PUTRAJAYA, November 20, 2019 – Malaysia’s agricultural productivity is less than half of high-income country averages, highlighting an urgent need for reforms and expanding the sector’s contribution to the country’s development trajectory, according to a new World Bank report Agricultural Transformation and Inclusive Growth: the Malaysian Experience, launched here today.
While the country’s success in agriculture can serve as a case study for many emerging economies, further efforts are needed if Malaysia is going to have an agricultural sector reflective of a developed economy, the report stated.
“The government is serious and is focused on this development need. Therefore, smart and high-value agriculture has been identified as a key economic growth activity in the recently launched Shared Prosperity Vision 2030,” said Datuk Saiful Anuar Lebai Hussen, Secretary-General of the Ministry of Economic Affairs in Malaysia. “This timely report is a joint effort between our Ministry and the World Bank and serves to distill lessons from the Malaysian experience and identify remaining key challenges. Moving forward, we will continue our cooperation to enrich development policies in Malaysia.”
The report notes that agriculture in Malaysia is still dominated by smallholders with an aging farmer population. With palm oil covering 75 percent of the cultivated land, agriculture diversification should be considered to reduce dependence on single crops to protect the sector from external shocks.
The latest figures show that as of 2017, agricultural value added per worker in Malaysia was 45 percent of the average among high-income countries. If agricultural transformation is delayed, the economy will also find it difficult to emerge from upper middle-income status and efforts to enhance shared prosperity between rural and urban communities may be hampered.
“At the heart of a country’s economic structural transformation is agriculture. No country has made a transition to high-income status without successful agricultural transformation. Without such shifts, there will be delays to economic transformation to the detriment of the overall economy, poverty reduction, food security, and the broad welfare of urban and rural people,” said Firas Raad, World Bank Country Manager for Malaysia. “We have been working closely with the Ministry of Economic Affairs on various areas of policy – agricultural transformation being the latest. We hope our strong partnership will continue to serve the long-term development aspirations of the country.”
The report recommends that Malaysia addresses this issue as a key development priority, noting that successful agricultural transformation would lead to a convergence between average household incomes from agriculture and from other development. In some countries, agricultural households command higher median incomes than households in other sectors reflecting higher productivity in agriculture relative to other sectors.