Agriculture

To address these issues and move up the value chain, six programmes will be implemented under a coordinated national project. The aim is to strengthen product quality and marketing efforts to penetrate global export markets for nutraceutical products and botanical drugs. Several popular Malaysian herbs have been identified as the focus, including Tongkat Ali, Kacip Fatimah and Misai Kucing.

• Establish four herbal centre of excellence clusters
  Each centre will respectively lead R&D in discovery, crop production and agronomy, standardisation and product development and pre-clinical studies. The centres of excellence will be responsible for coordinating research amongst research institutions, establishing strategic research collaborations amongst domestic and international institutions, ensuring quality of research output and obtaining intellectual property rights on the research findings.

• Promote and market internationally a national brand as the identity of Malaysia’s healing and beauty tradition
  Local herbal products will be exported under the umbrella brand. Government will work with foreign regulators to facilitate the registration of Malaysian herbal products in their markets. This will reduce the need for individual companies to invest in branding and product registration.

• Develop herbal cultivation parks in Durian Mentangau and Pasir Raja in Terengganu, Cegar Perah in Pahang and in Rantau Manis, Kelantan
  This is to ensure adequate and consistent supply of raw materials. The parks will undertake herb cultivation on a commercial scale based on a contract-farming model. Each 400-hectare park will allocate 40% of its land to be cultivated by more than 50 out-growers.

  The out-growers will benefit in terms of technical skills development, production quality assurance, secure off-take and income from the anchor company. It is anticipated that out-growers will have the potential to earn RM3,000 per month.

• Expand extraction facilities
  There are currently limited commercial-scale facilities; most are small or of pilot scale and not designed to operate commercially. New facilities will be built, each with a capacity of 1,000 kilograms per week to supply the industry with reliable, premium quality extracts at competitive cost.

Investments to date:

Nova Laboratories Sdn Bhd Nova Laboratories Sdn Bhd has been identified as one of the anchor companies to drive herbal products into the high value segment of nutraceuticals with pre-clinical/clinical claims or botanical drugs. A total of RM16.29 million (USD4.7 million) will be invested in R&D as well as pre-clinical and clinical trials to develop three high value herbal products and commercialise them.

By building on Malaysia’s status as a recognised supplier and resolving key challenges within the industry, we aim to capture 40% of the global market by 2020 with increased production from 290 tonnes to 870 tonnes and increased domestic processing into downstream products.

• Develop comprehensive legislation and guidelines to ensure sustainability of harvesting, animal welfare, consumer health and safety and regulated premises
  This will allow Malaysia to become the first country to comprehensively regulate the production of edible bird’s nest.

• Establish an additional 70% Malaysian-owned processing facilities
  Our target is to have 50% of all local products to be processed by Malaysian firms by 2020.

We aim to transform the industry to a high-yielding and commercial scale business by leveraging our strength in R&D and strong downstream infrastructure. The seaweed mini-estate initiative aims to increase yield from 1.5 metric tonnes to 5 metric tonnes of dried seaweed per hectare per year in a farmed area totalling 28,000 hectares. Six varieties of seaweed will be cultivated based on their carrageenan yield and growth rate.

• Implement seaweed cultivation immediately in areas such as Pulau Omadal, Pulau Selakan and Pulau Sebangkat
  The Sabah state government has designated 7,500 hectares of new areas for seaweed cultivation under Industrial Aquaculture Zone (ZIA), and an additional 20,500 ha will be designated by 2020.

• More than five anchor companies will manage clusters of 200 hectares each
  This is to ensure each anchor company is able to optimise cost and mitigate operational challenges such as water movement and weather variations. The anchor companies will link to smaller scale farmers by providing training and apprenticeship programmes, targeting the local community, particularly youth.

• The Government, in collaboration with universities, will assist anchor companies by issuing farm-operating procedures and providing extension services
  Best practices in the production value chain have been developed and will be rolled out, such as mechanical harvesting, which improves harvesting efficiency by nine times from 1 metric tonne per day to 10 metric tonnes per day and the tie-tie system, which reduces the time at sea for cultivation by 60%.

• Seek secure investors to establish two factories
  Factories will have production capacity to process between 20 and 50 metric tonnes of dry seaweed per day each, to be built in 2013 and 2015 respectively, to complement existing factories to cater for the increased production.

The Pegagau Group is a successful exporter of shrimps. With expansion plans into the EU, Middle East and U.S in mind, the Group will strengthen its export capabilities by setting up a new processing plant in Umas Farm, Tawau. It will also increase productivity by expanding into large-scale and integrated cage farming focusing on high value species such as the grouper

Investment: RM 67.7 million (USD19.3 million)

Cattle-rearing companies will contract with large oil palm plantations, especially GLCs, to rent their land for cattle-rearing purposes. The focus is on structured, rotational grazing to ensure profitability and sustainability. We target to increase the number of cattle in oil palm estates by 300,000 by 2020.

• Implement a new approach to producing fully-certified and traceable seafood in a sustainable manner through IZAQ
  The IZAQs are a network of industrial scale, land-based aquaculture zones that will be championed by strong anchor companies. Each IZAQ will have integrated infrastructure consisting of hatcheries, grow-out areas, a processing plant and feed-mills on a 1,000 hectare site.

  A target of 10 IZAQs will be established in Kedah, Pahang, Sabah, Sarawak and Terengganu. These sites were selected based on suitability of land, water quality and availability of local workers within the vicinity.

  Private sector investors will develop and operate the IZAQs, while the federal government will assist in developing the basic critical infrastructure such as access roads, electricity and clean water supply for each of the sites. Respective state governments will provide access to land.

  Each IZAQ will be led by an anchor company and SMEs will be involved in leasing pond modules through a contract farming concept. Anchor companies will deploy and enforce standard operating procedures at all pond modules to ensure production quality complies with certification requirements. A skills-training centre will be set up to develop the skills of workers, and these centres will be linked to public universities to enable certification and access to quality instruction.

• Establish an R&D facility to focus on developing breeding programmes for SPF shrimp and other species as well as health, nutrition and aquaculture related technologies
  The preliminary site identified is in Langkawi, leveraging the existing fisheries research institute and the suitable sea conditions.

• Build a fully accredited diagnostic facility to address the issue of food safety and traceability
  This will include a credible on-site verification system that will ensure aquaculture products in IZAQs meet the highest international requirements in terms of certification. Associated with this, training programmes will be developed to upgrade knowledge on standards for government officials and agencies. In collaboration with anchor companies, the Government will establish training programmes to increase the number of certification auditors and upgrade the knowledge of scientists in the aquaculture industry.

• Introduce a pilot aquaculture insurance scheme as well as attractive funding programmes to facilitate private sector investment in the IZAQs
  We will evaluate a model whereby the anchor company guarantees off-take of the shrimp, enabling a credit guarantee to back private-sector lending. Anchor companies will be encouraged to build and operate feed mills that also cater to grow-out farms. Other companies can also be encouraged to join the industry through strategic partnership with grow-out companies, where the feed companies build the infrastructure and handle the operations and the grow-out companies provide a captive market.

• Set up aquaculture export centres near major airports to facilitate the export of live and chilled fish to major importing countries such as Hong Kong, Taiwan and Japan
  To enable air freight as a more economically-viable portion for fish exporters, the centres will have modern technologies to reduce the weight of fish to water ratio from 3:1 to 1:1.

Investments to date:

Hannan Corporation Sdn Bhd Hannan Corporation Sdn Bhd will invest in the establishment of two Aquaculture Complexes comprising a 121 hectare Aquaculture Comple in Selinsing and a 323 hectare Aquaculture Complex in Pulau Gula, both of which are located in Perak. These complexes are projected to produce 14,000 tons of white shrimp per annum. Investment: RM72.6 million (USD21 million).

Exotic Star Sdn Bhd is a tropical fruits grower and exporter. The company plans to increase the production of its core fruits business (papaya, carambola, jackfruit, rock melon, banana and pineapple) by investing in a modern one-stop centre for fruit packaging and processing. It also plans to open new farms and engage local farms with land totalling 2,250 hectares.

Investment: RM80.31 million (USD23 million)

• Reorganise and scale-up the industry through domestic anchor companies that will establish four integrated food parks in phases
  The target is to complete the first cluster at the end of 2013, two in 2015 and the final one in 2018. The anchor companies will be responsible for obtaining product certification (such as standards on halal, food safety, organic and natural foods), packaging, branding and marketing and managing suppliers.

  These companies will establish a network of raw material providers, ingredient providers and end product manufacturers within the food park, either through relocation or expansion of existing small and medium enterprises (SMEs).

• Pursue the involvement of foreign partners
  They will strengthen market access through contract manufacturing arrangements, equity sharing and licensing out of proprietary products and brands. Existing incentives provided for under the Promotion of Investment Act will be leveraged.

• Leverage linkages of institutions such as MARA and SMECorp to the SME base in Malaysia to identify potential SMEs to be migrated
  Through support provided by the anchor companies, SMEs can concentrate on producing one to two product lines each based on the anchor company’s specifications, thereby enabling them to achieve scale and compliance to higher standards. Issues of taking the product to market and modifying the specifications of the product to suit the requirements of different markets will be handled by the anchor company.

A new rice variety (MRQ76) has been developed by MARDI, which has 80% similar attributes to foreign fragrant rice, thereby enabling it to tap the higher-end rice market, compared to normal white rice.

The focus is on cultivating MRQ76 in rain-fed areas, leveraging its draught tolerant attributes, which will enable yields in rain-fed areas to increase. Dedicated areas will be identified for the farming of this variety, to ensure no contamination by the normal white rice variety, and dedicated millers will be appointed to prevent contamination and preserve the product’s brand identity in the consumer market.

This premium identity will enable farmers to fetch a price for unmilled rice that is 20 to 30% higher, increasing their incomes.

New developments:

Malaysian Agricultural Research and Development Institute (MARDI) The Malaysian Agricultural Research and Development Institute (MARDI) will champion the initiative to introduce fragrant rice cultivation in non-granary (non-irrigated) areas and to market it as specialty rice. Investment: RM26.6 million in 2011.

We will promote commercial-scale farming, improve irrigation density and accelerate the use of new technologies with the target of increasing average yield to 8 tonnes per hectare by 2020.

The model to be adopted in the Muda area, particularly the provision of incentives to encourage outsourcing of land management and the setup of an integrated rice corporation, will be replicated in the KADA granary and in areas such as Batang Lupar in Sarawak and Kota Belud in Sabah.

In granaries managed by Integrated Agriculture Development Authorities (IADA), the focus during the initial stage will be on providing incentives to encourage outsourcing of land management

Expansion of feedlot capacity by 240,000 heads in Malaysia via an increase in the number of small-scale feedlotters and development of one anchor company to strengthen the link between farm and consumer. Animals will be brought into the country at optimum size to ensure the majority of value can be captured in Malaysia versus merely serving as a retail hub for already fattened animals.

Development of three dairy clusters with 27,000 heads of dairy cattle and downstream processing facilities, to increase Malaysia’s milk sufficiency from 2% to 5% by 2020. Re-introduce the school milk programme to improve consumer perception of the local dairy industry while ensuring a steady purchaser.

Currently there is no established seed or livestock research centre for tropical crops and livestock. Hence, there is potential for Malaysia to be the first to establish a regional breeding centre, capitalising on the expected growth of the agriculture sector in Indonesia, Thailand and Vietnam.

Set up the Centre for Marker Discovery and Validation (CMDV) to lead seed and broodstock research, initially in Malaysia, and subsequently in the region. Through collaboration with a leading Canadian research centre, the CMDV will be designed and built to support high throughput screening of genetic materials to discover molecular markers for desired traits.

This will enable the production of planting materials or brood-stock that are certified to contain desired attributes, thus enabling Malaysia’s sales of these products to increase and capture significantly higher value. For example, normal seeds for some crops can cost RM2.50 (USD71 cents) per kilogram but plantlets with confirmed attributes of high fertility and disease resistance can fetch RM25 (USD7.10) each.

Attract potential investors in agriculture biotechnology, leveraging existing bio-nexus incentives and focusing on areas such as crop nutrition and/or bio-yield enhancers, bio-pesticides and flavours and fragrances. Investments can be carried out either through merger and acquisition, joint venture or the set up of a new company.

Acquire four overseas cattle operations in order to ensure a steady supply of breeder cattle, dairy animals, and cattle for local feedlots. Investments will also generate profit for Malaysia since overseas farms can also export to a global marketplace.

There is potential to capture value from the development and commercialisation of products based on herbs and new herbs. Local manufacturers will be supported to move up the value chain through the provision of financial assistance, R&D support and marketing efforts.

There is the possibility of acquiring a foreign distributor with large distribution networks in strategic markets such as the USA, EU or China will be studied and pursued. This is to assist in overseas market penetration of Malaysian herbal products.

Capturing increased value from ornamental fish exports through establishing own branding and marketing channels as opposed to relying on other countries to export Malaysia’s products. In addition, by intensifying R&D, introduce specific pathogen-free fries to improve yield and quality.

There is a business opportunity to develop feed mills for aquaculture.

There is a business opportunity to develop aquaculture export centres.

New technologies, such as instant pressure drop, will be used to produce high quality dried fruit snacks from papaya, starfruit and pineapple that preserve more of the nutrition, taste, texture and volume of the fruit. Certification from international bodies will be obtained to enable the product to claim that it is natural, while relevant product registration will be performed to support functional and nutritional claims in target markets. The aim is to sell the products at a premium of 30 to 100%.

Addition of 20,000 poultry per year within oil palm plantations to target the growing market for free range and organic chicken.

Malaysia imports many types of mushrooms including dried, canned and fresh forms as local mushroom cultivation is lacking. However, Malaysia has favourable agro-climatic conditions for industrial production of mushrooms and companies that are successfully cultivating mushrooms on a large scale basis. The Department of Agriculture will facilitate the establishment of mushroom-farming businesses by providing standard operating procedures based on successful models and coordinating with Agrobank to provide funding.

Jackfruit products such as ready-to-eat fresh jackfruit, juice and vacuum-fried chips are growing increasingly popular in markets such as China. These minimally processed products are much simpler to export than the whole fresh fruit, which typically would not be able to meet the phyto-sanitary requirements of export markets. Anchor companies amongst medium-sized SMEs will be identified to establish minimal processing operations including a hygienic processing room of between 15°C and 20°C and basic operations such as chilled-water immersion, cutting and pre-treatment.

Attract foreign companies to collaborate in conducting research on Malaysian herbs to speed up the discovery of new bioactive compounds and accelerate product development. Upon successful fndings, the foreign companies will be given incentives to set up manufacturing facilities in Malaysia, enabling value capture of downstream activities.

Relocate from Singapore to Malaysia the processing facilities for fruit, vegetables and meat to be made into frozen food or convenience meals. Malaysia can offer the competitive advantages of low labour cost, proximity to Singapore market and abundance of materials.