According to the latest quarterly bulletin report (third quarter, 2019) released by Bank Negara Malaysia, Food Imports and the Exchange Rate: More Than Meets the Eye, Malaysia remains a net food importer with imports forming at least a quarter of total food supply (24%). This means that we have not attained self-sufficiency in food supply.
Total food imports in 2018 was valued at RM54 billion compared with 2013 at RM43 billion, reflecting an increase of compound annual growth rate of 5% throughout the five years.
Meanwhile, exports of food and beverage in 2018 rose at a faster pace (by 6% on average), amounting to RM35 billion compared with RM26 billion in 2013. However, as it is, the value of imports exceeds the value of exports.
The report highlights that by and large, Malaysia is self-sufficient in responding to domestic consumers’ demand for many basic food items.
Out of 33 most commonly consumed agricultural products (i.e. brinjal, cucumber, spinach and eggs), half of these food produce have a self-sufficiency ratio (SSR) of more than 100% with cucumber (118%), brinjal (116%), spinach (116%), eggs (116%), long beans (111%), lady’s finger (107%), pineapple (106%), cuttlefish (105%), banana (103%) and shrimp (103%).
The SSR for poultry meat and tuna stands at 98%, representing the two lowest food-import products, followed by crab (93%), ikan kembung (83%), coconut (78%), rice (70%), cabbage (42%), chilli (39%), beef (25%), mango (25%) and mutton (11%) on the higher end of the spectrum of dependency.
From the above, we are heavily dependent on certain food products (e.g. chilli, red meat, mango). Consequently, what are the reasons behind this pattern of dependency?
As such, the current reality for the vast majority of Malaysians is that we tend to spend more on imported products compared with local products, as stated by Prime Minister Dr Mahathir Mohamad.
In this case, higher imports signify that there is indeed a higher demand for these products which the local market is unable to satisfy.
Theoretically, high demand for a product would induce higher production or supply. That being so, when there is an increasing demand of a local product, why does it take a long time for the supply to be increased?
Arguably, this could be due to the inefficiencies in agricultural production, distribution networks and overall supply chain. This includes the availability of land – over-reliance on certain locations such as Cameron Highlands which currently supplies 10% of vegetables in the peninsula.
Among several factors in agricultural production (raw inputs, labour, utilities and logistics) are the many layers involving producers, processors, wholesale distributors, retailers and consumers, all of which affect costs and final prices.
The lack of economies of scale in the production processes and complexities in the domestic supply chain inhibit the country’s self-sufficiency in food supply.
Economies of scale are attainable when more units of a good or service can be produced on a larger scale, yet with abating input costs. Thus, lack of economies of scale in the production would result in firms transferring the high cost of production towards the final prices of their products.
As local products involve higher costs, a more practical approach would be to import food items at a much cheaper cost.
On the other hand, according to a survey by the Federation of Malaysian Manufacturers (FMM) and the Malaysian Institute of Economic Research (MIER) earlier this year, 85% of Malaysian manufacturers reportedly experienced a rise in production costs by up to 10% due to the sales and service tax (SST) rate on raw materials, components and services.
This means that for food and beverages that have high domestic production content, fiscal measures such as SST can increase costs.
In the final analysis, to promote higher self-sufficiency in food supply, perhaps the manufacturers could be given tax exemptions or applying low tariffs on their imported raw and semi-processed materials for local food production.
Moving forward, there also a need to be focused on the policy of ensuring that more land is available for food production via land tax reforms and land distributive schemes by emulating the success of Felda. But instead of exporting commodity crops for foreign exchange revenue, the focus is on promoting the country’s self-sufficiency in food supply.
Other measures of self-sufficiency are:
- Lands that are converted for agricultural purposes should be subjected to lower premium payment to the state government. The Land Acquisition Act 1960 should be made used of to increase agricultural production;
- Crucially as well is the digitalisation of agriculture that will enable higher productivity, yield and quality of food produce to take place, and allowing for suitable sites to be identified or earmarked; and,
- Implementation of smart technology via AgTech (agricultural technology) that would revolutionise farming and agriculture. This has great potential for smart farming in Malaysia when the use of internet-of-things (IoT) has already been deployed in paddy cultivation.
Thus, much more could be done to integrate and expand the use of smart technology into other areas of agriculture such as chilli, red onions and not least red meat (livestock).
Innovations, such as precision farming, would mean less manual workload for farmers since digitalisation and smart technology would perform the substitute role.
For example, drones have been deployed for spraying purposes in our padi fields. Meanwhile, IoT can be used to measure and provide real-time data for farmers in determining irrigation and fertiliser levels.
Talking about farming in the conventional sense, one must not neglect vertical farming which should be strongly encouraged and promoted in urban areas. This means that old and new buildings should be transformed into production areas of food supply. For example, certain levels in high-rise buildings should be allocated for growing vegetables.
In neighbouring Singapore, sky farming is already well under way to meet the country’s food needs and ensure its food security. The plantation culture is dependent on both hydroponics and aeroponics.
Hydroponics essentially means a method of growing plants in a water based, nutrient rich solution, which circumvents the use of soil. It uses inorganic materials such as perlite, rockwool, clay pellets, peat moss, or vermiculite.
On the other hand, aeroponics is a process of growing plants in an air or mist environment. Primarily it has the same concept as the hydroponic system, however aeroponics leaves the roots to dangle in the air where the plants are periodically puffed by specially designed misting devices.
Both out-of-the box methods contribute to solving the land shortage problem.
Moreover, in response to the contemporary imports policies, Dr Mahathir had responded that he will revise the existing policies that have been encouraging imports than exports, in which it would involve restructuring the tax system.
In summary, the factors of fiscal measures, land reforms, smart technology and unconventional, i.e. vertical farming will help to alleviate the challenge of Malaysia’s over-reliance on food imports.
Jamari Mohtar and Alissa Azizi are part of the research team at EMIR Research, an independent think-tank focused on strategic policy recommendations based on rigorous research.