Chapter 7

Economics of
Agricultural Development
Topic 1: Contribution of Agriculture to
Malaysian Economy
• Agriculture is part of the primary sector in Malaysian economy

• Contributes to the gross domestic product (GDP) over time.

• Its relative importance of the primary sector to the GDP has

decreased since 1970.

• Small and Medium Industries contributes about 47% in 2007.

• Agriculture in Malaysia is characterized by a dualistic system

where the plantation sector exists side by side with the
smallholder sector.
Plantation or estate agriculture
• Plantation or estate agriculture is normally single crop cultivation
in a land area of more than 40 ha.

• Crops: rubber, oil palm, coconut, cocoa, pineapple, tea

• Plantation management is more systematic, using modern

technology and hired labour
 Smallholder
• Consists of farmers who
cultivate small areas,
between 0.4 – 4.0 ha
• Production capacity is low
due to limited technology
and disorganized farm
management practices
• Two types of
smallholders:
• Subsistence farmers
• Farmers who practice
monocropping
Types of Smallholder
A. Subsistence farmers

• Cultivate land for their own

consumption and sell the
produce in the marketplace or
middleman
• Normally practice mixed
cropping systems where
vegetables and fruit trees are the
main crops being cultivated
• Some have mixed cropping and
livestock farming systems –
farmers grow cash crops and
fruit trees and at the same time
raise chicken, goat or cow on
their farm
 B. Farmers who practice monocropping

Farmers cultivate their land with commodity crops such as rubber,

cocoa or oil palm similar to those planted by plantations
• In the past emphasis was given to the production of primary
commodities from which the country enjoys export earnings.

• Now, agriculture has expanded into secondary downstream

processing for value added products.

• Malaysia’s agricultural development is guided by the National

Agricultural Policy (NAP).

• The development programmes are aimed at:

• Expanding food production to improve food trade balance.

• Increasing export of primary commodities.

• Ensuring supply of raw materials for local downstream

industries.