NATIONAL AGRICOMMODITY POLICY (2021-2030)

MINISTRY OF PLANTATION INDUSTRIES
AND COMMODITIES

2021-2030 (DAKN2030)

Advancing Agricommodity for Sustainability and Shared Prosperity





About the

MINISTRY OF PLANTATION
INDUSTRIES AND COMMODITIES (MPIC)

In 1972, recognising the importance of the commodities
industry for Malaysia’s economic growth, the Ministry of Primary
Industries (MPI) was established. MPI was focused on the
development of tin ore and rubber, the two main commodities
at that time. The ministry’s role was later expanded to include
the development of other commodities such as palm oil, cocoa,
forestry, minerals, pineapple and tobacco, which had all become
important contributors to the national economy.

Oversight of the pineapple industry was transferred to the Ministry of Agriculture
in stages from 1996-1999, following a cabinet decision to this effect. In 2004,
MPI was restructured and renamed the Ministry of Plantation Industries and
Commodities (MPIC), and known by its Bahasa Malaysia name, Kementerian
Perusahaan Perladangan dan Komoditi (KPPK). As part of the restructuring, the
Pepper Marketing Board (now known as the Malaysian Pepper Board), was shifted
to KPPK from the Ministry of Agriculture. Matters relating to forestry, minerals
and geo-science were transferred to the Ministry of Energy and Natural Resources
(formerly known as the Ministry of Natural Resources and Environment). Other
main responsibilities remained unchanged. In 2012, KPPK was rebranded, and its
acronym changed to the English language version, MPIC.

Two major developments took place in recent years – the rebranding of MPIC to its
original name, Ministry of Primary Industries (MPI) in 2018, followed by renaming it
back to the Ministry of Plantation Industries and Commodities (MPIC) in 2020. The
major responsibilities and functions of the ministry did not change during this time.

Today, MPIC is responsible for policy direction and industry development for a range
of commodities, implemented through its agencies:

 Palm Oil (includes Biofuels and oil palm Biomass)
Malaysian Palm Oil Board (MPOB), Malaysian Palm Oil Council (MPOC) and

Malaysian Palm Oil Certification Council (MPOCC)
 Rubber
Malaysian Rubber Board (MRB) and Malaysian Rubber Council (MRC)
 Timber (includes timber Biomass)
Malaysian Timber Industries Board (MTIB), Malaysian Timber Council (MTC) and

Malaysian Timber Certification Council (MTCC)
 Cocoa
Malaysian Cocoa Board (MCB)
 Pepper
Malaysian Pepper Board (MPB)
 Kenaf and Tobacco (includes Plant-based Fibres)
National Kenaf and Tobacco Board (NKTB)

In addition, MPIC established a formal training institution, the Institute of
Malaysian Plantation and Commodities (IMPAC) in 2010. IMPAC coordinates
all courses and training carried out by the agencies within MPIC to develop and
strengthen the skills of local workers in the commodity sector in a structured
manner.

LEMBAGA LADA MALAYSIA

© Kementerian Perusahaan Perladangan Dan Komoditi (KPPK)

Hak cipta terpelihara. Tidak dibenarkan mengeluar ulang mana-mana
bahagian artikel, gambar dan isi kandugnan buku ini dalam apa jua bentuk
dan apa juga cara sama ada elektronik, fotokopi, mekanikal, rakaman
atau cara lain sebelum mendapat izin bertulis daripada Kementerian
Perusahaan Perladangan Dan Komoditi.

Dasar Agrikomoditi Negara 2021-2030 (DAKN2030)
Ringkasan Eksekutif

ISBN

Diterbitkan oleh:
Kementerian Perusahaan Perladangan Dan Komoditi (KPPK)
No. 15, Aras 6-13,
Persiaran Perdana, Presint 2,
62654 Putrajaya, MALAYSIA

Table of contents

CHAPTER 1
AGRICOMMODITY- A VITAL SECTOR FACING SIGNIFICANT CHALLENGES 9

CHAPTER 2
ADVANCING AGRICOMMODITY FOR SUSTAINABILITY AND SHARED PROSPERITY 22

CHAPTER 3
LEVERAGING SMART PARTNERSHIPS ON TECHNOLOGICAL ADOPTION IN PALM OIL 43

CHAPTER 4
SYNERGISING TRANSFORMATION OF THE RUBBER INDUSTRY VALUE CHAIN 73

CHAPTER 5
MODERNISING THE TIMBER INDUSTRY TOWARDS INCREASED RESILIENCE 94

CHAPTER 6
DRIVING THE DEVELOPMENT OF THE COCOA INDUSTRY 118

CHAPTER 7
FOSTERING GROWTH OF THE PEPPER INDUSTRY 138

CHAPTER 8
REVITALISING THE PLANT-BASED FIBRES INDUSTRY 159

CHAPTER 9 181
SCALING UP THE CIRCULAR ECONOMY THROUGH AGRICOMMODITY BIOMASS

CHAPTER 10
PROMOTING BIOFUELS AS A SOURCE OF CLEAN ENERGY 198

CHAPTER 11
ADDRESSING CROSS-CUTTING PRIORITIES HOLISTICALLY 223

CONCLUSION
ADVANCING AGRICOMMODITY TOGETHER 254

APPENDICES 255

GLOSSARY 290

2 National Agricommodity Policy 2021-2030 (DAKN2030)

List of tables

Table 1.1: Targeted and Actual Planted Area (2010 and 2020) 13
Table 2.1: Emerging Technologies from Agencies under MOSTI 25
Table 9.1: Examples of Outcomes Delivered in the Biomass Industry 185
Table 9.2: Examples of Agricommodity Biomass products 187
Table 11.1: Range of Smallholder Incomes (2020) 228
Table 11.2: Commodity-specific Strategies to Improve Smallholder Well-being 231
Table 11.3: Examples of Bumiputera Programmes implemented by MPIC 235
Table 11.4: Commodity-specific Strategies for Bumiputera Advancement 238
Table 11.5: Definition of MSMEs in Malaysia (SME Corp) 241
Table 11.6: Known Agricommodity MSMEs as at December 2020 242
Table 11.7: Examples of Agricommodity Enterprises’ activities 243
Table 11.8: Commodity-specific Strategies for Entrepreneurship and MSME Growth 245
Table 11.9: Commodity-specific Strategies for Impactful Delivery 252

Policy Document 3

List of exhibits

Exhibit 1.1: Sectoral GDP Value and Contribution from Agricommodity (2010-2020) 10
Exhibit 1.2: Agricommodity Exports (2020) 11
Exhibit 1.3: Agricommodity Employment (2020) 12
Exhibit 1.4: Global Standing of Malaysian Agricommodity Products (2020) 15
Exhibit 1.5: Yield of Selected Commodities (2010-2020) 16
Exhibit 1.6: Agricommodity GDP Growth (2010-2020) 17
Exhibit 1.7: Agricommodity Export Earnings by Commodity (2010-2020) 18

Exhibit 2.1: Mega-trends that could Impact the Agricommodity Sector 22
Exhibit 2.2: The Shared Prosperity Vision 2030 (SPV2030) 28
Exhibit 2.3: The United Nations’ Sustainable Development Goals (SDGs) 29

Exhibit 3.1: Global Palm Oil Production and Consumption 2009-2020 & 2021-2030 (Forecast) 47
Exhibit 3.2: Exports of Crude and Processed Palm Oil Products (2010–2020) 47
Exhibit 3.3: Export Earnings and Average CPO Price (2010-2020) 48
Exhibit 3.4: Average Oil Yield of Malaysia, Indonesia and Thailand (2010–2020) 50
Exhibit 3.5: Oil Yield by State (2010 and 2020) 51
Exhibit 3.6: FFB Yield of Estates and Smallholders (2010-2020) 52
Exhibit 3.7: Total Workers in Malaysian Oil Palm Plantations and Percentage of Foreign
Workers, (2012-2020) 53
Exhibit 3.8: Total Planted Area by Independent Smallholders (2010-2020) 54

Exhibit 4.1: Rubber Contribution to Total GDP (2010-2020) 75
Exhibit 4.2: Rubber Export Performance (2010-2020) 76
Exhibit 4.3: Rubber Production of Smallholdings and Estate (2010-2020) 78
Exhibit 4.4: Rubber Production and Price (2010-2020) 78
Exhibit 4.5: Natural Rubber Trade (2010-2020) 80

Exhibit 5.1: Upstream and Downstream Segments of the Timber Industry 96
Exhibit 5.2: Timber’s Contribution to GDP (2010-2020) 97
Exhibit 5.3: Timber’s Exports and Import (2010-2020) 97
Exhibit 5.4: Value-Added Products Exports versus Primary Products Exports 100
Exhibit 5.5: Timber Production (2010-2018) 101

Exhibit 6.1: Cocoa Planted Area (2010-2020) 120
Exhibit 6.2: Cocoa Production and Productivity (2010-2020) 121
Exhibit 6.3: GDP contribution from Cocoa (2010-2020) 121
Exhibit 6.4: Cocoa Export Values and Primary Exports (2010-2020) 122
Exhibit 6.5: Import of Cocoa Beans (2010-2020) 124

4 National Agricommodity Policy 2021-2030 (DAKN2030)

Exhibit 7.1: Pepper Planted Area (2010-2020) 140
Exhibit 7.2: Pepper Production and Productivity (2010-2020) 140
Exhibit 7.3: Export of Pepper Products (2010-2020) 141
Exhibit 7.4: Pepper Exports by Destination (2020) 143
Exhibit 7.5: Domestic Consumption of Pepper (2010-2020) 144
Exhibit 8.1: Kenaf Cultivation Area by Region, 2019 162
Exhibit 8.2: Total Planted Area, 2010-2020 164
Exhibit 8.3: Dried Stem Production, 2010-2020 165
Exhibit 8.4: Kenaf Seed Production, 2010-2020 165
Exhibit 8.5: Total Production Cost of Kenaf 166
Exhibit 8.6: Key Initiatives for the Development of Kenaf from 2015 to 2020 166
Exhibit 8.7: Challenges of Planting Kenaf 168
Exhibit 9.1: Opportunities for Biomass Product Development 184
Exhibit 10.1: Land area required to produce 1 tonne of vegetable oil 201
Exhibit 10.2: Forecast of global biodiesel consumption (2020-2029) 202
Exhibit 10.3: Forecast of Biodiesel consumption in 2029 among developing countries 202
Exhibit 10.4: Palm Biodiesel Production (2011-2020) 203
Exhibit 10.5: Biodiesel Production Capacity (2020) 204
Exhibit 10.6: Palm Biodiesel Utilisation (2011-2020) 207
Exhibit 10.7: Biogas Capturing Facilities and Usage at Palm Oil Mills (2020) 217
Exhibit 11.1: Agricommodity Smallholders by Commodity Planted (2020) 224
Exhibit 11.2: Agricommodity Planted Area by Category (2020) 225
Exhibit 11.3: Distribution of Independent Smallholders (2020) 225
Exhibit 11.4: Productivity Levels across Palm Oil (FFB), Rubber and Cocoa (2010-2020) 227

Policy Document 5

List of flagship
programmes

FLAGSHIP PROGRAMME 1
MSPO TRACE 62

FLAGSHIP PROGRAMME 2 66
MECHANISATION AND AUTOMATION RESEARCH CONSORTIUM OF OIL PALM (MARCOP)

FLAGSHIP PROGRAMME 3
EAST COAST LATEX CORRIDOR 86

FLAGSHIP PROGRAMME 4
KEDAH RUBBER CITY (KRC) 89

FLAGSHIP PROGRAMME 5
FOREST PLANTATION DEVELOPMENT PROGRAMME (FPDP) 2.0 108

FLAGSHIP PROGRAMME 6 110
FURNITURE ORIGINAL DESIGN AND BRANDING

FLAGSHIP PROGRAMME 7 111
COCOA TRADING HUB AND COCOA NEXUS@ ISKANDAR

FLAGSHIP PROGRAMME 8
PEPPER DEVELOPMENT AND EXTENSION CENTRE 128

FLAGSHIP PROGRAMME 9
KENAF VALLEY 131

FLAGSHIP PROGRAMME 10
AGRICOMMODITY CIRCULAR ECONOMY (ACE) 134

FLAGSHIP PROGRAMME 11
B20/30 BIODIESEL 149



Policy Document 7

Chapter

Agricommodity-
A Vital Sector Facing
Significant Challenges

8 National Agricommodity Policy 2021-2030 (DAKN2030)

Policy Document 9

AGRICOMMODITY IS A

VITAL PART OF THE
MALAYSIAN ECONOMY

Agricommodity refers to agriculture-based commodities under the purview of the Ministry of
Plantation Industries and Commodities (MPIC). MPIC and its agencies cover the end-to-end
value chain of Agricommodity production and consumption, from upstream to midstream and
downstream. MPIC collaborates with related ministries and agencies for this purpose, including
the Ministry for Rural Development (Kementerian Pembangunan Luar Bandar, KPLB), Ministry of
Agriculture and Food Industries (MAFI) and the Ministry for International Trade and Industry (MITI).

Eight commodities and related output are covered in the Dasar Agrikomoditi Negara 2021-2030
(DAKN2030), i.e., palm oil, rubber, timber, cocoa, pepper, plant-based fibres (kenaf and other plant-
based fibres), biomass and biofuels.

Plant-based fibres and biomass are new additions that were not covered in the previous policy
document, the Dasar Komoditi Negara 2011-2020 (DKN2020). These two commodities are important
contributors towards scaling up the circular economy. While kenaf had been covered in the
DKN2020, it was positioned as a nascent crop to be developed over 2011-2020. The scope is now
expanded to capture opportunities from plant-based fibres in general, starting with kenaf, and other
Agricommodity plant-based fibres in future. Similarly, biomass will focus on Agricommodity biomass,
starting with palm oil and timber. These new opportunities will be developed in the coming decade
from 2021-2030 to scale-up the circular economy and further diversify the Agricommodity sector.

Agricommodity contributed 6.3% of total Gross
Domestic Product (GDP)

The Agricommodity sector is an important component of the Malaysian economy. Agricommodity
GDP contribution grew from RM76.2 billion in 2010 to RM85.1 billion in 20201 as shown in Exhibit 1.1
on the following page. The Agricommodity sector contributed 6.3% of Malaysia’s total gross domestic
product (GDP) in 2020. While this marks a decline in percentage contribution to GDP over the last 10
years, the overall value has increased. This is in line with the national development agenda where the
economy in general has expanded, and economic activities are shifting towards higher value-added
manufacturing and the services sector.

1 MPIC

10 National Agricommodity Policy 2021-2030 (DAKN2030)
Exhibit 1.1: Sectoral GDP Value and Contribution from Agricommodity (2010-2020)

Agricommodity exports are driven by palm oil,
rubber and timber

Agricommodity exports (excluding tobacco) reached RM150 billion in 2020. Palm oil continues to
be the largest contributor at 48.8% of total exports in 2020, followed by rubber (32.3%) and timber
(14.7%)2.

Exhibit 1.2: Agricommodity Exports (2020)

2 MPIC

Policy Document 11

In 2020, Agricommodity products were exported to over 160 countries. The top three export markets
are the United States of America (USA) (16.5%), the European Union (EU) (15.3%), and China (13.5%),
followed by India (6.8%) and Japan (5.6%).

The Agricommodity sector provides jobs for
almost 1 million Malaysians in the upstream
segment

In 2020, employment across the Agricommodity upstream segment exceeded 1.3 million, with more
than 90% in palm oil and rubber. Almost one million (75%) are Malaysians – mainly smallholders3
and plantation workers4, who make up 6.3% of the total Malaysian workforce5. The remaining 0.3
million (25%) are foreign workers, who are primarily employed in oil palm plantations6. Rubber, cocoa,
pepper and kenaf are driven by smallholders, while employment is estate-oriented7 in oil palm and
forest plantations.

Exhibit 1.3: Agricommodity Employment (2020)

3 Smallholders are Agricommodity farmers with planted area of less than 100 acres (40.46 ha)
4 MPIC
5 Ministry of Human Resources (MOHR) Labour Force Survey Report 2019 - Total labour force is 15.6 million
6 ibid
7 Malaysian Palm Oil Board (MPOB), Malaysian Rubber Board (MRB), Malaysian Timber Industries Board (MTIB), Malaysian Cocoa Board

(MCB), Malaysian Pepper Board (MPB), National Kenaf and Tobacco Board (NKTB)

12 National Agricommodity Policy 2021-2030 (DAKN2030)

THE AGRICOMMODITY SECTOR

HAS MADE PROGRESS

OVER THE LAST 10 YEARS

Planted area increased by 1.1 million hectares
over 2010-2020

Total planted area of the Agricommodity sector grew from 5.94 million ha in 2010 to 7.1 million ha in
2020. This makes up 93.7% of total agriculture planted area, and 21.2% of total land use in Malaysia8 9.
Of the overall 2020 target for planted area, 98% was achieved10, driven by expansion of oil palm,
rubber, and timber (Forest Plantation Development Programme-FPDP). Significant gaps remain for
cocoa, pepper and kenaf – crops which are almost entirely smallholder- driven. Cocoa and pepper
planted area have declined significantly. Total planted area for kenaf rose initially to a peak of 3,107
ha in 2016 but declined since 2017.

Table 1.1: Targeted and Actual Planted Area (2010 and 2020)

Year 2010 2020
Commodity Actual
(‘000 ha) Target Actual
Palm Oil 4,854 (‘000 ha) (‘000 ha)
Rubber 1,020
Timber (FPDP) 6,000 5,865
Cocoa 30 1,100 1,10711
Pepper 20 130 12612
Plant-based Fibres 14 7.213
(Kenaf) 1.8 7.4 5.9
TOTAL 2.4 8.0
5,939.8 1.6

7,247.0 7,113.5

Source: MPIC, MPIC Strategic Plan 2017-2020; Forest Plantation Development Sdn Bhd, MTIB
Note: Cocoa planted area includes estates under government agencies

Going forward, major expansions of plantation area will be limited due to increasing competition
for land use as the nation continues to urbanise, as well as restrictions on planting in forest reserves.
Therefore, increasing yield from existing planted area, and generating value through downstream
activities are key priorities for the Agricommodity sector in this upcoming policy period.

8 Source: MPOB, MRB, MTIB, MCB, MPB, NKTB, Department of Statistics Malaysia (DOSM), Department of Agriculture (DOA); MPIC, MPIC
Strategic Plan 2017-2020; Forest Plantation Development Sdn Bhd (https://www.fpd.com.my) includes Forest Plantation area

9 Includes Forest Plantation area
10 See Footnote 8.
11 Excludes rubber wood plantation area, which is included in Timber planted area (Forest Plantation Development)
12 Includes rubber wood plantation area, as part of Forest Plantation Development
13 Source: MPIC (IKL)

Policy Document 13

Sustainability practices have improved

The Government has worked with industry to improve sustainability practices as the Malaysian
Agricommodity sector comes under increasing scrutiny for environmental, sustainability and
governance issues. Some examples are highlighted below:

In 2019, the Government committed to limit expansion of oil palm plantations to protect
biodiversity and in support of efforts to retain 50% forest cover14 through the implementation of
four policies15 towards improving the sustainability of the palm oil industry:
Oil palm planted area will be limited to 6.5 million ha nationwide
No new plantations allowed on peat soil
No conversion of permanent protected forests for oil palm plantations, or for any other
agricultural activity
Official maps showing oil palm planted area will be made public

Oil palm planted area certified under the Malaysian Sustainable Palm Oil (MSPO) certification
scheme has increased – 5.2 million ha out of 5.9 million ha of planted area has been certified,
translating to 88.25% of planted area certified16. Effective January 2020, MSPO certification is
mandatory for all plantations, including smallholders.

The MSPO Trace platform was set up to monitor certification and traceability of the end-to-end
Malaysian palm oil supply chain, providing assurance on the credibility of Malaysian palm oil.

B7 (industry) and B10 (transportation) biodiesel blending was implemented nationwide. B20
blending for transportation is also being implemented in selected cities, increasing the use of
palm biodiesel as a greener alternative to pure fossil fuels.

Biogas capture from Palm Oil Mill Effluent (POME) has been mandatory since 2014 for all new
mills or mill expansions. 130 out of the 457 licensed mills have installed biogas capture facilities
with 50% of them using the gas for electricity or combined heat and power (CHP), reducing the
demand for energy from fossil fuels. This effort contributed to the development of the circular
economy by creating value from a waste product – in this case for energy generation.

The timber industry has increased the area of certified forests17, from 4.65 million ha to 5.27
million ha (40% Permanent Forest Reserves). 22 Forest Management Units (FMU) and eight
Forest Plantation Management Units (FPMU) hold the Malaysian Timber Certification Scheme
(MTCS) forest management certification in 2020, compared with just nine FMU and FPMU in 2011.

The number of timber companies holding Chain of Custody (CoC) certification has more than
doubled from 177 in 2011 to 381 in 2020.

Biomass has been recognised as a key part of the circular economy with a number of efforts
underway to utilise oil palm and timber biomass in various forms. The conversion of oil palm
trunks into raw materials for wood products is an example of cross-commodity collaboration
to create additional value for the Agricommodity sector while minimising waste and reducing
carbon emissions.

14 Ministry for Energy and Natural Resources
15 This policy was endorsed by the Cabinet on 22 March 2019
16 As at January 2021
17 Under the PEFC-endorsed Malaysian Timber Certification Scheme (MTCS)

14 National Agricommodity Policy 2021-2030 (DAKN2030)

Malaysia has become a global leader on a
number of products across upstream and
downstream

The Industrial Masterplan 3 (IMP3) 2006-2020 highlighted four Agricommodity-related industries
(wood-based, rubber-based, oil palm-based and food processing) as part of the 12 priority industries
for development and promotion. This was further reinforced in the tenth (10th) Malaysia Plan (2011-
2015) and the 11th Malaysia Plan (2016-2020).

This prioritisation has supported the advancement of the Agricommodity downstream segment
through extensive public-private partnerships, research and development and commercialisation
(R&D&C) activities and private sector investments. As a result, Malaysia has cemented its global
position for a wide range of products. For example, as of DEC 2020:

Best oil yield performance among the top 5 producers in the world
Second-largest producer and exporter of palm oil worldwide
Global top producer and exporter of rubber gloves
Seventh-largest global producer of natural rubber
Fifth-largest pepper producer in the world, with Malaysian pepper recognised for its unique

qualities
Second-largest cocoa beans processing country in Asia, and sixth-largest cocoa grinder in the

world
Top 10 exporter of timber and timber products
12th-largest wooden furniture exporter in the world; recognised for high-quality wooden furniture

production

Exhibit 1.4: Global Standing of Malaysian Agricommodity Products (2020)

Policy Document 15

CHALLENGES PERSIST

DESPITE THESE SIGNIFICANT
EFFORTS

While the policy interventions, programmes and projects implemented by the Government over
the last 10 years have supported the Agricommodity sector’s continued development and growth, a
number of challenges remain.

Yield of major commodities is declining

Palm oil fresh fruit bunches (FFB) yield declined from 18 tonnes per ha in 2010 to 16.7 tonnes per
ha in 2020 due to various factors including labour shortages, adverse weather conditions, poor
soil health, sub-optimal fertiliser input, limited replanting of aged oil palms with more advanced
clones, as well as pests and diseases. Similarly, rubber yields declined by 4.4%, from 1,480 kg per ha
in 2010 to 1,415 kg per ha in 2020, driven by the uneconomic size of land holdings and ageing trees,
and compounded by ageing smallholders and labour shortages which resulted in reduced tapping
activities. Low rubber prices also severely affected natural rubber production.

Cocoa production saw an even greater drop from 1.27 tonnes/ha to 0.14 tonnes/ha during the same
period due to various factors, including ageing farmers, insufficient application of agricultural best
practices and adverse weather conditions18. Pepper yield has improved from 4.4 tonnes/ha to 6.4
tonnes/ha over 2010-2020. This was driven by the increasing demand in the global market and
encouraging trend of domestic consumption, resulting in higher prices that encouraged farmers to
focus on nurturing their crops.

Exhibit 1.5: Yield of Selected Commodities (2010-2020)

18 El Nino effects were felt in mid-year 2015-2016 (Jabatan Meteorologi Malaysia Annual Report 2016)

16 National Agricommodity Policy 2021-2030 (DAKN2030)

GDP Growth has been marginal

Considering that planted area increased by almost 20% over 2010 to 2020, growth of sectoral
GDP contribution from Agricommodity has been minimal. Sectoral GDP contribution from
Agricommodity recorded a compound annual growth rate (CAGR) of just 1.1% over 2010-2020, from
RM72.6 billion in 2010 to RM85.1 billion in 2020. The upstream segment declined at -0.7% CAGR
during this period while the downstream segment grew at 3.9% CAGR.

Exhibit 1.6: Agricommodity GDP Growth (2010-2020)

Policy Document 17

Export earnings are stagnant

The CAGR of export earnings by the Agricommodity sector from 2010 to 2020 is 2.9% driven by a
significant increase in downstream rubber and cocoa exports. Palm oil exports - which represent
huge volumes relative to other commodities – grew by just 1.6% CAGR over the last 10 years.

Exhibit 1.7: Agricommodity Export Earnings by Commodity (2010-2020)

Three primary issues have been identified

The Agricommodity sector is highly dependent on low-skilled foreign labour while also dealing with
increasingly demanding sustainability requirements. Further, there has been insufficient investment
into the development of the downstream segment, including additional sustainability and value
creation efforts in growing the circular economy. These long-term structural issues continue to
challenge the Agricommodity sector despite decades of effort.

High dependence on low-skilled foreign labour

First-generation smallholders are advanced in age, and there is a lack of interest among the next
generation to take over, as jobs in the sector are deemed Dirty, Dangerous, and Difficult (3D). Better
education, a wider range of job opportunities and the migration of local labour from rural to urban
areas in search of higher wages and a different way of life are among the factors causing this labour
shortage for manual, low-skilled jobs, especially in plantations.

18 National Agricommodity Policy 2021-2030 (DAKN2030)

As a result, the high dependence on low-cost, low-skilled foreign labour continues – which in turn
suppresses wages and slows the shift towards automation and mechanisation. Foreign labour also
comes with increasing scrutiny over human rights, forced labour and child labour, important issues
that have come to the fore in recent years.

Labour shortages impact yield and output, as good planting practices get compromised (e.g.,
correct and consistent application of fertiliser). Plantations and smallholdings also face a shortage
of workers for harvesting and processing. At the same time, as labour costs form a large part of
production costs, increasing wages to attract locals will cause a rise in the total cost of production.
This must be offset by improved productivity to generate higher output per capita and supported
by consistent prices in the commodities markets. The Government is continuously working
with industry players to address these issues, including through incentives for automation and
mechanisation, and support for hiring local labour.

Increasingly demanding sustainability requirements

In recent years, Malaysia’s primary export markets such as the EU, the USA and Japan have increased
demand for sustainably produced Agricommodity products. Global multinational corporations
(MNCs) also are under increased pressure to ensure that their products and ingredients are
sustainably sourced and are produced in compliance with labour rights and human rights.

In addition, the effects of climate change are showing clearly, with adverse and unpredictable
weather conditions affecting output and increasing pressure on industry to change the way they
do business. The palm oil and timber industries in particular have also been criticised for alleged
deforestation and biodiversity loss and increases in greenhouse gas emissions. While progress
has been made on this front, such as with the MSPO and MTCS certification schemes, continuous
improvement is emphasised, to meet increasing demands and respond to consumer sentiment.
Even cocoa producers and chocolate manufacturers are subject to increasing scrutiny on the source
of cocoa beans, creating demand for traceability.

Most large players have been forced to improve compliance and maintain certification standards
due to buyer demand. However, smallholders are subject to less scrutiny and have been slower
to adopt better practices – in part due to the increased operating time and cost associated
with compliance. In the longer term, more Agricommodity products will certainly be subject to
increased sustainability standards, certification, and traceability requirements. Malaysia will be at a
disadvantage if this failure to comply with buyer requirements persists.

Insufficient product diversification and value-creation

Malaysia has historically been a bulk exporter of Agricommodity products such as crude palm oil
(CPO) and natural rubber (NR). Decades, later, value addition through increased local downstream
processing remains slow. The export volume of processed palm oil and palm oil products has
fluctuated according to CPO prices, with a marginal CAGR of 0.2% from 2010-202019.
While Malaysia is well-known for selected downstream products, moving up the value chain
to create more complex, less replicable products is vital to remain competitive in future. Other
emerging countries will be more competitive on volume and costs due to larger land areas, higher

19 MPIC

Policy Document 19

production capacity and cheaper labour. Malaysia will need to compete based on strengths – design
and production of higher value-added products including scaling up the circular economy, strong
logistics and supply chain infrastructure, an established R&D&C and manufacturing base, and the
availability of capable technical and management talent.

The COVID-19 pandemic and post-pandemic
recovery create additional complexities

The COVID-19 pandemic created a huge shock to the global economy in general, and in the
Malaysian economy in particular. The Movement Control Order (MCO) in Malaysia throughout most
of 2020 and 2021 due to the COVID-19 pandemic has impacted production, logistics, work and
travel across the economy. The Agricommodity sector was also impacted, despite being permitted
to operate during this period. The only bright spark was the increase in demand for rubber gloves
and other latex-based medical supplies in 2020, resulting in better performance for the rubber
downstream segment in that year.

Agricommodity output showed a decrease in 2020 compared to 2019. This was driven by an almost
4% decline in crude palm oil production and declines of 7%-23% in the production of palm oil
products. Natural rubber production declined by 20% while timber and wood products output and
exports fell across most products as well. Cocoa also showed a large decline of 31%, but on a low
base, from 1,017 tonnes to 706 tonnes. Pepper production declined by 9%, mainly due to decreasing
pepper prices in 2020 which subsequently reduced export values by 17%.

The Government has intervened to support the Agricommodity sector, with relief measures in place
as described in the accompanying Box Article: “Government Support for the Agricommodity Sector
in response to the COVID-19 Pandemic”.

Going forward, it is expected that the global economy could face similar shocks every few years
– whether health, financial or even climate-related crises. Risk management and contingency
planning will be encouraged so that the industry is better prepared for such eventualities in future.

20 National Agricommodity Policy 2021-2030 (DAKN2030)

GOVERNMENT SUPPORT FOR THE
AGRICOMMODITY SECTOR IN RESPONSE TO
THE COVID-19 PANDEMIC

Apart from a shortage of workers due to the freeze in supply of foreign labour, industry players
faced challenges due to limited cash flow and high costs to restart business activities in
compliance with changing Standard Operating Procedures (SOPs) as the country adapted to
new norms. The Government has provided support for businesses through the Prihatin Rakyat
Economic Stimulus Package (PRIHATIN), Short-term Economic Recovery Plan (PENJANA), and
Perlindungan Ekonomi Dan Rakyat Malaysia (PERMAI) Assistance Package.

Among the incentives for the Agricommodity sector are:
RM20 million one-off allocation for agricultural input for cocoa, pepper and kenaf

smallholders
100% exemption on export duty for crude palm oil, crude palm kernel oil and processed palm

kernel oil
RM350 million Micro-credit Financing Scheme at 3.5% interest through Agrobank for agro-

entrepreneurs including those involved in Agricommodity

Policy Document 21

THE DAKN2030 TAKES A

FORWARD-LOOKING
APPROACH

TO TRANSFORM THE
AGRICOMMODITY SECTOR

The persistent challenges faced by the Agricommodity sector, and the continuing fallout from the
COVID-19 pandemic all point towards the need for a structural shift in the Agricommodity sector
to increase resilience, strengthen sustainability and truly drive impact over the coming decade.
A forward-looking approach has been taken in defining the framework for the DAKN2030. As
described in the following chapter, this approach seeks to address structural challenges in line with
Malaysia’s national agenda and commitments as a global citizen.



Chapter

Advancing Agricommodity
For Sustainability And
Shared Prosperity

2

24 National Agricommodity Policy 2021-2030 (DAKN2030)

THE DAKN2030

FRAMEWORK
WAS DEVELOPED

TAKING INTO CONSIDERATION

GLOBAL MEGA-TRENDS

Five mega-trends are expected to influence the
Agricommodity sector’s growth over the next
10 years

A number of mega-trends are anticipated to influence global socio-economic growth and
development in general over the coming decade. Five mega-trends in particular are expected to
have a disproportionate impact on the Agricommodity sector in Malaysia.

Exhibit 2.1: Mega-trends that could Impact the Agricommodity Sector

Policy Document 25

1. Global economic power will pivot towards Asia

The global population reached 7.7 billion in mid-2019 and is expected to reach 8.5 - 8.6 billion by
203020. A bit more than half, about 4.6 billion people, are projected to be in Central and Southern
Asia (2.2 billion) and Eastern and South-Eastern Asia (2.4 billion). By 2040, the region is expected to
account for more than half of global GDP and about 40% of global consumption21.

The COVID-19 pandemic caused an economic downturn in 2020. The World Bank predicts
the deepest global recession since World War II, with global GDP contracting by 5.2% in 2020.
Nevertheless, it sees economic growth rebounding in 2021 under its baseline scenario22. Even if the
worst-case scenario pans out with 8% global GDP contraction in 2020, recovery is still expected to
start in 2021, albeit very slowly, with 1.3% growth.

China and India are still expected to remain drivers of growth, representing the bulk of global GDP
by the end of the decade. This implies that major export destinations for Malaysian Agricommodity
export markets will shift beyond “traditional” markets such as the EU and the US to include Asian
markets such as India and China. Today, China is Malaysia’s third-largest Agricommodity export
destination after the EU, and exports to India are growing. In parallel, competition from emerging
economies in the region will increase, as countries such as Viet Nam and Indonesia benefit from
their large populations and educated, skilled workforce.

2. Demographic shifts will put pressure on growth while increasing demands for better
business practices

Life expectancy is expected to increase over the next 3 decades, and, combined with declining
fertility rates, an ageing population will put more pressure on economic growth. By 2030 almost a
billion people worldwide will be aged 65 or above - almost 12% of the total population23. Malaysia too
is expected to become an “ageing nation” by 2030, with 15% of the population aged 60 and above24.

In addition, changing values and increased expectations of the next generation of workers and
consumers are expected to shift business practices. Generation Z (“Gen Z” - defined as people born
between 1996 and 2012) will constitute 25% of the overall population in Asia by 203025. Sustainability
and ethical production are key purchasing criteria among Gen Z consumers26, who also increasingly
seek purpose and meaning in the work that they do.

In Malaysia, the ageing population and shifting expectations of Gen Z will put increasing pressure on
the workforce, with further labour shortages expected. Finding labour for the plantation sector will
become even more challenging. Increased automation and application of technology will become
even more critical – and could create more opportunities for women to participate in the workforce.
Demand for sustainable and ethical practices will also grow, as Gen Z consumers’ demands become
more influential.

20 United Nations, World Population Prospects 2019
21 McKinsey & Company (2019) The future of Asia: Asian flows and networks are defining the next phase of globalisation
22 World Bank (June 2020) Global Economic Prospects
23 United Nations, World Population Prospects 2019
24 Ministry of Women, Family and Community Development (July 2019), Analysis of the Situation of Population and Family in Malaysia
25 McKinsey & Company (2019), Asia’s Generation Z comes of age, https://www.mckinsey.com/industries/retail/our-insights/asias-generation-z-

comes-of-age
26 PwC (2020), Gen Z is talking. Are you listening? https://www.pwc.de/de/handel-und-konsumguter/gen-z-is-talking-are-you-listening.pdf

26 National Agricommodity Policy 2021-2030 (DAKN2030)

3. The digital revolution will transform agriculture

The growth and adoption of digital technologies will create increasing gaps between early adopters
and late bloomers at the country- or industry-level. At present, China and the USA are responsible
for most Artificial Intelligence (AI)-related research and investment27. Smaller, globally-connected
countries such as Singapore, South Korea, and Sweden also score highly in the commercialisation
of AI solutions. Malaysia is said to be in a relatively weaker starting position but could have selected
comparative strengths in particular segments, such as agriculture.

Various solutions being created such as weeding and harvesting robots, ultra-precision spraying
drones, and high-efficiency vertical-farming facilities that reduce water use and minimise loss of
nutrients. However, many such solutions do not deliver clear value to individual farmers – high
capital and economies of scale are needed. The next step in this digital revolution is for companies to
provide tailored offerings that solve on-the-ground issues for specific grower segments28, including
training entrepreneurs to provide localised services such as maintenance and repair, data analytics
and related advisory services.

Malaysia is in a strong starting position given the country’s focus on digital adoption, digital
technology consumption and tech-entrepreneur development. Investing in digital technologies for
the Agricommodity sector will not only improve output and yield, it may even attract the younger
generation back to the sector. Home-grown technologies have been developed, including by the
Ministry of Science, Technology and Innovation (MOSTI), as shown in the table below.

Table 2.1: Emerging Technologies from Agencies under MOSTI

Programme Lead Agency Potential Applications
Nuklear Provide site-specific fertiliser
Nuclear and related techniques in site-specific and Malaysia recommendations and improve water
real-time soil nutrient and water management management in plantations
Rapid and specific soil fertility analysis for fertiliser MIMOS More effective fertiliser and agro-
chemicals application
recommendation using spectrometry and Reduce the impact of agricultural
machine learning technology diffuse pollution
Obtain wide-scale and time series of soil moisture
contents in plantation areas using Cosmic Ray Recommend the best time to climb
Neutron and Neutron Probe Sensor and pollinate for highest yield
Provide valuable information on groundwater Reduce labour time and number of
utilisation (potential area and zone) using people needed for pollination
Electrical Resistivity Tomography and Imaging
Geo Electric Technique

Intelligent Pollination Readiness Management
System (IPRMS) for oil palm pollination - using
temperature sensors and research logic to
determine the best time to pollinate the mother
palm, and minimise the number of climbs required
for pollination

27 McKinsey & Company (2019), Navigating a World of Disruption
28 BCG (2020), Signs of rebound forecast a new era for agriculture, https://www.bcg.com/publications/2020/agricultural-industry-to-bounce-

back-post-covid-19

Policy Document 27

Oil palm Empty Fruit Bunch (EFB)- based Nano Malaysia Production of:
nanocrystalline cellulose (NCC) and nanofibre Chitosan-CNC composite for wound
(NF) extraction using acid hydrolysis method and healing application
electrospinning technique CNC-based material for
The saltless nanocellulose is a green product that is cosmeceutical application
lightweight and non-toxic - stiffer than Kevlar and CNC composite Proton Exchange
has high tensile strength Membrane for fuel cells
Many potential applications in functional textiles, Potential application for:
biomedical, healthcare, renewable energy, gas production and purification
electronics and cosmetics cosmetic blend
food packaging
Source: MOSTI; Nuklear Malaysia, MIMOS, Nano Malaysia filtration device

4. Rising inequality will threaten stability, compounded by the impact of COVID-19

As wealth grows across economies, inequality has also risen. Countries where inequality has grown
are home to more than 71% of the world population29. As a result, social and political tensions have
risen, manifesting in growing public dissatisfaction as seen in public protests around the world in
recent times30.

In addition to securing social and political stability, a more inclusive economy could also lead to a
stronger economy and more balanced development. Recent major developments, i.e., the COVID-19
pandemic, increased armed conflict and the impact of climate change threaten to reverse progress
made on poverty reduction. A World Bank study indicated that growth was relatively inclusive for 74
out of 91 countries for which relevant data was available – including in East Asia and the Pacific, and
in South Asia31. However, the same report estimates that the fallout from COVID-19 is expected to
push some 100 million people into extreme poverty during 2020 alone.

In Malaysia, Agricommodity smallholders are among the most vulnerable segments of the
population, with incomes at risk from increasing input costs (e.g., fertiliser, labour), fluctuating
commodity prices and limited savings. This is compounded by the lack of a social safety net as
they are typically self-employed, with limited participation in formal support systems such as the
Employees Provident Fund (EPF) or the Social Security Organisation (SOCSO).

5. Concerns over environmental and climate risk will increase scrutiny on Agricommodity

As Asian countries, led by China and India, continue to grow economically, parts of the region
can expect to see increasing average temperatures, more frequent heat waves and changes
in water supply by 2050. While Southeast Asia (SEA) makes up only 3% of global land mass, it is
environmentally important as it houses 20% of the world’s biodiversity and 10% of the world’s
population.

SEA is currently projected to see a 60% increase in carbon emissions by 2040, with the highest
annual deforestation rate of any global tropical region at 1.2%. While China, the USA, and the EU have

29 United Nations (2020), World Social Report 2020
30 McKinsey & Company (2019), Navigating a World of Disruption
31 The World Bank (OCT 2020) Poverty and Shared Prosperity (Shared prosperity focuses on the poorest 40 % of a population - the bottom

40 - and is defined as the annualised growth rate of their mean household per capita income or consumption. The shared prosperity
premium, which is the difference in growth rates between the bottom 40 and the overall mean, is also measured. A high level of shared
prosperity is an important indicator of inclusion and well-being in any country)

28 National Agricommodity Policy 2021-2030 (DAKN2030)
committed to spend a combined USD5.2 trillion in 2020 to stimulate green industries, SEA has been
slow to act despite its significant environmental responsibility for the world’s biodiversity32. Carbon-
heavy industries such as energy, transport, and agriculture (including Agricommodity) thus need to
transition towards low-carbon practices – while limiting disruption to livelihoods for the economically
vulnerable.
In the Malaysian Agricommodity context, these concerns are especially important when it comes
to oil palm plantations which take up the most planted area, and are subject to intense scrutiny
over the loss of forested area and indirect land-use change (ILUC). Similarly, timber harvesting from
natural forest and the expansion of forest plantations are also of concern due to the potential loss
of biodiversity. Scaling up the circular economy will help to alleviate some of these concerns, for
example, providing alternative sources of raw materials (oil palm trunks as an alternative to timber
or rubber wood for furniture production) or increasing value creation from existing resources, by-
products or waste products, such as using Palm Oil Mill Effluent (POME) to generate biogas as a
source of energy.

32 Bain & Company (2020), Southeast Asia’s green economy: Pathway to full potential

Policy Document 29

THE NATIONAL AGENDA EMPHASISES

SHARED PROSPERITY
AND SUSTAINABILITY

The DAKN2030 was developed in line with major national priorities, namely:

The Shared Prosperity Vision 2030 (SPV2030), with three objectives - development for all;
addressing wealth and income disparities; united, prosperous and dignified nation

Mainstreaming the United Nations’ Sustainable Development Goals (SDGs), a commitment
which Malaysia has made as a responsible global citizen

The Twelfth Malaysia Plan 2021-2025 (RMKe-12) which sets the country’s socio-economic
development agenda and programmes for the medium term

The Third National Physical Plan (Rancangan Fizikal Negara Ke-3, RFN3) which is the highest-
level spatial planning policy in the national development framework33

The Shared Prosperity Vision 2030 (SPV2030)
has three objectives

The Shared Prosperity Vision 2030 (SPV2030) was first tabled in October 2018, and further developed
in 2019. It is a commitment to make Malaysia a country that achieves sustainable economic growth
along with fair, equitable and inclusive economic distribution across all income groups, ethnicities,
regions and supply chains. The aim of the SPV2030 is to provide a decent standard of living to all
Malaysians by 2030. This means that the country will shift its economic model and restructure the
business ecosystem while strengthening existing policies and plans to this effect. Three objectives,
15 guiding principles, seven strategic thrusts and eight enablers have been defined to realise the
desired goals. The three objectives are:

1. Development for all – Restructuring the economy to be more progressive, knowledge-based
and high-valued with full community participation at all levels

2. Addressing wealth and income disparities – addressing economic disparities across income
groups, ethnicities, regions and supply chains to protect and empower the rakyat in ensuring
that no one is left behind

3. United, prosperous and dignified nation – building Malaysia as a united, prosperous and
dignified nation and subsequently becoming an economic centre of Asia

33 RFN4 is due to be published towards end-2021. Relevant thrusts will be considered and incorporated into DAKN2030 implementation
programmes at that time.

30 National Agricommodity Policy 2021-2030 (DAKN2030)
Exhibit 2.2: The Shared Prosperity Vision 2030 (SPV2030)

Malaysia is also committed to mainstreaming
the United Nations’ Sustainable Development
Goals (SDGs) in development planning

The Sustainable Development Goals (SDGs) form a blueprint towards achieving a better and more
sustainable future for all34. The 17 SDGs are aimed at engaging all parts of society – government,
institutions, the private sector, community groups and individual citizens – to jointly take action and
address global challenges such as poverty reduction, inequality and climate change.

34 The United Nations www.un.org/sustainabledevelopment (Accessed on 28 OCT 2020)

Policy Document 31

Exhibit 2.3: The United Nations’ Sustainable Development Goals (SDGs)

Although the Agricommodity sector has an impact on each of the 17 SDGs in some way, five SDGs
are most pertinent in the context of the DAKN2030:

Goal 7: Affordable and clean energy – Ensure access to affordable, reliable, sustainable and
modern energy for all, e.g., biofuels as a greener source of energy.

Goal 8: Decent work and economic growth – Promote sustained, inclusive and sustainable
economic growth, full and productive employment and decent work for all, e.g., ensuring decent
work and incomes for all in the Agricommodity sector, especially smallholders and foreign
workers, and shifting the perception of jobs in the sector from ‘3D’ to dignified, fairly-paid jobs.

Goal 12: Responsible consumption and production – Ensure sustainable consumption and
production patterns, e.g., requiring sustainability certification and traceability of products along
the value chain for all major commodities. The circular economy will play a big role here too.

Goal 13: Climate Action – Take urgent action to combat climate change and its impacts, e.g.,
reducing Greenhouse Gas (GHG) emissions through effective waste management, including
utilisation of biomass as part of the circular economy

Goal 15: Life on Land – Sustainably manage forests, combat desertification, halt and reverse land
degradation, and halt biodiversity loss, e.g., managing diversity of crops and land use to limit
degradation; supporting biodiversity management efforts in plantation areas, and minimising
human-wildlife conflict.

32 National Agricommodity Policy 2021-2030 (DAKN2030)

The Twelfth Malaysia Plan guides overall socio-
economic development planning

The Twelfth Malaysia Plan (RMKe-12) set up the national development agenda over the medium
term, i.e., for the next five years from 2021 to 2025. The objective of RMKe-12 is ‘A Prosperous,
Inclusive, Sustainable Malaysia’ with three themes aligned to the country’s long-term development
goals outlined in the SPV2030 and linked to the SDGs:

resetting the economy
strengthening security, wellbeing and inclusivity
advancing sustainability

For the Agricommodity sector in particular, the priorities and strategies that are most relevant
include advancing sustainability, improving productivity growth, shifting to higher value-added
activities, increasing market access and intensifying private investment. These priorities were
considered in the formulation of the DAKN2030, and incorporated into the policy thrusts and
specific strategies.

The Third National Physical Plan (RFN3)
highlights nine strategic directions

Among the strategic directions that are most relevant for the DAKN2030 are DG 2: Integrated Rural
Development; SR1: Sustainable Management of Natural, Food and Heritage Resources; SR 2: Holistic
Land Use Planning; and IC 1: Inclusive and Quality Living Environment.

Thrust 1 (DG): Dynamic Urban and Rural Growth
DG 1 – Balanced Urban Growth
DG 2 – Integrated Rural Development
DG 3 – Enhancing Connectivity and Access

Thrust 2(SR): Spatial Sustainability and Resilience To Climate Change
SR 1 – Sustainable Management of Natural, Food and Heritage
Resources
SR 2 – Holistic Land Use Planning
SR 3 – Low Carbon Cities and Sustainable Infrastructure

Thrust 3(IC): Building Inclusive and Liveable Communities
IC 1 – Inclusive and Quality Living Environment
IC 2 – Liveable Community Environment
IC 3 – Community Participation and Collaboration

Policy Document 33

THE DAKN2030
FRAMEWORK HAS

THREE COMPONENTS

The framework for the DAKN2030 was developed taking into consideration four major
developments:

Learnings from the successes and challenges of the Agricommodity sector over the last 10 years
The national agenda and priorities shaping Malaysia’s direction to 2030
Implications of the COVID-19 pandemic on short-term and long-term socio-economic

development and growth
Global mega-trends expected to shape the global economy over the next 10 years

Among the priorities emerging are the need to advance the Agricommodity sector beyond primary
industries – shaping the future and creating more high-valued jobs through increased productivity,
higher-value downstream activities and continuous market development. Taking a long-term view
is vital – ensuring that sustainability practices are adhered to, and that the wealth created is shared
fairly among all stakeholders.

34 National Agricommodity Policy 2021-2030 (DAKN2030)

FRAMEWORK

FOR THE DASAR AGRIKOMODITI
NEGARA 2021-2030

Strategic Direction

VISION
ADVANCING AGRICOMMODITY FOR
SUSTAINABILITY AND SHARED PROSPERITY

1 5 5

SUSTAINABILITY Policy Thrusts INCLUSIVENESS

Lead the way in sustainable 14 Increase inclusiveness
production and and ensure fairer wealth
Indicators
consumption, and scale up distribution
the circular economy

2 3 4

PRODUCTIVITY VALUE-CREATION MARKET
DEVELOPMENT
Accelerate productivity Intensify value-creation
through R&D&C&I and through new product Expand markets by
technology application leveraging the global
applications, product diversity
and increased complexity supply chain

Policy Document 35

Commodity-Specific Aspirations

PALM OIL RUBBER TIMBER COCOA

Leveraging Smart Synergising Modernising The Driving The

Partnerships On Transformation Of Timber Industry Development Of The

Technological The Rubber Industry Towards Increased Cocoa Industry

Adoption In Palm Oil Value Chain Resilience

PEPPER PLANT-BASED BIOMASS BIOFUELS

Fostering Growth Of FIBRES Scaling Up The Promoting Biofuels
Circular Economy
The Pepper Industry Revitalising The As A Source Of Clean
Plant-based Fibres Through
Agricommodity Energy
Industry
Biomass

Cross-cutting Priorities

SMALLHOLDER BUMIPUTERA ENTREPRENEURSHIP IMPACTFUL
WELL-BEING ADVANCEMENT AND MSME GROWTH DELIVERY
Build next-gen Expand services and Increase efficiency for
Develop “SMART” encourage innovation maximum impact
Smallholders by Bumiputera
modernising services agricommodity
and increasing use of
businesses in
technology midstream and

downstream

36 National Agricommodity Policy 2021-2030 (DAKN2030)

1. Strategic Direction - provides clarity on the overall vision, policy thrusts and outcomes for the
Agricommodity sector as a whole.

The vision statement for the Agricommodity sector to 2030 was developed with input from key
stakeholders including representatives from the private sector, and smallholders:

Advancing Agricommodity for Sustainability
and Shared Prosperity

This vision statement reflects the dual objective in developing Malaysia’s Agricommodity sector
– ensuring sustainability and sharing prosperity. On the one hand, all industry players, from large
corporates to smallholders and workers must benefit from the wealth created. But, this prosperity
must not come at the cost of the environment, nor the long term viability of the sector and the well-
being of the people involved in it. Hence, efforts to develop the Agricommodity sector will balance
long term economic, social and environmental priorities of the country and all key stakeholders.
The five policy thrusts of the DAKN2030 reflect desired outcomes for the Agricommodity sector
in particular, linked to the national agenda. They cover: Sustainability, Productivity, Value-creation,
Market Development and Inclusiveness. These are elaborated further in the following section.

2. Commodity-specific Aspirations highlights targets, strategies and enablers for each of the eight
(8) commodities over the next 10 years to 2030.

The Aspiration for each commodity as shown below have been defined in consultation with key
stakeholders across Government and industry. These are elaborated in the following chapters,
starting with palm oil in Chapter 3.

PALM OIL: Leveraging Smart Partnerships on Technological Adoption in Palm Oil
RUBBER: Synergising Transformation of the Rubber Industry Value Chain
TIMBER: Modernising the Timber Industry towards Increased Resilience
COCOA: Driving the Development of the Cocoa Industry
PEPPER: Fostering the Growth of the Pepper Industry
PLANT-BASED FIBRES: Revitalising the Plant-based Fibres Industry
BIOMASS: Scaling up the Circular Economy through Agricommodity Biomass Maximising the

Potential of Agricommodity Biomass
BIOFUELS: Promoting Biofuels as a Source of Clean Energy

3. Cross-cutting Priorities defines the way forward for important national priorities in the context
of the Agricommodity sector.

Four cross-cutting priorities were identified for the DAKN2030: Smallholder Well-being;
Bumiputera Advancement; Entrepreneurship and MSME Growth; and Impactful Delivery. These
four inter-related issues priorities require a holistic approach to address them in a substantive way,
involving a whole of government approach. This topic is covered in Chapter 11.

Policy Document 37

Smallholder Well-being – smallholders are the backbone for commodities such as rubber,
cocoa, pepper and kenaf, and important contributors for palm oil. Many of them are ageing
and are at risk of income loss due to volatile commodity prices, high input prices and low
yields, among others. Their continued well-being is an important element in ensuring that the
Agricommodity sector continues to grow in a sustainable and inclusive way. Key opportunities
include diversification of activities to include cash crops or livestock, and advancing the role of
cooperatives.

Bumiputera Advancement – as key players in the upstream segment and in some parts of
the midstream and downstream segments, the Bumiputera community will continue to be
supported through entrepreneurship and access to jobs towards fulfilling the national agenda.
A priority in the coming decade is to increase Bumiputera participation in the midstream and
downstream segments, especially focused on the next generations of smallholders.

Entrepreneurship and MSME Growth – entrepreneurs and MSMEs play an important role across
the Agricommodity supply chain, and can be a source of innovation and job creation. Providing
Agricommodity-related services, including in the application of automation and mechanisation,
as well as supporting the industry in application of digital technology are opportunities to be
pursued.

Impactful Delivery – strengthening institutions and building technical skills in Government
will be a priority during the coming decade to continue supporting industry, including shifting
the way things work in the new norm post-pandemic. Collaboration across Government, the
private sector and communities is vital for impactful delivery that creates better outcomes for the
country and for the Agricommodity industry, especially for smallholders and the workforce.

38 National Agricommodity Policy 2021-2030 (DAKN2030)

THE FIVE POLICY
THRUSTS AND 14
OVERALL INDICATORS

REFLECT EXPECTED OUTCOMES
FROM THE DAKN2030

The five policy thrusts of the DAKN2030 set the direction for the Agricommodity sector and guide
the development of each commodity. Delivery of each Policy Thrust will be supported through
specific strategies at the commodity level. The five policy thrusts are described further below,
followed by 14 overall indicators and targets to measure outcomes from the implementation of the
DAKN2030.

i. SUSTAINABILITY: Lead the way in sustainable production and consumption, and scale up the
circular economy - Socio-economic development can no longer be pursued at the expense of
the environment and long-term well-being of communities. DAKN2030 balances the trade-off
between developing the Agricommodity sector and protecting the environment – an increasing
demand of many buyers and consumers domestically and internationally. Strategies will support
green growth by emphasising the circular economy, and put sustainability at the forefront of the
Agricommodity agenda, including ensuring certification and traceability across the value chain.
The DAKN2030 is also an opportunity to catalyse the adoption of circular economy practices to
reduce wastage in production and consumption while strengthening the resilience of the sector
as a whole for long term continuity, including for smallholders.

CIRCULAR ECONOMY OPPORTUNITIES IN
THE AGRICOMMODITY SECTOR

The circular economy utilises the reduce, reuse and recycle (3R) approach to minimise
resource use, maximise the reuse of products and recycle materials back into the
manufacturing loop to create new or different products. The Twelfth Malaysia Plan (RMKe-
12) highlights the circular economy model as a ‘Game Changer’ for national development.
Scaling up the circular economy is expected to help Malaysia to achieve a systemic shift
towards long-term resilience by eliminating unsustainable consumption and production
practices. This should also help to mitigate climate change impacts, reduce environmental
degradation and minimise biodiversity loss.35

35 Twelfth Malaysia Plan, 2021-2025, Economic Planning Unit (EPU)

Policy Document 39

The circular economy approach is in contrast to traditional linear economy approaches,
where products typically have a single life cycle before being discarded as waste. The ‘take-
make-use-dispose’ approach of the linear economy is inefficient, resource-intensive, and
causes a huge impact on the environment.

Integrating the circular economy approach into upstream and downstream production
processes will greatly advance sustainability in the Agricommodity sector. The immediate
opportunity is to increase the utilisation of Agricommodty biomass (from palm oil, rubber,
timber, and kenaf especially) as raw materials for bio-based products.

ii. PRODUCTIVITY: Accelerate productivity through R&D&C, innovation and technology
application - The reality is that agricultural land for expansion is limited, and planted area is
declining for some commodities. Competition from other emerging economies is increasing.
Thus, yield improvements and cost management are paramount for the Agricommodity sector
to remain competitive. A related concern is labour productivity, to mitigate the over-reliance
on cheap, unskilled foreign labour. Public-private partnerships will be prioritised for R&D&C to
develop marketable technology solutions that increase yield and productivity, improve working
conditions for the workforce and expand adoption of mechanisation and automation across
upstream, midstream and downstream.

iii. VALUE-CREATION: Intensify value-creation through new product applications, product
diversity and increased complexity – Malaysia’s competitive strength lies in higher value-added
and niche downstream production. Building on the strong manufacturing capabilities in the
country, availability of managerial talent and relative maturity of the services sector, Malaysia will
become a regional leader in the downstream segment by expanding applications for existing
products, diversifying into new product lines and increasing complexity of products, including
tapping into opportunities emerging from the circular economy. Further opportunities include
the development of Agricommodity-related services, especially digital technologies and services.

40 National Agricommodity Policy 2021-2030 (DAKN2030)

iv. MARKET DEVELOPMENT: Expand markets by leveraging the global supply chain – as a
trading nation, Malaysia is very much part of the global supply chain. While Agricommodity
exports have remained stable over the last few decades, there is always the risk that existing
markets cease to import Malaysian products. This could be due to cheaper competitors
emerging, or issues such as sustainability and workers’ welfare. Diversifying export products and
markets will help hedge against these risks. In parallel, imports of latex, wood, and cocoa beans
– among other inputs – will continue to grow as domestic production is insufficient to meet
the needs of the downstream segment. Standards will be defined to manage the quality and
sustainability of imported raw materials while source countries will also be diversified to reduce
reliance on just a few sources.

v. INCLUSIVENESS: Increase inclusiveness and ensure fairer wealth distribution – the
Agricommodity sector has historically played a key role in poverty reduction through the
smallholder development model (organised and independent). Institutional reform, up-to-
date data and more efficient allocation of resources are key elements to improve support to
smallholders so that Agricommodity cultivation can be a sustainable source of income for
them. Two other groups will also be prioritised: the Bumiputera community and Micro, Small
and Medium Enterprises (MSMEs), who are under-represented especially in the midstream and
downstream segments of the Agricommodity value chain.

Fourteen indicators have been identified to track outcomes and set common goals for all
stakeholders to work towards over the next 10 years.

I. SUSTAINABILITY: Lead the way in sustainable production and consumption, and scale up the
circular economy across the value chain

Indicators Baseline Target Target
2020 2025 2030

1. Upstream – Area certified sustainable 100% To maintain
95% 100% planted
Palm Oil - Percentage planted area certified sustainable area certified
100%
Plantations 99.8% 40% 50%

Independent Smallholders - licensed as per Regulation 31.6% 100% To maintain
5 (1), Malaysian Palm Oil Board (Licensing) Regulations 100% of mills
2005
certif ied
Organised Smallholders 98.5%

Timber - Percentage forest certified sustainable (natural 29%
and planted forests)

2. Downstream – Production Facilities Certified Sustainable

Palm Oil - Certified processing units: Percentage Mills 95% of 457
certified under MSPO Part 4 mills certified

Timber - Number of Chain of Custody (CoC) certificate 381 600 750
holders
3,540
3. Environment - Greenhouse Gas (GHG) emissions reduced (‘000 tonnes CO2 equivalent)** 5,000

Annual reduction in GHG emissions from biodiesel 1,590 3,540
usage

Annual reduction in GHG emissions from biogas capture 4,000 4,500

**Estimated GHG emission reduction is based on calculation using IPCC Guideline, in line with BUR3 exercise; Only palm biodiesel impact is
measured as it represents a direct effort from Government to reduce GHG emissions
Source: MPIC; MPOB; MPOC; MPOCC; MRB; MTIB; MTC; MTCC; MCB; MPB; NKTB

Policy Document 41

II. PRODUCTIVITY: Accelerate productivity through R&D&C&I and technology application

Indicators Baseline Target Target
2020 2025 2030

4. Yield (Output/ha)  3.70 4.00
1,820 1,950
Palm Oil – Oil Yield (tonnes/ha) 3.33* 0.50 0.56
6.40 6.60
Rubber (kg/ha) 1,415 Stem: 10 Stem: 13
Seed: 0.5 Seed: 0.8
Cocoa (tonnes/ha) 0.14
11:1 12:1
Pepper (tonnes/ha) 6.40 4:1 4:1
4:1 4:1
Kenaf / Plant-based Fibres (tonnes/ha) Stem: 6 4:1 4:1
Seed: 0.2 1:2 1:2
1:1 1:1
5. Labour intensity (Land : Labour ratio)
10% 10%
Palm Oil (ha:worker) 10:1 13% 15%
13% 15%
Rubber (ha:worker) 4:1 13% 15%
13% 15%
Forest Plantation (ha:worker) 4:1 13% 15%

Cocoa (ha:worker) 4:1

Pepper (ha:worker) 1:2

Kenaf / Plant-based Fibres (ha:worker) 1:2

6. Transfer/licensing and commercialisation rate of R&D projects

Palm Oil 10%

Rubber 10%

Timber 10%

Cocoa 10%

Pepper 7%

Kenaf / Plant-based Fibres 10%

Source: MPIC; MPOB; MPOC; MPOCC; MRB; MTIB; MTC; MTCC; MCB; MPB; NKTB

III. VALUE-CREATION: Intensify value-creation through new product applications, product
diversity and increased complexity

Indicators Baseline Target Target
2020 2025 2030

7. Sectoral GDP Contribution from Agricommodity (RM) – Total 47.5 50.1
57.8 88.7
Upstream GDP (RM billion) 46.9
1 : 0.82 1 : 0.85
Downstream GDP (RM billion) 38.3 1 : 1.1 1 : 1.4
1 : 0.8
8. Utilisation rate (Ratio of Production : Domestic Utilisation) 1 : 0.75 1:1
1:1 1 : 0.22
Palm Oil36 1 : 0.8 1 : 0.8
1 : 0.26
Rubber 1:1 1 : 0.9

Timber 1 : 0.7

Cocoa 1:1

Pepper 1: 0.32

Kenaf / Plant-based Fibres 1:1

Source: MPIC; MPOB; MPOC; MPOCC; MRB; MTIB; MTC; MTCC; MCB; MPB; NKTB

36 Domestic Utilisation refers to the domestic utilisation of crude palm oil (CPO) and crude palm kernel oil (CPKO) for local consumption, the
refining industry and the downstream segment (after deducting CPO and CPKO exports only). The formula used to calculate the ratio is =
1: (1 - [(CPO & CPKO exports) / (CPO & CPKO production)])

42 National Agricommodity Policy 2021-2030 (DAKN2030)

IV. MARKET DEVELOPMENT: Expand markets by leveraging the global supply chain

Indicators Baseline Target  Target 
2020 2025 2030
9. Total Agricommodity Exports (RM million)  171,000 203,000
Palm Oil 150,49137 75,000 84,000
Rubber 73,253 58,000 70,500
Timber 48,536 28,000 32,800
Cocoa 22,023 10,000 15,000
Pepper 6,229 144.5 216.8
10. Agricommodity Balance of Trade (RM million) 120.8 129,412 154460
11. Ratio of Upstream to Downstream Exports 109,276
Palm Oil 66 : 34 61 : 39
Rubber 79 : 21 15 : 85 17 : 83
Timber 15 : 85 32 : 68 30 : 70
Cocoa 34 : 66 10 : 90 9 : 91
Kenaf / Plant-based Fibres 16 : 84 50 : 50 40 : 60

Source: MPIC; MPOB; MPOC; MPOCC; MRB; MTIB; MTC; MTCC; MCB; MPB; NKTB N/A

V. INCLUSIVENESS: Increase inclusiveness and ensure fairer wealth distribution

Indicators Baseline 2020 Target 2025 Target 2030 Note

12. Smallholders Income (RM) 1,560 1,540

Palm Oil Net Income (MONOCROP) (MONOCROP) 1,580 Average
smallholding
Gross Income 1,940 1,960 (MONOCROP)
size 3.8 ha
Rubber Net Income (INTEGRATED) (INTEGRATED) 2,040 Source: MPOB,

3,020 3,020 (INTEGRATED) JAN 2021

(MONOCROP) (MONOCROP) 3,480 Average
smallholding
3,560 3,620 (MONOCROP)
size 1.9 ha
(INTEGRATED (INTEGRATED) 4,050 Source: MRB,

589 1,250 (INTEGRATED) FEB 2021

(MONOCROP) (MONOCROP) 1,580 Average
smallholding
Gross Income 902 2,030 (MONOCROP)
size 1 ha
(MONOCROP) (INTEGRATED) 2,550 Source: MCB,

Cocoa Net Income 368 1,730 (INTEGRATED) FEB 2021

(MONOCROP) (MONOCROP) 2,170 Average
smallholding
Gross Income 640 2,720 (MONOCROP) size 0.25 ha
Source: MPB,
(MONOCROP) (INTEGRATED) 3,480
MAR 2021
Pepper Net Income 541 440 (INTEGRATED)
Gross Income 1,046
(MONOCROP) 530

1,520 (MONOCROP)

(INTEGRATED) 1,830

710 (INTEGRATED)

(MONOCROP) 800

1,790 (MONOCROP)

(INTEGRATED) 2,100

890 (INTEGRATED)

1,310 1,280

1,730

37 2020 Baseline data for total Agricommodity exports includes tobacco

Policy Document 43

Indicators Baseline 2020 Target 2025 Target 2030 Note

Kenaf / Plant- 934 2,200 3,100 Net income =
based Fibres gross income

for Kenaf
smallholders
as costs are
subsidised by
Government

Average
smallholding
size 1.53ha (2020)
and 2 ha (2025 &

2030)
Source: NKTB,

FEB 2021

13. Contribution of Agricommodity-based MSMEs to Agricommodity-based output (RM)

Rubber 2.4 billion 3.4 billion 4.4 billion

Timber 65 milion 85 million 100 million

Pepper 20 million 24124.4 million 25186.6 million

Kenaf / 9.44 million 22.5 million 45.5 million
Plant-based
FibresFiber

Cocoa 5.8 million 12.5 million 25 million

14. Percentage of Bumiputera MSMEs in midstream & downstream segments – especially “Next Gen”
Bumiputera Entrepreneurs

Rubber 43% 76% 98%
(13/325) (23/325) (33/367)

Timber 43.8% 59.2% 71%
(370/845) (500/845) (600/845)

Pepper 20% 3083% 4085%
(11/55) (600/2000) (800/2000)

Kenaf / 99% 80% 60%
Plant-based (125/126) (210/263) (520/867)
FibresFiber

Cocoa 93% 90% 80%
(216/232) (254/282) (257/321)

Source: MPIC; MPOB; MPOC; MPOCC; MRB; MTIB; MTC; MTCC; MCB; MPB; NKTB