datuk Amar Dr. James Masing noted that Salcra had made a bid to develop 60,381 hectares of land for oil palm cultivation and new development or replanting of existing estates which involved a total bid of RM815.6 million from the federal government.
He observed that out of that amount, RM123 million had been approved for the 2016-2017 rolling plan under the 11th Malaysia Plan (11MP).
For state projects, Masing noted Salcra had been approved to implement four projects with a total allocation of RM51.1 million consisting of RM29 million grants and RM22.1 million soft loans
He observed that Salcra through its subsidiary company Salcra Jaya Sdn Bhd will be developing the Tunoh area in Kapit.
A finding from Recoda’s website showed that Tunoh has been earmarked for the development of oil palm and forest plantation as well as agriculture and eco-tourism.
It is also one of the growth nodes which will be developed in the 11MP.
According the to the Ministry of Land Development’s website, the total area across Sarawak developed into oil palm estates as at Dec 2014 was 1.28 million hectares.
For planted area, there were 288,064 hectares in the southern region, 408,192 hectares in the central region and 585,483 in the northern region.
In the southern region, the planted areas were divided into Kuching (58,089 hectares), Samarahan (116,254 hectares), Sri Aman (55,288 hectares) and Betong (58,433 hectares).
In the central region, the planted area were Sarikei (10,444 hectares), Mukah (227,666 hectares), Sibu (109,038 hectares) and Kapit (61,044 hectares).
Likewise, in the northern region, the planted area were Bintulu (205,863 hectares), Miri (358,429 hectares) and Limbang (21,191 hectares).
Besides, there are 68 palm oil mills in Sarawak with capacity production of 16.2 million mt per year, four palm kernel crushers with 697,200 mt per annum and six refineries with 2.9 million mt per year.
Apart from that, Federal Land Consolidation and Rehabilitation Authority (Felcra) Bhd Sarawak has developed land spanning 6,286 hectares in Muara Tuang, Asajaya, Sadong Jaya, Simunjan and Sebuyau since 1992.
Moreover, SEDC through its joint venture also involved in the development of oil palm plantation in Lundu, Kuching measuring 3,125 hectares.
In Miri, SEDC has a joint venture with Sarawak Oil Palms Bhd which involved in the development of oil palm plantation at Karabungan measuring 2,023 hectares.
Another food staple that has the potential to be cultivated in Sarawak is paddy.
Masing believed the Sungai Tunoh basin in Kapit could become a major rice production region and one of the rice bowls of Sarawak.
He said, “Sungai Tunoh located on the alluvial flood plain at the foothills of Bukit Mabong is suitable for large scale commercial wet paddy cultivation as the land is flat and very fertile.
“The Iban community living there have been planting paddy in Sungai Tunoh river basin for years.
“Its fertile soil has offered not only good paddy harvest but it is an ideal place for the planting of tropical fruits and all kinds of vegetables,” he said.
Masing added the Agriculture Department and private companies had conducted experiments on planting paddy and other crops there.
Other locations which have seen paddy farming are Skuduk Jepak in Siburan, Tanjung Purun (Lundu), Lubok Nibong (Saratok) and Stumpin, Bijak and Lingga in Sri Aman.
Besides, there is also the famous rice from Bario, cultivated in the Kelabit Highlands located in the northern part of Sarawak with more than 145 hectares being planted.
Going forward, the state government in collaboration with Bayer CropScience will work on increasing the rice yield in Sarawak through a hybrid rice programme.
Last year, Sarawak through the state Agriculture Department and Bayer CropScience signed a memorandum of understanding (MoU) on the two-year partnership to boost rice yield following a successful trial.
With the MoU, Bayer CropScience will plant rice that generates better yield with the hybrid varieties with a target of reaching a total of 200 hectares by 2017.
Besides providing hybrid seeds, Bayer CropScience will provide technical advice on hybrid rice planting to strengthen cooperation and knowledge sharing for sustainable rice production.
Bayer CropScience believed hybrid rice offers higher yields and better tolerance to pests such as bacterial leaf blight and brown plant hopper.
It pointed out that hybrid rice is also more tolerant to stress such as salinity and excessive flooding compared to traditional varieties.
On top of that, the state will also widen its rubber planting coverage area.
Minister of Modernisation of Agriculture Datuk Patinggi Tan Sri Alfred Jabu noted the state’s Agriculture Department will undertake six projects to plant high yielding rubber which covers 992 hectares of land in the Telang Usan constituency this year.
Assistant Minister for Agriculture (Research and Marketing) Datuk Mong Dagang said, “The rubber industry is seen as a sector that is able to strengthen the state’s economy as well as the income of the local community.
“From 2012, the government under the National Key Economic Area (NKEA) initiative has implemented a total of 37,695 hectares of land for re-planting and new rubber planting by the state Agriculture Department with the Rubber Industry Smallholders Development Authority (Risda).
“Under the NKEA project, it has been agreed that a latex processing and latex-based rubber products hub would be built in the state.
“Among the proposed locations were Betong, Sri Aman and Sarikei,” Mong observed.
Furthermore, an area of more than 2,000 hectares in Serian has been proposed as the site for a rubber replanting programme by Risda.
Minister of Infrastructure Development and Communications Dato Sri Michael Manyin said the proposal will involve six villages.
The villages were Lanchang Sijo, Lanchang Sabai, Kakeng, Jenan, Labak Tungan and Sira.
Manyin is confident that the programme will generate better economic benefits for the villagers there while putting their native customary rights (NCR) land to good use.
The proposal is an expansion of the cluster rubber replanting being carried out by Risda for Lanchang Sijo and Lanchang Sabai which involved 66 participants covering 84.7 hectares.
Similarly, Risda has involved in rubber planting programmes involving 15 villages in Serian since 2012.
Mong encouraged plantation smallholders in the state to cultivate cash crops to increase income especially when the price of rubber drops.
Apart from that, the planting of pineapples in Sarawak will be raised under the 11th Malaysia Plan (11MP) starting this year.
Malaysia Pineapple Industry Board (MPIB) director-general Sahdan Salim revealed that under the 11MP, pineapple cultivation areas in Sarawak will be expanded to 3,500 ha from the present 1,700 ha with a projected production of 150,000 mt per year.
He disclosed at the end of last year that Sarawak. which has the second largest pineapple cultivation area behind Johor produces about 30,720 mt of pineapples per annum.
Moreover, Agriculture and Agro-Based Industry Deputy Minister Anthony Nogeh Gumbek pointed out the need to empower the growth of the pineapple industry following strong global market demand.
He opined, “The prospect of the pineapple industry in the next 10 years is very bright.
“The MD2 variety Malaysian pineapples have strong demand from the Middle East, China, Japan, South Korea and European countries.
“The government will double its efforts to produce fresh pineapple products especially from the MD2 variety which has been classified as premium agriculture products,” he said.
Nogeh noted the state — with its vast land mass and large tract of peat soil — has big potential to become the nation’s main pineapple producer.
He said Sarawak would be allocated RM4.5 million out of the RM25 million approved under the 11MP to strengthen the growth of the pineapple industry as grants for new planting and replanting as well as to support smallholders with planting areas below 15 acres (6.7 hectares)
To note, there are about 500 farmers participated in growing pineapple in Sarawak while the peninsula has 2,256 farmers.
Access to Funding and Government Assistance
Given the various agriculture produce and cash crops which can be planted to boost the agriculture sector in the state, financing in particular investing in technology is essential.
Therefore, the government has set up a platform for smallholders and agriculture players through Agrobank to obtain the necessary funds for them to grow their businesses.
Agrobank’s president and chief executive officer (CEO) Datuk Wan Mohd Fadzmi Wan Othman said, “As a bank that understands agriculture better, Agrobank provides a comprehensive financing solution for upstream activities such as the supply of agricultural production inputs to downstream activities such as processing and selling of agriculture products to consumers.
“For Agrobank, we will support and finance any viable business and projects related to agriculture sector,” he said.
Agrobank currenty covers 10.43 per cent for financing in primary agriculture in the country, according to figures as at Nov 2015.
Looking at financing for agrofood sector, Fadzmi revealed Agrobank’s shares was quite promising with a total value of RM2.73 billion or 23.62 per cent share of total outstanding loan worth RM11.57 billion in the banking system as at Nov 2015.
He pointed out that the financing programmes is designed with attractive profit rate which was as low as 3.75 per cent per annum.
Recently, Agrobank launched a micro financing programme called Agro Bakti, to aid entrepreneurs with physical disability to undertake or expand their businesses that are agriculture-based or agro-based industries.
The programme will have an initial funding of RM5 million.
Minister of Agriculture and Agro-Based Industry Datuk Seri Ahmad Shabery Cheek said Agro Bakti will provide micro financing of a minimum of RM3,000 to RM50,000 without any collateral, while the profit rate remained at 5.5 per cent.
He disclosed the programme, with a repayment period of up to five years is open to those with physical disabilities registered with the Welfare Department or any other registered disabilities organisation.
Prospects for Agriculture Sector
Mohd Fadzmi believed, “There is massive opportunity to export our food products to Asean market.
“As of 2014, the Asean market was worth over US$1.4 trillion in total consumer expenditure and it covers food and agro-products items,” he noted.
For the halal food market, it was worth approximately US$632 billion or 16 per cent of the global food industry and Malaysia is a trusted brand for halal food.
“There is indeed a lucrative export market for a wide range of agricultural products for Asean and halal market.
“With its huge potential and prospects, the outlook looks positive for business in agriculture,” he believed.
Besides, Agrobank also foresees huge potential to generate more businesses in Sarawak.
Mohd Fadzmi during an interview said the bank is fully geared up to transform itself by providing more financial services in line with the changing needs of the agriculture industry and the increasing business opportunities needed by its clients.
“We want to tap the increasing business opportunities here especially the small and medium enterprises (SMEs) as they are the backbone of the economy.
“We want to expand the scope of financing which include new segments or markets such as food-based for instance production of halal food products.
“The financial services could also cover the entire value-chain of the industry for example working capital to purchase machinery and equipment for the production (of agriculture),” he believed.
He observed the financial services which are being provided to food-based industry players by Agro Bank have seen a pick-up and the responses are very encouraging.
He revealed that customers from rural areas have contributed a significant businesses to the bank and hoped that there will be continued support from them.
“The number of customers in Sarawak has witnessed a steady increase in line with the increasing activities of agriculture, farming and fisheries here.”
He stressed that the Ministry of Agriculture and Agro-based Industry is very committed to address the trade balance deficit of RM17 billion recorded and aims to reduce the country’s dependency on food imports.
The ministry is developing various plans to increase the country’s Self Sufficiency Level (SSL) for food.
“Agrobank believes that technology is the solution towards increasing food and agriculture products productivity.
“We are looking forward to supporting businesses which want to acquire technology to increase their productivity,” he said.
He added the allocation of RM5.3 billion in 2016 Budget to modernise the agriculture sector showed that the government’s strong commitment to transform the agriculture sector for higher productivity and commercial viability.