NATIONAL AGRICOMMODITY POLICY (2021-2030)

Policy Document 145

4
Market Development: Position Malaysia
as a regional hub and increase exports
to developing markets

Position Malaysia as a regional cocoa hub

Malaysia has been active in the trading of cocoa beans and cocoa products for over four
decades now. Malaysia’s strategic location, strong supply chain and infrastructure, technical and
management, and favourable incentives provided by the Government provide a strong basis to
develop and promote the country as a regional hub for cocoa in Asia.

Domestic and multi-national companies based in the regional cocoa hub will import and re-export
cocoa beans, grind cocoa beans, and manufacture semi-finished and finished cocoa products.
Facilities provided in the regional cocoa hub include warehousing and logistics, R&D&C, product
development and testing.

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

Background

The development of the cocoa industry in Malaysia is driven by growth in value-added
activities throughout the production chain. Malaysia will be positioned as a cocoa trading hub
to stimulate the development of the country’s cocoa downstream segment, ensure continuous
supply of cocoa beans and maintain market share. Therefore, the establishment of the Cocoa
Trading Hub will provide an effective and efficient trading ecosystem to attract investment
opportunities, generate new economic growth and increase national income from the cocoa
industry.

When established, the Cocoa Trading Hub will support the development of the Cocoa Nexus
at Iskandar Malaysia, a new development project to create an environmentally friendly,
efficient and effective downstream cocoa industry cluster. This development is a public-
private partnership that will include infrastructure investment and shared services such as
warehouses, incubators, laboratories, and a wholesale centre.

The current competitive business environment in the Iskandar region has led to the existence
of three prominent local and multinational cocoa processing companies with a current
capacity of 300,000 tonnes of dry cocoa beans (83% of total grinding capacity in the country).
There are also 12 chocolate manufacturing companies and 23 chocolate entrepreneurs in
the region, with a total revenue of RM67.8 million. The ecosystem was further boosted with
the recent opening of the largest chocolate production facility in Asia with total investment
estimated at RM816 million.

146 National Agricommodity Policy 2021-2030 (DAKN2030)

Objectives

Create a trading ecosystem that will attract new domestic and multinational investments
Boost downstream cocoa industry development through investment facilities and

opportunities to attract investors to venture into cocoa processing and manufacturing of
cocoa products
Provide remedial measures to current issues related to tariff and non-tariff barriers that
impact exports of cocoa products, expansion of market destinations and cocoa market
shares

Target Segment

Domestic and multinational manufacturers involved in cocoa processing and
manufacturing of cocoa products

Cocoa traders

Lead Agency and Relevant Stakeholders

Lead Agency: MCB
Relevant Stakeholders: Iskandar Regional Development Authority (IRDA), Johor State

Government, industry associations, domestic and multinational investors

Expected Outcomes

Increased export earnings: RM10 billion in 2025
More employment opportunities for high-skilled Malaysians
Expansion of Malaysia’s market share in new and existing markets (2025 targets):
Asia & Oceania: 51%
Middle East: 48%
Africa: 33%
Eastern Europe: 20%

Policy Document 147

Brand and promote Malaysian cocoa

Efforts will be strengthened in collaboration with the private sector and local artisan chocolatiers
to promote Malaysia as a single origin and fine or flavour cocoa producer that consistently delivers
high-quality, certified sustainable and traceable cocoa beans and cocoa products.

Malaysian producers will be supported to participate in national and international competitions and
awards, such as the International Cocoa Awards through the Cocoa of Excellence Programme, which
recognises the work of cocoa farmers. Such awards and certifications are typically a strong branding
tool that would highlight the quality and unique characteristics of Malaysian cocoa.

In addition, domestic promotions will be increased to position Malaysian chocolate products for the
right segments in the retail trade, including placing the “Malaysian Chocolate” logo on products
and packaging. Premium artisan chocolates will be made available in upmarket grocers to increase
domestic consumption of premium Malaysian-made chocolates.

Develop new markets

The Export Market Promotion Programme will be strengthened to increase the market share of
Malaysian cocoa products in Asian, Eastern European and African countries. The programme will
include trade missions, exhibitions, market intelligence, preparation for market entry, compliance
with local food safety requirements and guidance on product customisation to meet local tastes.

5
Inclusiveness: Increase smallholder
incomes while developing
entrepreneurs

Advance income generation for smallholders and local cocoa entrepreneurs/MSMEs

The sustainability of the upstream segment depends on smallholder wellbeing – most importantly
their income generation opportunities. While extension programmes to promote better agricultural
practices and increasing yield are core to MCB’s mandate, further income-generation opportunities
will also be supported. Programmes that will be developed include integrated cocoa and agro-
tourism clusters, nursery and farm visits, adopting a “Farm-to-Table” model, as well as processing in
line with customer’s needs to increase farm-gate prices.

Cocoa entrepreneur development programmes will also be continued, including market access
facilitation, through the Langkawi Chocolate Hub and product placement at premium supermarkets
and key tourism sites. Entrepreneurs will also be encouraged to adopt digital marketing techniques
to widen their reach.

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ENABLERS NEEDED

Three enablers are outlined to ensure effective implementation of the strategies to drive the cocoa
industry’s development.

Investment Facilitation

The private sector will need support to venture into cocoa planting, in order to make the economics
more viable. End-to-end investment facilitation support will be provided, from identifying and
securing suitable land for cocoa plantations to providing access to quality planting materials and
know-how, including for crop integration where relevant.

Creative funding channels will be encouraged, including to provide access to bridge financing.
Venture capital investments, crowdfunding and angel investment opportunities will be highlighted.
Joint ventures between downstream players or end-users/buyers and mid-sized plantations may
also be facilitated.

Improving Market Access

Funds will be made available for excellent chocolate-makers to participate in international
competitions to increase the visibility of Malaysian cocoa and chocolate products. Marketing
missions to new markets will be encouraged in collaboration with the relevant ministries and
agencies. A whole of government approach will be taken to address trade barriers and related issues
faced by the industry – including securing support from trade attaches and diplomatic missions in-
country and abroad.

Institutional Reform of the MCB

The MCB was formed in 1989 as a federal statutory agency to develop the cocoa industry in Malaysia.
Over the past three decades, it has evolved in response to market needs, covering six key functions:
Research and Development (R&D); Market Development and Techno-economy; Regulatory
and Quality Control, including licensing and grading; Target Groups Development, e.g., cocoa
smallholders, agriculture entrepreneurs and chocolate entrepreneurs; Extension and Transfer of
Technology; and Technical and Advisory Services, including lab facilities for physical, chemical and
microbiological analyses of cocoa beans and cocoa products.

As the next 10 years are crucial for the survival of the Malaysian cocoa industry, MCB will be
strengthened to provide the support and services that the industry needs. A big priority will be the
development of strategic partnerships for the upstream segment, while commercial acumen is vital
for the continued growth of the downstream segment.

To this end, a restructuring of MCB will be undertaken. MCB’s seven R&D centres will be transformed
into Centres of Excellence recognised for specific research areas. Talent development will be
prioritised for MCB officers, as part of succession planning and to build subject matter experts
among the next generation of scientists, extension officers and marketeers.

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150 National Agricommodity Policy 2021-2030 (DAKN2030)

Policy Document 151



Chapter

Fostering Growth Of
The Pepper Industry

7

154 National Agricommodity Policy 2021-2030 (DAKN2030)

Policy Document 155

Way Forward 2021-2030

15 13

Indicators Strategies
& Targets

15

SUSTAINABILITY 2 4 INCLUSIVENESS
Ensure sustainability of Forging partnerships
PRODUCTIVITY MARKET DEVELOPMENT
the pepper industry Enhance productivity Expand into specialised between pepper
through high yields through technology smallholders and
products and new industry players
and quality adoption market segment S12. Implement dedicated
S1. Focus on quality S4. Encourage technology S10. Enhance trade programmes to
facilitation to penetrate develop Pepper
pepper production – adoption to improve into new market and Agripreneurs
quality compliance vine productivity expanding existing S13. Facilitate partnerships
with Maximum Residue S5. Strengthen advisory markets between pepper
Level (MRL) aligned and extension services S11. Continuous marketing producers and industry
with Codex to smallholdings for and promotion of high players
(International food adoption of Good valued pepper and • Increase yield per
standard) to comply Agricultural Practices pepper-based
with requirements of (GAP) products, including vine/hectare
buyer and codex S6. Establish collaborations exploring synergies - Introduce good
standard of respective with existing training with other spices
country institutes by engaging planting and
S2. Foster better farming with social enterprises post-harvest
practices with more to provide training and practices
extension support extension services to - Integrated
services to smallholders smallholders extension
S3. Create a more programmes,
conducive business increase coverage to
and farming all producing areas
environment to attract and effective
the private sector and transfer of
youth to engage in technology to
pepper cultivation – pepper
especially with modern smallholders
farming practices and - Establish and
emphasis on develop Pepper
sustainability Agripreneurs
Programme to
3 encourage greater
participation of
MSMEs and small
industry players into
the pepper-based
downstream
activities

VALUE-CREATION
Accelerate the shift to downstream activities
S7. Advance small business growth in the downstream segment
S8. Intensify R&D to explore potential use of pepper and pepper extracts beyond the food sector
S9. Increase local consumption of pepper
• Promoting the usage and benefits of the pepper and pepper-based products among
entrepreneurs and end users

156 National Agricommodity Policy 2021-2030 (DAKN2030)

1 CURRENT
STATUS

The pepper industry is an integral part of the Agricommodity sector due to the high involvement
of smallholders. Despite keen competition from other major producing countries, particularly Viet
Nam and Indonesia, the demand for Sarawak pepper, known for its quality and aromatic attributes,
remains high. Currently, Malaysia is the fifth largest pepper producer in the world.

However, further advancement of the pepper industry continues to be undermined by several
key issues at the upstream level such as ageing smallholders and low labour recruitment into
the industry, high input costs, and limited R&D and innovation. At the downstream level, the
industry continues to struggle with a very competitive global market, price fluctuations and lack of
investment in developing downstream products.

Compared to 2010, pepper planted area showed a marked decline by 2020, as confirmed by a
ground survey of pepper smallholders registered with the Malaysian Pepper Board (MPB). Prior
to 2018, pepper planted area growth had been estimated on a linear basis using historical data.
A recent survey indicates that the planted area was 8,030 ha in 2020. Almost 98% of the pepper
planted area is in Sarawak, and the remaining 2% is in Peninsular Malaysia and Sabah.

Exhibit 7.1: Pepper Planted Area (2010-2020)

Policy Document 157
Over the DKN2020 period, pepper production registered significant growth driven by productivity
improvements. Production reached 30,804 tonnes in 2020 despite planted area reducing by almost
half. The average yield per ha increased by 0.2 tonnes/ha annually.

Exhibit 7.2: Pepper Production and Productivity (2010-2020)

Despite increased production, export earnings from pepper were influenced by pepper prices in the
world market. For example, the price of black pepper which was RM10,097 per tonne in 2010 rose to
RM28,031 per tonne in 2015 but later dropped drastically to RM7,847 per tonne in 2020. These price
fluctuations had a great influence on the export earnings which peaked in 2015 at RM513 million and
dropped to RM120.8 million in 2020.

Exhibit 7.3: Export of Pepper Products (2010-2020)

158 National Agricommodity Policy 2021-2030 (DAKN2030)

ATTRIBUTES OF SARAWAK CREAMY WHITE PEPPER

Sarawak Creamy White Pepper (CWP) is a premium quality pepper specially produced by smallholders at the
farm level. CWP is produced through a natural process without using any preservatives or additives:

Fully matured pepper berries are hand-harvested and carefully selected.
The selected berries are soaked in tanks with piped running mountain water under controlled conditions

to remove the pericarp. CWP can also be produced by soaking the matured berries in clean and clear
running mountain streams.
The constant monitoring of water circulation produces uniformly high-quality CWP. This process also
allows the CWP to acquire distinctive aromas and flavours.

CWP is greatly sought after by domestic and international end-consumers as well as importers, especially
those in the food and hospitality industry in the US, Japan, China and Singapore. CWP fetches a huge
premium, almost 2.5 times more than standard white pepper.

Given this price premium, CWP has the potential to improve pepper smallholder’s livelihoods, whilst
creating a specialised, high-valued niche product. The MPB will focus on CWP production as a niche product
in suitable production areas which have clean and clear mountain streams.

Extension services will be provided to uplift pepper smallholders’ knowledge of better farming practices.
Farm inputs such as pepper sieves, jute sacks and packaging materials will be provided, in addition to the
construction of pepper soaking facilities.

Pepper is predominantly a smallholders’ crop

Currently, the development and growth of the pepper industry in the country is highly dependent
on smallholders. Approximately 38,430 pepper farmers are registered with MPB, and almost 98%
of them are in rural areas in Sarawak. The average farm size is 0.25 ha, the equivalent of 500 pepper
vines. Pepper is a suitable crop for smallholders, as they tend to work in and manage their own farms
with special care and close monitoring. Unlike other crops, pepper demands almost daily care.

Over generations of pepper planting, these smallholders have acquired and inherited invaluable
expertise in caring for their vines. However, due to low economies of scale, pepper smallholders
generally combine pepper farming with other economic activities in order to maximise their
incomes. Some also rely on government support.

Policy Document 159

Exports are shaped by global market trends

Malaysia is the 5th largest pepper producer in the world behind Viet Nam, Brazil, Indonesia and
India. Despite steadily increasing production, export earnings of pepper and pepper products
declined sharply from 2016 affected by the price instability and excess of pepper stocks in the world
market. Malaysian pepper exports mainly consist of black pepper used as a basic ingredient and
preservative in the food and gourmet industry.

In 2020, of the total exports of pepper, 3,155 tonnes or 42% was exported to Japan, followed by China
at 1,527 tonnes (15.8%), and Viet Nam at 911 tonnes (8.4%). Other export destinations include Taiwan
(8.2%), Singapore (6.9%) and South Korea (4.5%).

Exhibit 7.4: Pepper Exports by Destination (2020)

160 National Agricommodity Policy 2021-2030 (DAKN2030)

Domestic consumption shows an encouraging
trend

Domestic consumption of pepper has grown steadily from 7,100 tonnes in 2010 to 11,500 tonnes in
2020. The domestic consumption of pepper in 2020 made up one-third of the total pepper output
in that year. Domestic consumption of pepper is expected to grow at an average of 2.7% per annum
to meet the demand of local industries engaged in value-added activities especially in the food
processing sector. On this note, Malaysia’s aspirations to be the Halal food hub of Asia will further
encourage the rise of the domestic consumption of pepper for the food industry.

Exhibit 7.5: Domestic Consumption of Pepper (2010-2020)

Sustainability efforts are focused on good agricultural practices
From an environmental sustainability perspective, the Malaysian pepper industry is not facing
any major issue. Plans for new planting will not affect or involve deforestation. Pepper farms do
not require large areas of land to be cleared. Sustainability efforts are focused on good planting
and management practices as well as efficient application of farm inputs. In addition, cultivation
practices are also in compliance with MPB’s prescribed good agricultural practices (GAP) for
pepper planting. To ensure the sustainability of the pepper industry, the Government will continue
with programmes and assistance so that the pepper industry in Malaysia remains relevant and
sustainable.

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2 KEY
ISSUES

Yield could be improved

Pepper yield is estimated at 6.4 tonnes per ha or equivalent to 2,000 pepper vines, in 2020. With
the current low prices, pepper smallholders might find it difficult to adopt efficient management
practices. Despite these constraints, the current farming practice still yields good quality pepper that
has given fame to the brand “Sarawak Pepper”.

High cost of production

The pepper industry is affected by the high cost of farm inputs. The cost of agricultural inputs such
as fertilisers, pesticides and Belian posts (staking for pepper plants) are increasing, resulting in a
higher cost of production borne by the smallholders. The cost of chemical fertilisers, dolomite and
chemical pesticides are high as most of the ingredients are imported. For example, the price of
dolomite (25kg per bag) and pesticide (1kg per packet) have increased by 7% and 48% respectively as
compared to the previous year due to the weakening of the Ringgit against the United States (US)
Dollar.

Ageing pepper smallholders

The majority of pepper smallholders are aged 50 years and above. Attracting the younger generation
to cultivate pepper is a major challenge to sustain the industry. It is very important because
the younger generation is more adaptable to change and could adopt new technology and
modern farming practices. Without involving the younger generation, pepper farming might face
sustainability issues in the long run.

Limited provisions of extension services

With approximately 38,430 registered pepper farmers and 35 MPB extension officers, the ratio
of smallholders to extension officers is only 1: 1,098. This inadequacy limits the number of pepper
smallholders who receive extension services, thus inhibiting the capacity building of smallholders in
many areas such as yield improvement techniques and the application of GAP at the farm level.
Nascent R&D&C activities

R&D on pepper only started in 2009, after the formation of MPB in 2007. Potential uses in high-end
sectors such as pharmaceuticals and cosmetics remain low and yet to be explored. Currently, most
of the R&D programmes and projects have completed the exploratory stage and are moving towards
application, especially in the food industry. Increased R&D&C will create greater demand for pepper

162 National Agricommodity Policy 2021-2030 (DAKN2030)

and create entrepreneurship opportunities for more people to be involved in developing the pepper
industry.

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3 WAY FORWARD
FOR PALM OIL

Sarawak pepper has established a name for itself in the world for its high quality. Moving forward,
the upstream segment will remain smallholder-dominant, as large-scale cultivation offers little
viability considering the nature of pepper farming. Concerted efforts are needed to ensure that
pepper smallholders remain competitive, continue to increase production through better farming
practices and venture into downstream activities to produce high-valued niche products. The
development of the downstream segment will be prioritised. The content covers key indicators and
targets for the pepper industry to 2030, related strategies and enablers needed.

PEPPER: INDICATORS, TARGETS
AND STRATEGIES 2021-2030

Policy Thrust Indicators Baseline 2020 Target 2025 Target 2030 Strategies
11.8 15.0 18.0
SUSTAINABILITY 1. Tonnes of pepper Focus on quality
Ensure graded by 780 900 1,200 pepper production
sustainability Malaysian Pepper – compliance with
of the pepper Board Maximum Residue
industry through Level (MRL) aligned
high yields and (‘000 tonnes) with Codex
quality (International food
2. Number of grade standard) to comply
certificates issued with requirements
of buyer and codex
standard of respective
country

Foster better
farming practices
with more extension
support services to
smallholders

Create a more
conducive business
and farming
environment to attract
the private sector and
youth to engage in
pepper cultivation –
especially with modern
farming practices
and emphasis on
sustainability

164 National Agricommodity Policy 2021-2030 (DAKN2030)

Policy Thrust Indicators Baseline 2020 Target 2025 Target 2030 Strategies
3. Yield (Tonnes/Ha) 6.4 6.4 6.6
PRODUCTIVITY 1:2 Encourage technology
Enhance 4. Labour intensity 1:2 1:2 53.0 adoption to improve
productivity (Land: Labour 15% vine productivity
through ratio) 30.8 43.5
technology 7% 13% N/A Strengthen advisory
adoption 5. Total Production 1,077 and extension services
(‘000 tonnes) N/A to smallholdings for
11,650 adoption of Good
6. Transfer/ 1: 0.22 Agricultural Practices
licensing and (GAP)
commercialisation
rate of R&D Establish collaborations
projects with existing training
institutes by engaging
VALUE-CREATION 7. Sectoral GDP N/A N/A with social enterprises
Accelerate Contribution to provide training and
the shift to (RM million) 2,434 802 extension services to
downstream N/A N/A smallholders
activities Upstream GDP 11,450 11,550
(RM million) Advancing small
1: 0.32 1: 0.26 business growth in the
Downstream GDP downstream segment
(RM million) 8,490 tonnes 13,035 tonnes
(RM120.8 (RM144.5 Intensifying R&D to
8. Volume increase in million) million) explore
local consumption 82.9 112.1 potential use of pepper
(tonnes) and pepper extracts
beyond the food sector,
9. Utilisation e.g., pharmaceutical
rate (Ratio of and cosmetics
Production:
Domestic Increase local
Utilisation) consumption of
pepper
10. Total Exports
15,710 tonnes Enhance trade
MARKET 11. Balance of Trade (RM216.8 facilitation to penetrate
DEVELOPMENT (RM million) million) into new markets and
Expand into expanding existing
specialised 193.4 markets
products and new
market segments Continuous marketing
and promotion of
high valued pepper
and pepper-based
products, including
exploring synergies
with other spices

Policy Document 165

Policy Thrust Indicators Baseline 2020 Target 2025 Target 2030 Strategies

INCLUSIVENESS 12. Smallholders Income (RM) - Average income per month per Implement dedicated
Forging smallholding programmes to
partnerships develop Pepper
between *calculation is based on latest average pepper price Agripreneurs
smallholders and
industry players Gross Income RM 1,046 RM 1,310 RM 1,730 Facilitate partnerships
between pepper
Source: MPB; MPIC Net Income RM 541 RM 890 RM 1,280 producers and industry
players
13. Number of pepper 52 50 50

entrepreneurs

established

14. Contribution of RM20 Million RM24124.4 RM25 M186.6
Agricommodity- Million Million
based MSMEs to
Agricommodity-
based output (RM)

15. Percentage of 20% 30% 40%
Bumiputera (11/55) (600/2000) (800/2000)
MSMEs in
midstream &
downstream
segments –
especially “Next
Gen” Bumiputera
Entrepreneurs

166 National Agricommodity Policy 2021-2030 (DAKN2030)

STRATEGIES TO
DRIVE GROWTH

OF THE PEPPER INDUSTRY

Thirteen strategies will be implemented along the five policy thrusts, with the objective of fostering
the growth of the pepper industry.

1
Sustainability: Ensure sustainability
of the pepper industry through high
yields and quality

Focus on quality pepper production

Strategies to increase pepper production will be implemented together with efforts to enhance
the quality of the pepper, ensuring compliance with the Maximum Residue Levels (MRL) aligned
with Codex76. In addition, pepper smallholders will be empowered to grow premium pepper
commercially.

Foster better farming practices with more extension support services to smallholders

MPB will further improve its functions and operations on extension services focusing on educating
pepper smallholders on better farming practices for improving existing pepper farms. More efficient
use of farm inputs will be encouraged, as well as provision of alternative resources to replace Belian
posts with cheaper vine poles and providing high yielding and disease-resistant pepper varieties.
Adoption of an Integrated Pests and Diseases Management Programme (IPDM) in black pepper
cultivation will be intensified through the implementation of research activities.

Existing financial support to pepper smallholders which covers only part of farm inputs will be
reviewed, especially considering rising prices of imported materials such as chemicals and fertilisers.
Lab services shall be strengthened and extended to the smallholders so that they could send
soil samples for testing to determine soil texture and nutrients needed. Smallholders will also
be encouraged to practice natural farming with minimal harmful effects on soil quality and the
surrounding environment.

76 Codex Alimentarius refers to international food standards, guidelines and codes of practice for the safety, quality and fairness of the
international food trade (http://www.fao.org/fao-who-codexalimentarius/about-codex/en/)

Policy Document 167

Create a more conducive business and farming environment to attract the private sector
and youth

Pepper farming at a larger scale will be explored through the acquisition of land in collaboration
with State Governments and economic corridors. To create economies of scale and increase
adoption of technology and modern farming practices, consolidating contiguous areas or clustering
of smallholdings under the guidance of successful and model smallholders is one way to move
forward. Engaging social enterprises is also another way to provide end-to-end services to pepper
smallholders.

2
Productivity: Enhance productivity
through technology adoption

Encourage technology adoption to improve vine productivity

Technology adoption programmes will be intensified for good and sustainable farming practices,
improving plant protection and farm maintenance particularly on disease and pest management.
Smart and modern farming techniques will be useful in improving disease resistance and increasing
yield of pepper vine varieties. Implementation of precision farming technology, to improve
productivity will help ensure more efficient regulation and monitoring of pepper farms. Adoption
of viable technology and machinery especially at farm-level and for midstream processing shall be
encouraged, and assistance extended to smallholders for technology adoption.

FLAGSHIP PROGRAMME 8: PEPPER DEVELOPMENT AND
EXTENSION CENTRE

Background

The Pepper Development and Extension Centre will serve as a comprehensive research and
reference centre on pepper in Malaysia. It will be a catalyst for R&D&C&I activities aimed at
maximising production, increasing yield, and ensuring the sustainability of the pepper industry
in Malaysia, focusing on four areas:

production of high yield, high-quality planting materials that are resistant to diseases and
pests

environmentally-friendly pest control methods
modernising pepper cultivation and processing practices
development of value-added and diversified pepper and pepper-based products

In addition, the centre will serve as a pepper development centre through ongoing awareness
and training activities for industry players to further enhance their technical and non-technical
skills.

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Objectives
Expand research findings, as well as the development and innovation of pepper;
Become a comprehensive research and reference centre on pepper;
Disseminate knowledge, skills, expertise and technology transfer to stakeholders; and
Drive human capital development towards an integrated pepper industry.

Target Segments
Pepper smallholders
Pepper industry players

Lead Agency and Relevant Stakeholders
Lead Agency: MPIC-MPB
Relevant Stakeholders: Federal Government Ministries, State Governments, pepper

smallholders, entrepreneurs and pepper exporters.

Expected Outcomes
Increase pepper productivity through innovative agricultural practices as well as R&D&C&I.
Improve living standards of pepper smallholders by generating higher returns through

higher yield varieties, better farming practices and value-added pepper-based products.
Strengthen and diversify the use of pepper downstream products for increased value

creation.

Policy Document 169

Strengthen advisory and extension services to smallholdings for adoption of Good Agricultural
Practices (GAP)

As the dedicated agency to spearhead the growth of the pepper industry, MPB will continue to
build the necessary skills, competency, knowledge, capacity, and resources to provide the required
extension and advisory services to pepper smallholders. The existing structure and functions of MPB
will be reviewed, enabling them to meet challenging demands to remain as competitive pepper
producers by practising good agriculture practices.

Establish collaborations with existing training institutes

Collaborative initiatives, by pulling together resources between MPB and other agriculture-related
training institutes shall be encouraged to develop and conduct training and skill development
programme to uplift the capacity and skills of workers in the pepper industry.

3
Value-creation: Accelerate the shift to
downstream activities

Advancing small business growth in the downstream segment

An Entrepreneur Development Programme will be introduced to provide training and guidance to
pepper entrepreneurs, especially in the downstream segment. Towards this end, a dedicated division
on entrepreneurship will be established within MPB to guide pepper-based MSMEs to think and
act globally as well as to exploit export opportunities. Joint ventures with the gourmet food industry
shall be encouraged through government investment facilitation.

Intensifying R&D to explore potential use of pepper

R&D will be intensified to explore more uses of pepper and pepper extracts beyond the food sector.
Experiments in new applications of pepper include beauty and personal care products, nutraceutical
products and additional development in technology and processing for food products. Options shall
be explored to undertake joint research experiments with other existing research institutes and with
the private sector, to ensure commercial viability.

Increase local consumption of pepper

Domestic consumption of local pepper will be encouraged by engaging more small entrepreneurs
to venture into pepper-based product manufacturing. Domestic market analysis will provide further
insights into the customers’ expectations and growth opportunities.

170 National Agricommodity Policy 2021-2030 (DAKN2030)

4
Market Development: Expand into
specialised products and new market
segments

Enhance trade facilitation to penetrate into new markets and expanding existing markets

Trade facilitation will be undertaken by organising and participating in trade fairs and trade missions
in collaboration with the gourmet food industry. Malaysian foreign missions need to be engaged
actively to continuously monitor and study market sentiment and provide feedback on emerging
trends and opportunities. Constructive marketing efforts will be taken to create visibility of Sarawak
Pepper, and to increase understanding of its quality and unique attributes. Rebranding of Sarawak
pepper to enhance its marketability as a high-value niche product based is a step forward in this
direction.

PEPPER-BASED FOOD PRODUCTS

The pepper-based food products are developed in-house and are focusing on the usage of pepper berries,
powder and pepper oleoresin. These pepper-based food products are categorised into seasonings,
flavoured products and sauces/dressings whereby all these products are transferred to MSMEs or
interested entrepreneurs through hands-on training sessions and consultations.

MPB has provided assistance through technical and hands-on training sessions, sensory evaluation tests
for product acceptance by panellists and provided support in preparing packaging samples for market
testing.

Policy Document 171

Continue marketing and promotion of high valued pepper and pepper based-products,
including exploring synergies with other spices

Market diversification of pepper products is a key step in exploring new markets for downstream
pepper products in both local and international markets. Besides focusing on traditional products
and markets, the industry will be encouraged to move towards advancing downstream activities
through R&D and marketing of value-added products. Synergies with other spices such as cloves,
coriander and cinnamon will also be explored to strengthen Malaysia’s position as a producer of
high-quality spices.

5
Inclusiveness: Forging partnerships
between pepper smallholders and
industry players

Implement dedicated programmes to develop Pepper Agripreneurs

This dedicated agripreneurs development programme by MPB will encourage the participation
of MSMEs and small industry players in pepper-based downstream activities. Through the
programme, MPB will provide consultations and guidance to aspiring agripreneurs in the fields
of entrepreneurship, branding, manufacturing, marketing and packaging. The Entrepreneur
Development Programme would also involve pepper smallholders and thus enhance the
participation of the Bumiputera community in pepper agripreneurship. The target is to establish 50
agripreneurs by 2025.

Facilitate partnerships between pepper producers and industry players

One of the approaches under the entrepreneur’s development programme is to forge partnerships
between pepper producers and industry players. Whilst the potential with the gourmet food
industry is clear and needs to be developed, possibilities with the non-food sector such as
pharmaceuticals or nutraceuticals will be explored further. Additional financial support and a
conducive business environment will be established for MSMEs with high potentials for JVs in
developing and commercialising high-value products.

172 National Agricommodity Policy 2021-2030 (DAKN2030)

SARASPICE

The Malaysian Pepper Board (MPB) has been operating a retail outlet marketing product under the Saraspice
Brand for the past twenty-three (23) years since 1996. The types of products under the Saraspice brand are
pepper berries, pepper powder, pepper candies, pepper sweets, black pepper sauce, marinades/spice mixture
and pepper perfume. The distribution of Saraspice products is mainly focused in Sarawak. Meanwhile,
the distribution of the products in the Peninsular Malaysia market is very much limited. Currently, the
production of Saraspice products is carried out in MPB’s Kuching premise. Thus, the production is limited due
to space constraint and is done manually which leads to constraints to meet market demands. Total sales of
Saraspice products for the period 2016 to 2020 are as shown in Table 1.

Table 1: Total sales of Saraspice products for the period 2016 to 2020

YEAR VALUE (RM MILLION)
2020 0.44
2019 1.24
2018 1.33
2017 2.11
2016 2.32

Source: Trading Division, MPB

The market for Saraspice is very promising and has a great potential to be developed especially in
Peninsular Malaysia. Product rebranding is essential to make it a premium brand to be one of the best
and highest quality peppers in the world. In view of this, MPB is in the process of undertaking the product
rebranding such as redesigning the logos, product displays, posters, signage, product shelves, product
packaging and intensifying marketing campaigns as well.

MPB has registered a subsidiary company, “SARASPICE SDN. BHD.” on 12 September 2019. The company
is wholly owned by MPB with its main objective to stimulate the Malaysian pepper industry in the
development of downstream pepper business, which mainly focuses on locally produced pepper on sales,
and to undertake product-marketing activities.

This new company will help to stimulate the pepper
industry to cater for the downstream pepper industry,
which is to develop and market consumer products
and expand to other spice products. This initiative
will further spur Sarawak’s pepper market share
locally and internationally. Once the demand for
pepper increases, it will improve the local production
and at the same time will increase the pepper price
as well. There’s a demand for all of this and the needs
to supply more raw material and demand cost and
subsequently price will increase significantly. So, at
this point, Saraspice is the catalyst for all these chain
effects.

Policy Document 173

ENABLERS NEEDED

Two enablers are outlined to ensure effective implementation of the strategies to foster the growth
of the pepper industry.

Investment and Market Facilitation

Conducive business environment and funding facilities are needed to forge partnerships between
industry players and smaller entrepreneurs to venture into the downstream segment and to create
value-added products. In addition to Federal Government funding, State Governments will establish
special funding assistance to support small local entrepreneurs in the production of pepper-
based products. Facilitation programmes shall identify entry points to connect pepper MSMEs
with the food industry to assure buyers of their products. R&D&C of non-food pepper products
will be encouraged through incentives for research institutions, researchers, and higher learning
institutions in collaboration with the private sector.

Institutional Reform of MPB

The Malaysian Pepper Board (MPB) is a federal statutory body under MPIC, established on 1st
January 2007 under the Malaysian Pepper Board Act 2006. The board provides a wide range of
services including the development of the upstream segment and advancement of the downstream
segment, and entrepreneurship development. Its main functions include research, quality control,
trading, market development and factory services. The MPB is also responsible for providing
extension and advisory services particularly to smallholders to uplift their skills for better farm
management. However, an acute shortage of both financial resources and trained staff impedes
MPB’s efforts to serve the more than 38,430 pepper smallholders who are spread all over the remote
areas of Sarawak.

To strengthen its effectiveness in both, upstream and downstream segments and for the future
growth of the pepper industry, MPB will undertake a restructuring exercise on three key areas:

i. improve extension and advisory services and nurture competent manpower for better farm
management

ii. Nurture researchers and experts to develop high yielding and pest/ disease resistant planting
materials.

iii. Strengthen R&D&C to develop new products and increase commercialisation



Chapter

Revitalising The Plant-
Based Fibres Industry

8

176 National Agricommodity Policy 2021-2030 (DAKN2030)

Policy Document 177

Way Forward 2021-2030

17 15

Indicators Strategies
& Targets

1 2 4 5

SUSTAINABILITY PRODUCTIVITY MARKET DEVELOPMENT INCLUSIVENESS
Promoting Expand productivity Expand markets by Increasing Bumiputera
improvements across all
sustainability across the leveraging the global participation in the
kenaf value chain segments supply chain kenaf industry
S5. Develop and
S1. Complete value chain S12. Expand industry-led S14. Enhance entrepreneur
development by implement suitable strategic partnerships development via an
creating good planting methods and to increase market infant industry
coordination from Good Agricultural access with buyers as programme for
upstream to Practices (GAP) to well as expanding into Bumiputera and
downstream achieve high level of new markets MSMEs
productivity in kenaf
S2. Attract private sector output S13. Target foreign-local S15. Develop Smallholder
investment by S6. Implement collaboration Cooperatives to achieve
providing incentive and outcome-based economies of scale
support to industry monitoring through mechanisation
players. S7. Increase operational and other initiatives
efficiency including the
S3. Implement use of machinery for
certification of kenaf planting, harvesting
products and processing kenaf
S8. Establish industry
S4. Zone specific areas for anchors
kenaf production (land
consolidation for
cluster farm)

3

VALUE-CREATION
Accelerating the shift to higher value-added activities
S9. Increase R&D and adoption of technology (IoT, IR 4.0, data analytics) in planting
management, downstream processing, and marketing (digital marketing and
e-commerce)
S10. Form strategic partnerships to create new kenaf/fibre based products especially
high value-added products.
S11. Conduct market research and a techno-economic study to find the best commercial
uses for kenaf-based fibres.

178 National Agricommodity Policy 2021-2030 (DAKN2030)

1 CURRENT
STATUS

The potential of the plant-based fibres industry is huge. In recognising this, the Government has laid
the groundwork to develop kenaf in the past 10 years. Over the next 10 years, the Government will
prioritise kenaf for the development of the plant-based fibres industry alongside other feedstock
crops such as bamboo, hemp, flax and sisal. This chapter will thus focus mainly on the kenaf industry.

PLANT-BASED FIBRES - THE COMMODITY OF THE FUTURE

Rising awareness that synthetic materials are damaging the environment has led to a growing interest
in eco-friendly materials. Given the sustainability of natural fibres, natural fibre-based materials have
experienced an upsurge in applications in various manufacturing sectors including the textiles industry. It is
forecasted that there will be a 48% increase in demand for textile fibres (natural and man-made) by 2030
due to a population increase.

Kenaf could be a solution to the rising demand for natural fibre as it is a fast-growing crop (3-4 months)
that can be grown multiple times a year. It is able to produce 3 to 5 times more biomass than most forest
species which take between 10 to 20 years to reach a harvestable size. These characteristics make kenaf an
alternative bio-based raw material for the needs of wood-based industries and eco-products. Kenaf also has
a higher concentration of cellulose than timber with 50 to 60% holocellulose, thus requiring less energy to
extract its fibres.

Apart from that, kenaf has a carbon absorption capacity of 21-89 tonnes per ha of carbon per year, about
5 times more over 10 years compared to other timber plant species. Therefore, there is potential for kenaf
to be part of mitigation efforts to reduce carbon emissions. The low carbon footprint and its sustainability
positions kenaf as a green and sustainable crop, contributing to the development of Malaysia’s green
economy as well.

Malaysia’s kenaf industry hit a milestone when Industrialised Building System (IBS) materials were
successfully produced from 90% of kenaf core. Kenaf IBS panels have passed several SIRIM tests that
are of international standard. Kenaf IBS panels are 60% lighter than concrete and cost 40% less than
conventional IBS panels. Additionally, the benefit of the IBS technology includes workforce safety, reduced
reliance on labour and environmental sustainability, while also being cost-effective.

Policy Document 179

Housing components using Kenaf-based Bio-composites via Industrialised Building System (IBS)

An iconic investment is the Pusat Pemprosesan dan Pengeluaran Produk Kenaf in Saujana, Setiu,
Terengganu. The factory was completed in 2019 at a cost of RM25 million. It will produce 2,400 tonnes of
non-woven raw material annually, supported by 500 smallholders who will produce the kenaf feedstock at
an estimated value of RM20 million per year.
There is potential to be tapped in the plant-based fibre industry over the next 20 years in both upstream
and downstream markets. Plant-based fibres are found in abundance in Malaysia but are yet to be
commercialised. Additionally, other natural fibres, e.g., fibre from the waste sector, jute, abaca, coir, kenaf
and sisal are in high demand globally.

Kenaf, a new source of fibre in Malaysia

Kenaf (Hibiscus cannabinus L.) was first introduced in 2010 as an alternative crop to tobacco by
the Government. Kenaf is a versatile fibrous crop with wide applications in bio-composites, pulp
and paper, the automotive and construction industries and many more. These traits make kenaf
an alternative raw material for the industry to produce high value-added product innovations. As
a sustainable fibre crop, kenaf offers a was identified as a viable solution in mitigating negative
environmental impacts as an industrial material, maximising the potential of the circular economy.

180 National Agricommodity Policy 2021-2030 (DAKN2030)

Developments in the kenaf industry are mainly driven by the National Kenaf and Tobacco Board
(NKTB). During the DKN2020 policy period, the Government encouraged kenaf cultivation and
allocated large land hectarages to kenaf smallholders. As a result, the total planted area of kenaf
grew from 1,897 ha in 2010 to 2,805 ha in 201577. Geographically, kenaf is cultivated primarily in the
states of Pahang, Kelantan, Terengganu, Kedah, and Perlis. The combined area for these five (5)
states in 2019 is 1,699 ha or 98% of the total kenaf planted area78. While growth in the early 2010s was
promising, efforts to further develop the kenaf industry faced unexpected obstacles.

Exhibit 8.1: Kenaf Cultivation Area by Region, 2019

In 2020, the planted area of kenaf had declined to 1,626 ha, 32% below the targeted planted area79.
The aggregate production of dried stems was 6,450 tonnes and 45 tonnes of seeds, and it was grown
by 1,061 smallholders80. From 2010 to 2020, dried stem kenaf production increased by 10%. In 2015,
dried stem production peaked at 11,602 tonnes but declined to 6,450 tonnes in 202081.
Additionally, kenaf seed production grew a CAGR of 12.4 % between 2010 and 202082. However,
production suffered a decline in 2017 due to a prolonged dry spell that affected yield. As a result of
that extreme weather, yields in subsequent seasons continued to be affected.

77 MPIC
78 ibid.
79 ibid.
80 ibid.
81 MPIC
82 ibid.

Policy Document 181
Exhibit 8.2: Total Planted Area, 2010-2020

Exhibit 8.3: Dried Stem Production, 2010-2020

182 National Agricommodity Policy 2021-2030 (DAKN2030)
Exhibit 8.4: Kenaf Seed Production, 2010-2020

The cost of kenaf production is subsidised by the Government at an average of 61% - 63% of the total
production cost through subsidies given to participating smallholders. In 2020, the estimated value
of kenaf production was RM28 million, calculated based on a mean production cost of RM3,885 per
tonne of dried stem (output 6,450 tonnes of stem) and RM4,655 per ha of seed (output 45 tonnes of
seed).

Exhibit 8.5: Total Production Cost of Kenaf

Policy Document 183
Given kenaf’s relatively recent entry into the market as an Agricommodity crop, infrastructure
development for kenaf production is still in its early stages, particularly in the midstream and
downstream segments. As a result, productivity (yield per hectare) and quality are low.
The key initiatives for the development of kenaf between 2015 and 2020 are shown below.

Exhibit 8.6: Key Initiatives for the Development of Kenaf from 2015 to 2020

Source: NKTB

184 National Agricommodity Policy 2021-2030 (DAKN2030)

RECOGNITION OF MALAYSIA’S KENAF INDUSTRY DEVELOPMENT

GLOBAL NATURAL FIBRE FORUM (GNFF) RECOGNISED MALAYSIA’S INVOLVEMENT IN KENAF CULTIVATION
PROCESSING AND DEVELOPED IN TERMS OF R&D SCALE

The Global Natural Fibre Forum (GNFF) is an international network set up to promote the development and
propagation of natural fibres towards sustaining our ecology. The Asia Regional Symposium of GNFF aims
to bring together key stakeholders in the natural fibre industry across Asia to exchange experience and
knowledge and explore collaborations to build the Asian chapter of GNFF.

The GNFF provided Malaysia with an opportunity to showcase
pioneering and innovative work with natural fibres, from
traditional baskets and bags to the novel Jutin, a new building
fibre made from jute fibre. The Exhibition also provided a
visual link between raw materials and products made from
natural fibres.

As a result, Malaysia was recognised by the GNFF for its
substantial efforts in kenaf cultivation and processing.

Presently, Malaysia actively carries out R&D to develop natural fibres, and to reduce production cost.
Additionally, Malaysia continues to produce higher-value products and promote natural fibres to replace
fibreglass. Strong efforts are also undertaken to pursue market expansion by leveraging on the green image
of the product and strengthen institutional support to improve the industry-related delivery system.

Policy Document 185

2 KEY
ISSUES

The kenaf industry is still in the early stages of development, and significant challenges have been
identified in all segments of its value chain. At the current level of development, dedicated end-to-
end support for all segments of the value chain is essential, i.e., to manage the production of high-
quality kenaf (upstream), for processing (midstream), and to link them (downstream) to produce
high-quality fibre products and create access to markets for end-products.

Exhibit 8.7: Challenges of Planting Kenaf

Source: Twelfth12th Malaysia Plan on Commodity Industry Focus Group: Kenaf/Fibre Industry 2019 (MPIC)

186 National Agricommodity Policy 2021-2030 (DAKN2030)

Upstream

Limited seed variety development 

The low productivity of kenaf farms is partly due to limited seed variety in Malaysia, adverse weather
conditions and diseases prevalent in Malaysia. Between 2016 and 2017, kenaf output fell from 10,340
tonnes to 3,268 tonnes. Despite efforts to disseminate proper planting guidelines, most smallholders
still do not comply with the recommended practice, which has contributed to lower quality and
output of seed production.

Insufficient land bank amidst competition from other viable crops 

The bulk of fertile agricultural land in Malaysia has already been allocated to established crops, such
as oil palm and rubber. Given the scarcity of suitable agricultural land, kenaf is allocated land with
several constraints. The yield of kenaf from such lands is much lower than expected. This results in
kenaf being less competitive than other crops and consequently lower economic returns for the
smallholders.

Challenges to attain a premium price with low quality of kenaf raw materials

Despite kenaf’s positive image as a sustainable and green crop, low-quality kenaf does not
meet specific user demand requirements, thus commanding lower prices in the market. User
requirements for traditional and new fibre-based products vary: the best prices are reserved for fibre
of the highest quality. This condition applies similarly to traditional fibre products such as ropes,
strings, and cord.

Midstream

Limited processing capacity for kenaf and low harvesting mechanisation for fibres

Being a new industry, there are no dedicated processing machines for kenaf. The processing
machines for kenaf in Malaysia were adapted or modified from other natural fibre industries,
according to suitability, needs and usage. That being the case, the result is limited and suboptimal
processing capacity and mechanisation in the midstream segment of the industry. The problem is
further compounded by poor logistics and distribution systems, resulting in greater than average
wastage in production.

Heavy reliance on government support

The current development of the kenaf industry relies on the Government for both funding and
institutional support. The level of institutional support for kenaf remains critically low in several
areas, especially in the processing infrastructure and getting sufficient labour and skills into the
midstream segment of the industry. In order for the entire kenaf value chain to be successful,

Policy Document 187

integrated development of the industry through cooperation from various parties will be prioritised.
Active involvement of the private sector is required for generating more investments and managing
business operations.

Downstream

Lack of R&D, innovation, and private sector investments 

The lack of R&D and innovation in the kenaf and fibre industry is strongly correlated with its low
productivity levels and slow growth due to limited funding. R&D is a critical factor to develop the
value chain of the industry. Strong collaboration between the Government, the private sector, and
research institutions will be continued to make this industry successful.

Limited awareness of the potential of the plant-based fibres industry 

There is limited awareness of the plant-based fibres industry’s potential, correlating with the low
level of private sector investments into this industry. The broader the scope of the business to
be developed (upstream, midstream, downstream), the greater the perceived risk by the private
sector in long term investments. Hence, strong industry knowledge and experience are needed
to accurately assess, manage, and moderate any risks identified. A coherent set of engagement
programmes could help investors understand the opportunities and how they can best minimise
risks, lower costs, and increase the venture’s success rate.

188 National Agricommodity Policy 2021-2030 (DAKN2030)

3 WAY FORWARD FOR PLANT-
BASED FIBRES

Strong efforts are needed to transform kenaf into a competitive Agricommodity crop, and to develop
the plant-based fibres market. Given that the kenaf industry is still in its infancy, the Government
aims to spur substantial developments across the entire kenaf value chain, while setting the
foundation for the development of other plant-based fibres. Maximising utilisation of plant-based
fibres from a number of sources will contribute towards waste reduction and increase sustainability
while fostering value creation as part of the circular economy. The following content covers key
targets for the kenaf industry to 2030 and the various strategies and enablers needed to achieve
identified targets.

PLANT-BASED FIBRES: INDICATORS, TARGETS
AND STRATEGIES 2021-2030

Policy Thrust Indicators Baseline 2020 Target 2025 Target 2030 Strategies
1. Kenaf planted area 1,630 ha 6,000 ha 10,000 ha
SUSTAINABILITY Complete value chain
Promoting (ha) Stem: 6.1 2 cycles per 2 cycles per development by
sustainability tonnes/ha year, 3,000 ha year, 5,000 ha creating good
across the kenaf 2. Yield (Tonnes/Ha) coordination
value chain Seed per cycle per cycle from upstream
3. Labour Intensity Production: 0.2 to downstream
PRODUCTIVITY (ha: worker) Stem: 10 Stem: 13 (i.e., – logistics
Expand tonnes/ha tonnes/ha tonnes/ha from plantation to
productivity 4. Level of 1: 2 processing centre)
improvements automation for Seed Seed
across all planting and Planting 70% Production: 0.5 Production: 0.8 Attract private sector
segments processing kenaf Processing investment by
60% tonnes/ha tonnes/ha providing incentive
(% of total industry) 1: 1 1: 1 and support to
industry players
Planting 85% Planting 90% 
Processing Processing Implement
80% 90%  certification of kenaf
products

Zone specific areas
for kenaf production
(land consolidation for
cluster farm)

Develop and
implement suitable
planting methods
and Good Agricultural
Practices (GAP) to
achieve high level of
productivity in kenaf
output

Implement outcome-
based monitoring

Increase operational
efficiency including
the use of machinery
for planting and
processing kenaf

Establish Industry
Anchors

Policy Document 189

Policy Thrust Indicators Baseline 2020 Target 2025 Target 2030 Strategies
10% 13% 15%
VALUE-CREATION 5. Transfer/
Accelerate licensing and 80: 20 60: 40 50: 50 Increase R&D and
innovation and commercialisation 13.7 180 415 adoption of technology
technology rate of R&D 4.15 30 65 (IoT, IR 4.0, data
adoption projects 9.55 150 350 analytics) in planting
1: 1 management,
6. Output – Ratio 1: 0.90 1: 0.80 downstream
of Upstream: processing, and
Downstream 50% of marketing (digital
production marketing and
7. Contribution to e-commerce)
GDP (RM million) - 1,000
Total Form strategic
N/A partnerships to create
Upstream GDP new kenaf/fibre- based
(RM million) products especially
high value-added
Downstream GDP products
(RM million)
Conduct market
8. Utilisation research and a techno-
rate (Ratio of economic study to find
Production: the best commercial
Domestic uses for kenaf-based
Utilisation) f ibres

MARKET 9. Total Exports of N/A 30% of Expand industry-led
DEVELOPMENT Fibre Products 10 production strategic partnerships
Foster to increase market
partnerships and 10. Total Domestic N/A 500 access with buyers as
international Market of Kenaf N/A well as expanding into
collaboration and Plant-based N/A new markets
Fibre Products (RM 50:50
million) Target foreign-local
collaboration
11. Balance of Trade
(RM million) 40:60

12. Ratio of Upstream
to Downstream
exports

190 National Agricommodity Policy 2021-2030 (DAKN2030)

Policy Thrust Indicators Baseline 2020 Target 2025 Target 2030 Strategies
13. Smallholders RM934
INCLUSIVENESS 100% RM2,200 RM3,100 Enhance entrepreneur
Increasing Income (RM) - development via
Bumiputera Average income 4 33% 20% an infant industry
participation per month per • 2,000 • 2,000 programme for
in the kenaf smallholding Bumiputera and
industry 14. % smallholder hectares hectares MSMEs
farms versus total organised organised
size of kenaf farms smallholders smallholders Develop Smallholder
• 2,500 • 5,000 Cooperatives to
15. Number of hectares hectares achieve economies
smallholder cluster farm cluster farm of scale through
cooperatives • 1,500 • 3,000 mechanisation and
hectares hectares other initiatives
16. Contribution of commercial commercial
Agricommodity- plantation plantation
based MSMEs to & private/ & private/
Agricommodity- company company
based output (RM)
10 15
17. Percentage of
Bumiputera RM9.44 Million RM22.5 Milion RM45.5 Milion
MSMEs in
midstream & 99% 80% 60%
downstream (125/126) (210/263) (520/867)
segments –
especially “Next
Gen” Bumiputera
Entrepreneurs

*Note: Bumiputera
participation in the
Kenaf/Plant-based
Fibres industry
will continue to
grow and expand.
In addition, more
non-Bumiputera are
expected to enter the
industry as well.

Policy Document 191

STRATEGIES TO

DRIVE THE
DEVELOPMENT

OF THE PLANT-BASED FIBRES
INDUSTRY

Fifteen strategies will be implemented alongside five policy thrusts to meet the objective of
developing the entire kenaf value chain and transforming kenaf into a lucrative and competitive
Agricommodity crop by 2030.

1
Sustainability: Promoting sustainability
across the kenaf value chain

Complete value chain development by creating good coordination from upstream
to downstream

Greater coordination by all parties in the value chain is needed to improve kenaf handling and to
minimise waste, thus maximising circular economy opportunities. This will be done by principally
increasing the efficiency of transport logistics from the plantations to processing centres.
Additionally, it is vital to improve storage conditions to avoid high exposure of kenaf to harsh
environmental conditions before the decortication process. The establishment of an investment hub
for kenaf processing and manufacturing will complete the value chain development.

Attract private sector investment by providing incentive and support to industry players

The Government aims to attract private sector investments by providing incentives and
support. Private sector investment is a crucial component in the industry’s development with
complementary and supporting roles by the Government through the captive market initiative. In
that regard, privatising the role of kenaf collection would enable the concessionaire to negotiate
with smallholders on the quality, quantity and price of the kenaf raw material. Therefore, the private
sector will ably manage and purchase only quality raw material with stable and consistent feedstock
supply.

192 National Agricommodity Policy 2021-2030 (DAKN2030)

Implement certification of kenaf products

Quality control and inspections will be carried out at the plantation sites to ensure that smallholders
utilise high-quality seeds and employ sustainable methods of kenaf cultivation. SIRIM will be
assigned the task of developing certification standards for the kenaf industry. A certification
standard is extremely useful to fix prices, meet buyers’ requirement and show traceability to the
farms where the feedstock originates from.

Zone specific areas for kenaf production

The Government will establish kenaf cluster farms as a way of consolidating land for kenaf farming.
The Malaysian kenaf industry presently loses out to international players due to the high cost of
production and price competitiveness. By introducing the kenaf zoning or land bank for kenaf
farming, this effort will increase the economies of scale in kenaf upstream production. As a cash
crop, kenaf can be integrated with other crops such as paddy on a rotation system to promote soil
improvement and generate additional income for the smallholders.

2
Productivity: Expand productivity
improvements across all segments

Develop and use suitable planting methods and employ Good Agricultural Practice (GAP) to
achieve high level of productivity in kenaf output

Advancing the productivity, R&D programme will be promoted in areas such as seed breeding,
quality farm management, and soil improvement study. It is imperative that quality seeds are
utilised by smallholders in kenaf cultivation to increase productivity. These initiatives will go hand-in-
hand with an increase in compliance and utilisation of existing planting guidelines to ensure optimal
production of output.

Implement outcome-based monitoring

The measurement of outcomes and productivity of the industry is essential to track industrial
progress and to monitor ongoing developments. The Government will set up outcome-based
monitoring and regularly produce reports for programme review.

Policy Document 193

Increase operational efficiency including the use of machinery for planting, and
processing kenaf

At the midstream level, the improvement of operational capacity and processing time will be the
main focus of the operational transformation to minimise the risk of rotted stems. Consequently,
these improvements will increase kenaf productivity and enhance the quality of kenaf core and
f ibres.

Establish Industry Anchors

The Government will identify capable private firms to be industry anchors through a Special Purpose
Vehicle (SPV) for the kenaf industry value chain. These firms will be facilitated to collaborate with
kenaf smallholders and cluster farms through contract farming. The anchor firm will ensure quality
control of produced fibres that will meet the standards and specifications of the end markets. The
anchor firms will be a SPV that will champion industrial commercialisation.

194 National Agricommodity Policy 2021-2030 (DAKN2030)

FLAGSHIP PROGRAMME 9: KENAF VALLEY

Background

The Kenaf Valley development will be concentrated at the nodes of the industry: Pasir Puteh
(Kelantan), Setiu (Terengganu), Rompin (Pahang) and Chuping (Perlis). The aim of the Kenaf
Valley is to develop and strengthen the kenaf value chain in the midstream and downstream
segments. Four semi processing facilities and basic infrastructure have been developed in
the last three years to attract industry players and new investors. This approach is to lower
investment risks at the infancy stages of development and provide support for the new
venture. Competent champion companies will be promoted as Special Purpose Vehicles (SPV)
with the goal of spearheading growth in the industry in the initial phase.

In the future, the plan is to expand the development model to other designated areas - on the
east coast, in the northern region, and in Sabah and Sarawak.

Objectives

Increase economic activities and development of the local economy
Lead in commercialising kenaf products to promote industry growth

Target Segments

Kenaf smallholder’s cooperative
Industrial sectors (kenaf building materials, kenaf non-woven, kenaf pulp and paper,

biodegradable, kenaf particleboard, absorbent & bio-composite industry)

Lead Agency and Relevant Stakeholders

Lead Agency: NKTB
Relevant Stakeholders: State Governments, private sector

Expected Outcomes

Transform the kenaf industry to be industry-driven and self-sustaining with commercial-
scale farms

Develop the export market for kenaf products to increase its economic contribution to
Malaysia’s economy and

Transform kenaf into one of the nation’s main Agricommodity crops