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The Malaysia agricultural crop mix has shifted, and this study has applied the system dynamics methodology to understand this process and examine the impact of policy interventions. Divided into two reports, Phase II of this study looks at the industrial crops. Click here for Phase I of the report.
This study aims to identify the key policy interventions towards revitalisation of the agricultural sector with respect to primary production growth, equity and sustainability. The specific objectives are:
- To identify the structural and institutional factors and policy paradigms that drive the crop mix change and slow growth in production;
- To examine the structural and institutional factors that cause low productivity and hence low return to smallholders;
- To develop a system dynamics model that captures the relationship between the structural elements and behavior and performance of the agricultural sector; and
- To simulate alternative policy interventions on the industry.
This study showed that the dominant shift towards oil palm plantation was driven by higher oil palm markup over rubber and cocoa.
Among the three policy instruments (replanting, yield improvement and non-labour input cost reduction) productivity improvement is the most effective in increasing fresh fruit bunches (FFB) production for both the estates and smallholders alike.
Labour shortage is more detrimental than price downturn to both the estates and smallholders. A reduction of labour by 30% from the current level, reduces production by half.
In a nutshell, to reduce the dependence on land there is a dire need for the oil palm industry to improve yield, expedite replanting, reduce non-labour input cost to increase production and revenue. Besides, developmental supports on the SH would yield higher return. Investment on the SH will create an inclusive growth, equitable distribution and hence sustainability of the oil palm sector.
