Growing agriculture

Growing agriculture COMMENT BY ANNA TAING AS FAR AS national budgets go, Budget 2006 was hailed as a positive one. It was expansionary yet prudent against a backdrop of weaker economic growth and the need for fiscal constraint. It was pro-business; at the same time there was also something for the man-in-the-street. But let us not forget that this budget is a very important one ­ it is actually the first budget of the 9th Malaysia Plan (9MP), which will map out the country's development strategies for the next five years. Towards this end, Budget 2006 has put in place significant measures to kick start efforts to move Malaysia to a higher position on the global value chain. Of significance are the measures to modernise the agriculture sector. In the past, Prime Minister Abdullah Ahmad Badawi had talked about plans to invigorate the agriculture sector to make it one of the key growth drivers for the economy. The question then was, how? Now, we are now seeing this rhetoric being translated into more concrete measures. That's a good start. Malaysia can no longer rely on the manufacturing sector as the main growth engine, at a time when stiff competition is coming from new manufacturing powerhouses such as China and India. Indeed, growth in the manufacturing sector has slowed in the last couple of years. Gone are the days of double-digit growth numbers enjoyed by this sector in the last decade or so. What the government has done in Budget 2006 is this: it has allocated RM2.8 billion to help the agriculture sector become more dynamic. It has also announced plans to restr ucture the Ag riculture Department, beefing it up with the creation of 255 new posts. To promote the exports of agricultural products, Agriculture Counsellor Offices will also be set up, as has already been done in The Hague and Beijing. But what is of greater significance, we believe, is the move to place gover nment-linked companies (GLCs) in the forefront of its plans to commercialise this sector. In this regard, the government has allocated RM400 million to finance agricultural projects by GLCs. There is more. Khazanah Nasional will establish the National Agriculture and Food Corporation with a capital of RM500 million. Functions of the corporation include matching and management of production, processing, marketing, distribution and related logistics. Focus, according to Abdullah, will be given to activities such as commercialisation, branding, research and development and establishment of hi-tech plantations. Prior to the budget announcements, the government has already put in place several initiatives to develop biotechnology in the agriculture sector early this year. These include a National Biotechnology Policy and the setting up of the Malaysian Biotechnology Corp. Industry observers say the agriculture sector has not seen such major policy moves for the longest time. Ever since manufacturing took over as the biggest growth driver in the mid 1980s, in fact. Today, agriculture's contribution to the country's gross domestic product (GDP) is just 8.4%, compared with 31.5% from manufacturing. Yet, it has the potential to con tribute more. The global value of agriculture biotechnology (agrobio) is estimated at US$6 billion this year. Already, we are beginning to see some of these potential being harnessed. Malaysia has applied agrobio to improve yields and to develop new products, such as extracting Vitamin E from palm oil and anti-fungal extracts from seacucumbers. The breeding of ornamental fish through agrobio, for example, has turned into a lucrative industry. Starting out as a hobby, this industry today generates export earnings in excess of RM40 million a year for the country. For the first half of this year, exports of ornamental fish rose by 10.2% to RM24.8 million. The global industry is valued at US$303 million in 2005. Are the measures contained in Budget 2006 enough? Perhaps not, although it is a start. For sure, these measures will not yield results overnight, but then, that wasn't the intention in the first place. Much will depend on how effective the National Agriculture and Food Corporation will be when it becomes operational. The corpora tion is equivalent to an umbrella body to oversee the industry. The ultimate objective is to move the agriculture sector, long regarded as a traditional sector confined to the rural areas, to a high value-added and technology-based platform. It will not be an easy task because it involves a paradigm shift in the mindsets of those involved in the sector. If agriculture is to be revitalised to become a new growth area and a lead contributor to GDP, there is a need to link the supply processes ­ from production to manufacturing and finally, to services. This will take time, but with the right incentives and an enabling environment, it can be done. And if we can be successful in doing that, we would have killed two birds with one stone ­ shifted a traditionally production-based sector towards higher value-added downstream activities to earn foreign exchange. At the same time, it would be a boon for rural development because that is where most of the farmers are. This article is taken from the Oct 3-9 issue of The Edgee.