Value Chain

Agribusiness
The global dynamics ….

Agriculture has evolved into an industrial specialisation which creates significant impact around the
world. It is no longer just a way of life, traditional small-farm practices are fast disappearing….

• Social pressures are impacting on the traditional Agriculture industry.

• Globalisation results in product price having priority over productivity and
efficiency.
• Strengthening of global influence of liberalisation - WTO/Free Trade Regimes.
• Key Issues - such as Food Safety / Quality - are increasingly driven by
consumers and giant-retailers – the government’s role is reduced in this aspect.

Phased withdrawal
Passing of control Product - of Government Direct
Producers to Retailers Commoditised and Involvement
globalised eBusiness
Acknowledged Drivers
Quality Standards
The global dynamics ….

As a result of these evolving key drivers and sociological changes around the world, the giant food-retailers
– with multinational presence have taken the opportunity to revolutionise the industry with new ways of
doing business.

WAL-MART PARMALAT TESCO ROYAL AHOLD

(USA) (ITL) (GB) (NL)

JUSCO CARREFOUR
(JPN) (FR)

• Retailers have first-hand market intelligence on consumer preferences – their Competitive Advantage is
Knowledge.
• Retailers work with Producer Boards / Research Organisations to decide and to create NEW PRODUCTS.
• Retailers dictate WHAT, WHEN & HOW to buy - and to a certain degree, the PRICES of agriculture produce.
• Retailers implement e-Business / Internet technologies to drive higher efficiencies and new channels of doing
business – their upstream suppliers would have no choice but to follow them.
• Retailers “integrate” with their upstream partners (wholesalers, contract farmers) as well as their horizontal
partners (restaurants, petrol stations) to create economies of scale and demand – WHICH IS BASED ON
BRANDING.
The domestic agribusiness industry

The domestic agribusiness industry also acts and reacts to the global environment. The industry comprises 3
major components, namely (1) Industry framework and drivers, (2) Industry set up and (3) Knowledge
Infrastructure.

Framework and Drivers

Agro-Climatic Planning and Socio-economic

and Ecological Implementation and political

Input & Post

Production
Industry Set Up services harvest

Flow and Stock Marketing Processing Consumers

Knowledge Infrastructure
Our findings from
Malaysia’s agribusiness
Knowledge centres Learning &
Motivation industry and the best
practice review have
Providers Connectivity been mapped to this
framework and industry
set up.
Framework and drivers

The industry framework and drivers that influence the domestic agribusiness industry are illustrated as
follows…
Planning & Implementation
• Third National Agricultural Policy • IMP2 ensures the expansion of the
(NAP3) – Key policy for development of manufacturing sector and encourages
the agriculture industry and national development of technological capabilities,
interest. which the agriculture sector can leverage on
• Government striving to achieve objectives to improve.
in NAP3. • Funding and training are given by relevant
• Second Industrial Master Plan (IMP2) agencies to boost the agribusiness industry.
assists the achievement of the objectives in
NAP3 via technology.

Agro-climatic & Ecological Socio-economic & Political

• Hot weather and rain throughout • Education.
the year. Agribusiness • Lifestyle.
• Rain fall is inconsistent. Domestic • Technology.
• Limited suitable land for local Environment • Internationalisation and
produce. globalisation.
• Issues of fertility of land. • Environmental issues.
• Only selected crops can be • Institutional pressures.
planted on a given piece of land. • Regulations.
The industry set up

The Components of the Industry Set Up are the Flows & Stocks…

Flow – Logistics of the Industry

Input & Production Post Harvest Processing Marketing Consumer

Services

Components Factors required/ Services & Services & Services required People &
required at the affecting facilities needed facilities needed at to market produce Organisations
initial stage of production at post harvest processing stage including to be served in
production including contract stage such as including promotion, the market.
including input system, grading, storage systems. integration, branding, selling ,
materials, mechanisation, etc. training, farmer etc.
distribution, information, etc.
financial services,
R&D, etc.

Stock – Organisations / Entities supporting the Flow

The Knowledge Infrastructure

Components of the Knowledge Infrastructure…

Knowledge Providers Learning Connectivity

Centres & Types of & Motivation
Info

Resource centres / Organisations Activities and Connection

database / portals that provide and facilities between all
that capture all process the related to components of
types of information. motivating and the Knowledge
information teaching users Infrastructure.
ranging from to better utilise
growing to the Knowledge
marketing to Infrastructure.
consuming that are
relevant and
important for the
agriculture
industry to
function well.
Malaysian Agribusiness
Industry
Malaysian agribusiness industry: Flow and stock

The average farm size is generally small. Only 20% of agricultural land is used for food
Land commodities (80% is for industrial commodities).

High risk and low return. Bank Pertanian Malaysia is one of the major sources of financing
Capital for agri-food projects. Schemes like “Fund for Food” (to aid food producers) are also
available.

Employment in the agricultural sector is approximately 1,408,000 people. Productivity level is

Labour
low (1/4 of manufacturing productivity) and labour is inadequately skilled.

Lack of indigenous technology and R & D. The major R&D centres are MARDI, FRI, VRI,
R&D Universities.

Mechanisation Low technology level. Mechanisation is promoted by DOA and FOA.

Fertilisers and chemicals Fertilisers and chemicals are mainly imported. Major component of production costs.

Input & Post

services Production harvest Processing Marketing Consumer
Malaysian agribusiness industry: Flow and stock (cont’d)

Distribution Network Still inefficient along the supply chain.

Cost of production Relatively non productive in food production. Higher cost compared to other ASEAN
countries.

Grading system Inadequate facilities for food analysis, testing & quality control operations.

The supply of raw materials for processing is scarce as the growers prefer to sell as fresh
Backward integration produce to fetch a higher price. Lack of quality and inconsistent supply of raw
materials.

Outsourcing Approximately 70% of raw materials for processing are imported as local supply is not
able to meet the demand for the processing sector.

Input & Post

services Production harvest Processing Marketing Consumer
Malaysian agribusiness industry: Flow and stock (cont’d)

FAMA – MID and Ministry of Domestic Trade and Consumer Affairs collect price information. Price
Price is mainly determined by wholesalers and is highly volatile. The wholesale market is Monopolistic /
Oligopolistic.

Advertisement on radio, television, newspaper, magazines and etc. Some branding of finished products
Promotion such as AGROMAS (FAMA), NESTLE. International promotions are organised by MATRADE, other
PLCs and exporters of agricultural produce.

The marketing channels from small farmers to retailers are disorganised, inefficient and characterised by
Place asymmetric price mechanisms.
Generally, the selling places are wet markets and wholesale markets, chain retailers and Pasartani.

Product Mostly for fresh consumption. Very minimum processing. High level of waste / spoilage, approximately
30%.

Consumer Eating out – 10% of disposable income

Profile Food expenditure – 34% of disposable income
Median age of Malaysian population - 24 year old

Input & Post

services Production harvest Processing Marketing Consumer
Malaysian agribusiness industry: Flow and stock (cont’d)

Unstructured. The respective agricultural organisations serve as a component of the

Knowledge Centres
knowledge centre. Their databases are stand alone and maintained by themselves.

Most of the government departments / agencies publish some selected information on

their websites. The agricultural websites are linked by Agrolink. Very limited
Providers information is published by private trade associations.

As for the Flower Growers Association - marketing information is disseminated through

telephone, facsimile and newsletter. Vegetable growers to wholesalers to retailers to
consumers. Fruits plantation –growers to wholesalers/processors to exporters.

Champion Provider(s) Agrolink, MOA

Decentralised: Information is gathered by different agencies and disseminated on

Information Aggregations agencies’ own network. The public has little knowledge of information available from
these agencies.
Ownership Various. For agricultural related infrastructure, the owner is MOA.
MAMPU is the watchdog for government’s ICT infrastructure.

Farmers do not appreciate the value of knowledge centres as prices are mainly
Value of Knowledge determined by middlemen.

Knowledge Centres & Learning

Types of Info Providers & Motivation Connectivity
Malaysian agribusiness industry: Flow and stock (cont’d)

Data / Information maintenance Many owners and are decentralised. Data maintenance is done by individual network
and refresh sessions eg MOA-Agrolink.

Under “Desa Digital Program” 100 cyber centres will be established by the end of
Connectivity 2002. The databases of various MOA agencies are currently not online and
networked with each other.

Other Non-e Methods Of For small farmers, information exchange is mainly based on word of mouth. For
Connecting more established sectors, i.e. livestock & flower growers and agriculture
product processors, information is provided through trade associations bulletin
and group meetings.

Farmers are generally not IT literate. MIMOS has initiated the Program Desa
Digital to help the rural community in developing its information communication
Learning technology (ICT).
Another MIMOS program is to initiate ICT in schools i.e. Smart School
(approximately 8000 schools, source: PIKOM), Smart Learning Environment
(SLE) and CikguNet.

Knowledge Centres & Learning

Types of Info Providers & Motivation Connectivity
Issues and challenges of the Malaysian agribusiness industry

Issues

• High food import bill.

• Farm labour shortages.
• AFTA and WTO trade liberalisation.
• Agriculture produces mainly exported as primary
or intermediate product.
• Low sustainable production. (with current field
practices, production will not or could not be
maximized)

Challenges

• Ensuring adequate supply and accessibility of safe,

nutritious and high quality food at affordable
prices.
• Reducing labour requirements in agriculture.
• Maximising land utilisation.
• Strengthening the competitiveness of the Malaysian
Agriculture Industry.
• Enhancing private sector investment in food
production.
• Transforming the smallholders to be more
commercial oriented.
• Strengthening industrialisation and offshore
investment.
 International Standard for
Phytosanitary Measures
• Pest surveillance is an important activity of the National Plant
Protection Organizations (NPPO) under the International Plant
Protection Convention (IPPC)
• The main purpose of pest surveillance is to generate information about
the presence or absence of regulated pests in a way that is
internationally acceptable as reliable and sound. Information gathered
through pest surveillance may be used to:
• conduct pest risk analyses to justify regulating a particular pest and to
require precautionary phytosanitary measures from trade partners;
• establish and maintain pest-free areas to convince trade partners that
the commodities from
• those areas are free of certain pests and should be except from
quarantine measures;
• aid the early detection of new pests;
• compile host and commodity pest lists and distribution records;
• report to other organizations such as RPPO and FAO.
 Plant and Plant Products
in Malaysia Regulations
• The import of plant and plant products into Malaysia is governed by
the Agricultural Pests and Noxious Plants (Import/Export) Regulations
1981
• The aim of plant quarantine regulations is to control the import of
plants for the purpose of prevention of introduction of pests and
disease from foreign countries
• The inspection and certification of consignment of plants, plant parts
or plant products, processed or otherwise must conform to the current
phytosanitary requirements. Applications for Phytosanitary Certificate
(P.C.) are to be made on Form PQ 9 obtainable from any Plant
Quarantine office and submitted at least four working days before the
proposed date of inspection.
 Live Animals/Birds

• The Department of Veterinary Services (DVS), empowered by the

Animal Rules, 1962 DVS regulates the importation of live animals or
birds and livestock products into Malaysia. The Animal Quarantine
Services provide facilities for quarantine of live animals and birds
imported into the country. Animal Ordinance, 1953, Animal Rules
1962, Animal Importation Order 1962 and Federal Animals
Quarantine Station (Management and Maintenance) By-Law 1984 are
enforced and requirements such as import license and health certificate
are needed to facilitate the importation of live animals and birds into
Malaysia.
Organizational Arrangements for
Plant Protection
• Component Regions under the Plant Quarantine Act 1976 and Plant
Quarantine Regulations 1986
• Department of Agriculture Peninsular Malaysia
• Department of Agriculture Sabah
• Department of Agriculture Sarawak
• Coordination Mechanism:
• Official coordination meetings between the component
regions through Annual Plant Quarantine Technical
Committee Meeting and Task Force Meetings.
• Establishment of Malaysian Quarantine Inspection
Services (MAQIS)
• Established in 2008 under the Ministry of Agriculture and
Agro-Based Industry Malaysia (MOA) as a Department; 
Integrated services relating to quarantine, inspection and
enforcement at entry points for the import and export of
plants, animals, carcasses, fish, agricultural produce, soils,
microorganism and food;  Currently, all entry points at
Peninsular Malaysia are under the management of
MAQIS.
 ITEMS REGULATED UNDER
THE PQ ACT
• Plants and planting materials including GMO’s;
• Growth media, composts, peat moss, etc;
• Organic fertilizers;
• Pests ( invasive species), biological control agents, beneficial
organisms;
• Plant products (e.g mango and items derived from coconut and oil
palm tree, herbarium, fresh/dried cut flowers); bamboo baskets,
gunny sacks;
• Soil (stones, sands and minerals*);
• Wood (Wood mulch, bark chip, fuel wood, rubber wood, logs from
Longhorn Beetle countries
Those which require PC Only

Plant products imported from countries endemic to Khapra Beetle:

Bangladesh; - India; - Pakistan; - Sudan; - Turkey; - Philippines; -
Myanmar; - Morocco; - Sri Lanka