NATIONAL AGRICOMMODITY POLICY (2021-2030)

Policy Document 245

5
Inclusiveness: Note - Not relevant as
palm biodiesel requires large players
to drive R&D, product development
and commercialisation due to the high
costs involved

246 National Agricommodity Policy 2021-2030 (DAKN2030)

ENABLERS NEEDED FOR PALM
BIODIESEL

Three enablers are needed to ensure the successful implementation of the strategies described
above.

Investment Facilitation – Loans and grants will be formulated to promote cooperation between
the Government and the private sector in palm biodiesel research and development, especially
for the maritime and aviation sector. The Government may co-invest in pilot programmes to
show proof of concept.

Improving Market Access - Communications, stakeholder engagement and promotion efforts
of palm biodiesel will be increased. In addition, technical support and guidance will be provided
to help industry players increase compliance towards recognised certification and standards.

Developing the Institutional Framework – The National Biofuel Policy (2006) will be updated,
taking into consideration industry maturity, latest developments, and long-term commitments
to drive the adoption of biofuels.

1 CURRENT Policy Document 247
STATUS
BIOGAS
FROM POME

There is huge potential to generate energy
from Biogas

Biogas is produced from the treatment of palm oil mill effluent (POME) before it is discharged into
the environment. During the treatment of POME, to meet environmental standards and regulations
before discharge into a water course, about 2.3 million tonnes (or 1.8 billion cubic metres) of biogas
is generated. This biogas contains an estimated 65% methane and 35% carbon dioxide, and has the
energy equivalent to 20 megajoules (MJ) per cubic metre, resulting in a potential total generation
of 36 billion MJ of energy. Biogas can be used in gas engines to generate electricity, or in boilers to
generate combined heat and power (CHP).

BIOGAS CAPTURE FROM POME

Palm Oil Mill Effluent (POME) is the organic sludge waste from the processing of oil palm fruit bunches into
crude palm oil and palm kernel at the palm oil mill. This is an example of ‘waste to wealth’ opportunities
within Agricommodity in the context of the circular economy. Raw POME has high levels of organic
pollutants which are susceptible to natural microbial degradation, resulting in high levels of biochemical
and chemical oxygen demand (BOD and COD). This is harmful to other organisms if discharged into drains
and the water course without further treatment.

Stringent environmental regulations set by the Department of Environment in Malaysia require huge
reductions of these pollutants in the raw POME before discharge. To meet these regulations, the raw POME
is subjected to a fermentation process using a series of ponds and/or tank digesters.

The anaerobic fermentation process releases biogas, which consists of about 65% methane and 35%
carbon dioxide. This methane can be used as a fuel. Methane is also 25 times more potent than carbon
dioxide as a greenhouse gas (GHG). Therefore, the utilisation of POME biogas results in the twin benefits of
improving sustainability and profits of the main crop – palm oil. Effective capture and utilisation of POME
biogas will enhance the sustainability of palm oil mill processing by improving the Life Cycle Analysis (LCA).

The biogas produced can be used as:

i. fuel in a gas engine to produce electricity; the hot exhaust gas and coolant can be used for various
heating and drying purposes

ii. gaseous fuel in a multi-feed boiler to generate steam for electricity generation, as well as in the
processing activities of the crop

iii. bio-CNG (which has >90% methane) that can be piped and injected into the national gas grid, or further
compressed into gas cylinders for use elsewhere

248 National Agricommodity Policy 2021-2030 (DAKN2030)

Biogas capture has been mandated since 2014

Installation of biogas capture facilities has been mandatory since January 2014 as a requirement
for the issuance of new palm oil mill licenses, and for the approval of mill capacity expansion. As at
December 2020, there were 457 palm oil mills, with an actual annual FFB throughput of 116.8 million
tonnes. These mills generated an estimated 65 million tonnes per year of POME. Out of the total of
457 mills, only 130 mills or 28% have biogas capturing facilities. The usage of captured biogas is as
illustrated in Exhibit 10.7. There is a big opportunity to expand biogas capture and utilisation as part
of the circular economy.

Exhibit 10.7: Biogas Capturing Facilities and Usage at Palm Oil Mills (2020)

Policy Document 249

2 KEY
ISSUES

Government incentives for biogas-electricity
generation could be strengthened

Strengthening the current government incentives for power generation could make it more
attractive for even more palm oil mills to install biogas capture facilities. A pricing structure that
gives additional consideration for GHG emission reductions by polluting industries could encourage
more mills to capture biogas. The current scheme for power generation also does not extend to
Sarawak – where the bulk of oil palm are planted - due to excess power from cheap hydroelectric
sources.

Lack of infrastructure and investment for
bio-CNG

There is also a lack of infrastructure for the utilisation of biogas in other technically feasible options,
such as in converting the biogas by refining (removal of CO2 and impurities) and compression into
bio-CNG or other liquefied biogas.

250 National Agricommodity Policy 2021-2030 (DAKN2030)

3 WAY FORWARD FOR
BIOGAS FROM POME

The Government will continue to encourage the installation of biogas capture facilities, and
support mills to create value through power generation and conversion to bio-CNG as part of the
circular economy. Seven strategies will be implemented across four policy thrusts: Sustainability,
Productivity, Value-creation and Inclusiveness. Market development is not covered as the biogas
produced will be consumed domestically through mechanisms implemented as part of Value
Creation and Inclusiveness. Indicators, targets and strategies for biogas from POME are highlighted
below.

BIOGAS FROM POME: INDICATORS, TARGETS
AND STRATEGIES 2021-2030

Policy Thrust Indicators Baseline 2020 Target 2025 Target 2030 Strategies
SUSTAINABILITY 130 155 180
Biogas capture 1. Number of biogas 4 4.5 Continue educating
facilities in all plants installed 5 and encouraging
mills (cumulative) 30 40 mills to install biogas
capture facilities
PRODUCTIVITY 2. Annual reduction
Invest in R&D&C in GHG emissions 50 Invest in R&D&C, i.e,
to increase from biogas database, feasibility
feasibility of grid capture95 (million study and technical
connection tonnes CO2 eq) evaluation on grid
connection
3. Number of grid-
connected biogas
capturing facilities

VALUE-CREATION 4. Percentage of mills 50% 55% 60% Promote power

Tap into the utilising biogas for generation where

potential from energy use (%) feasible

biogas capture 5. Number of bio- 2 4 5 Facilitate mills to
CNG plants from convert biogas to bio-
POME (cumulative)
CNG

Introduce a bio-CNG

blending mandate

Develop mill cluster

schemes

INCLUSIVENESS 6. Number of Biogas 3 4 5 Include biogas as part

Supporting rural plant connected to of the solution in rural

electrif ication local grid for rural electrification schemes

electrif ication

95 Estimated GHG emission reduction is based on calculations using the IPCC Guideline, in line with BUR3 exercise

Policy Document 251

STRATEGIES TO ACHIEVE

TARGETS FOR BIOGAS

FROM POME

To achieve the targets on the above indicators, the following strategies have been identified.

1
Sustainability: Biogas capture
facilities in all mills

Continue educating and encouraging mills to install biogas capture facilities
As methane has a 100-year global warming potential 25 times that of CO296, the capture of biogas,
even where ponding is used for POME treatment, is the first step towards increasing sustainability.
The utilisation of biogas to generate useful energy with consequent revenue is the second step. The
Government will continue to encourage the remaining 72% of mills to install biogas capture facilities
in support of the national sustainability agenda.

2
Productivity: Invest in R&D&C to
increase feasibility of grid connection

Invest in R&D&C, i.e., database, feasibility study and technical evaluation on grid connection
Continued R&D&C together with industry players will be prioritised to make grid connection viable
for mill owners with biogas capture and processing facilities. This aims to reduce costs for mills and
increase their return on investment into the biogas capture facility.

96 Climate Change 2007: The Physical Science Basis. IPCC (2007).

252 National Agricommodity Policy 2021-2030 (DAKN2030)

3
Value Creation: Tap into the potential
from biogas capture

Promote power generation where feasible

The most practical option to promote biogas capture at mills is the use of gas engines or by co-
generation engine to generate and supply electricity for the mill, and to the national grid. The
Government will prioritise mills that are accessible to national/local grids (within or less than a 5km
radius from the nearest connecting substation). Seasonality of biogas production would be resolved
by letting the distribution licensees manage supply and demand (load management) at the grid
level. Government incentives for the power generation from biogas shall be reviewed and refined to
encourage these investments, subject to Renewable Energy fund availability.

Facilitate mills to convert biogas to bio-CNG

Where interconnection to the national or local grid is not attractive, the conversion of biogas to
bio-CNG will be incentivised. This resolves issues arising from lack of demand for energy at the
mill or its vicinity, and addresses seasonality of biogas production through storage for use when
there is demand. The bio-CNG could also be transported and stored for residential, commercial and
industrial usage. Where feasible, bio-CNG may be injected into the natural gas grid under a special
feed-in tariff scheme.

Introduce a bio-CNG blending mandate

Similar to the strategy for biodiesel, the Government will introduce a blending mandate for biogas
to secure bio-CNG demand and reduce reliance on fossil fuels. This will only be done when sufficient
biogas conversion facilities are in place and a funding mechanism has been defined.

Develop mill cluster schemes

Where there is insufficient economies of scale for the utilisation of biogas, mill cluster schemes will
be developed within a particular radius in partnership with the private sector to increase economies
of scale and make biogas or bio-CNG utilisation more viable. A demo plant for bio-CNG pipeline
injection will also be explored.

Policy Document 253

4
Market Development: Note - Not
relevant as the biogas produced will
be consumed domestically through
mechanisms implemented as part of
Value Creation and Inclusiveness

5
Inclusiveness: Supporting rural
electrif ication

Include biogas as part of the solution in rural electrification schemes
Biogas and its conversion to electricity will be included as part of the solution in rural electrification
schemes. A whole of government approach will be taken to maximise all available resources to
develop basic infrastructure that serves rural communities in a cost-effective manner, while also
increasing the share of energy from renewable sources. Local grid infrastructure will be developed
accordingly.

254 National Agricommodity Policy 2021-2030 (DAKN2030)

ENABLERS NEEDED FOR
BIOGAS FROM POME

Two enablers were identified to ensure the successful implementation of the strategies described
above.

Investment Facilitation – the 327 mills that are yet to install biogas capture facilities may be
more willing to invest if there is support to make the investments needed. Creative funding
options will be explored towards this end, including seeking access to international climate funds
or carbon offset schemes.

Infrastructure Development – connectivity to the national or local grids is vital for mills to
capture value from the installation of their biogas capture facilities. Similarly, bio-CNG storage
and transportation facilities will be developed, and related costs factored into pricing.

Policy Document 255



Chapter

Addressing Cross-
Cutting Priorities
Holistically

11

258 National Agricommodity Policy 2021-2030 (DAKN2030)

Cross-cutting priorities refer to important areas that have
a disproportionate impact on the sustainable growth and
development of the Agricommodity sector. Addressing cross-
cutting priorities definitively requires a holistic approach within
MPIC and across government, together with relevant stakeholders
in the private sector. This is essential to deliver more effective
outcomes for the development of the Agricommodity sector
in particular, and towards fulfilling Malaysia’s socio-economic
development agenda as a whole.

Four Cross-cutting Priorities have been identified for the DAKN2030:

1 Smallholder Well-being

Smallholders are the backbone for commodities such as rubber, cocoa, pepper and kenaf,
and important contributors for palm oil. Their well-being is vital for the sustainability of the
Agricommodity sector, and to ensure that Malaysia’s shared prosperity goals are achieved.

2 Bumiputera Advancement

The Bumiputera community makes up a large number of smallholders, and is involved
in parts of the downstream segment, for example, furniture-making and wood-carving.
Increasing Bumiputera participation in the midstream and downstream segments across
commodities will ensure better distribution of wealth and create more jobs for Bumiputera
graduates towards fulfilling the national agenda.

3 Entrepreneurship and MSME Growth

Entrepreneurs and MSMEs are key to innovation, job creation and wider socio-economic
development. While large industry players are more prevalent in the Agricommodity
sector, entrepreneurs and MSMEs play important roles across the supply chain. As the
Agricommodity sector expands adoption of automation, mechanisation and digital
technologies, there will be an increased need for related services, creating opportunities for
enterprises to fill this gap, especially in rural areas.

4 Impactful Delivery

The Government has a crucial role to play in supporting the Agricommodity sector through
strategic partnerships for continued advancement. A whole of government approach
will continue to be implemented to ensure effective and efficient implementation of
the DAKN2030, and to capture full value from every ringgit of public funding spent on
Agricommodity.

Policy Document 259

Each of these four Cross-cutting Priorities have been tackled in targeted ways within the individual
commodity chapters (Chapter 3-10) – relevant strategies from each chapter are summarised in the
sections that follow. In addition, the Government will take a macro-view across commodities to
address these four cross-cutting priorities at a strategic level by:

Gathering learnings and new approaches across commodities to define better solutions that can
be shared within the ministry and across agencies

Learning from local and international best practices to identify and adapt solutions for the
Agricommodity sector

260 National Agricommodity Policy 2021-2030 (DAKN2030) SMALLHOLDER
WELL-BEING
1 CURRENT
STATUS

Smallholders play a significant role in the
Agricommodity sector

Smallholders are defined as farmers with a crop planted area of less than 100 acres or 40.46 ha. In
addition, any person declared to be one by the Minister-in-charge under Section 26 of the Rubber
Industry Smallholders Development Authority (RISDA) Act 1972 (Act 85) is considered as a rubber
smallholder.

In 2020, a total of 994,610 independent and organised smallholders97 were involved in the
Agricommodity sector with a total planted area of 2.7 million ha (37% of total Agricommodity planted
area). Cultivating the two largest Agricommodity crops in terms of hectarage, oil palm and rubber
smallholders constitute 95% of total smallholders in the Agricommodity sector.

Exhibit 11.1: Agricommodity Smallholders by Commodity Planted (2020)

97 Organised smallholders = groupings of smallholders supported by an organisation that provides technical assistance, agriculture inputs
and/or financing, e.g., FELDA, FELCRA, RISDA, SEDC or other government agencies; Independent smallholders = individual farmers who
own/lease self-managed planted areas

Policy Document 261
Rubber, cocoa, pepper and kenaf are highly reliant on smallholders for upstream production. Kenaf
and pepper are completely smallholder-driven, while 92% of rubber and 85% cocoa planted area is
cultivated by smallholders.

Exhibit 11.2: Agricommodity Planted Area by Category (2020)

The spatial distribution of independent smallholders throughout the country follows the rural-
urban divide, with the upstream segment predominantly a rural-based, agrarian economy. Sarawak
and Sabah have the highest number of independent smallholders, while in Peninsular Malaysia,
independent smallholders are concentrated along the northern and east coast regions.

Exhibit 11.3: Distribution of Independent Smallholders (2020)

262 National Agricommodity Policy 2021-2030 (DAKN2030)

Smallholders are supported through various
government programmes

Since independence, the Government has prioritised the economic empowerment and welfare of
smallholders. Dedicated federal development agencies such as the Rubber Industry Smallholders
Development Agency (RISDA), the Federal Land Development Authority (FELDA), and the Federal
Land Consolidation and Rehabilitation Authority (FELCRA), as well as state and corridor development
agencies have been set up to drive rural development. These agencies have supported both
organised and independent smallholder schemes to spur the growth of oil palm and rubber
cultivation, offering assistance to smallholders in the form of loans, technical assistance, legal
support, and guaranteed markets or prices.

Various programmes have also been implemented by MPIC and its core agencies to support
smallholders in the Agricommodity sector, with some examples described below:

Palm Oil - Independent smallholders are assisted on oil palm cultivation, care and harvesting by
extension officers known as Tunjuk Ajar Nasihat Sawit (TUNAS) officers under the Malaysian Palm
Oil Board (MPOB). The Oil Palm Mechanisation Incentive Scheme (OPIMIS) offers discounts of up
to 20% for machinery purchased for use in oil palm plantations, with RM 4.5 million previously
allocated under the 11th Malaysia Plan.

Rubber - initially introduced in 2015, the Insentif Pengeluaran Getah (IPG) aims at mitigating the
impact of fluctuating rubber prices on smallholders’ incomes as well as ensuring continuous
domestic production of natural rubber. The incentive is activated when the average monthly
price of either SMR20 or cuplump falls below RM6.10 per kilogram or RM2.50 per kilogram
(50% dry rubber content) respectively. Malaysian rubber smallholders who hold the Rubber
Transaction Authority Permit (Permit Autoriti Transaksi Getah (PAT-G)) and sell rubber to MRB-
licensed dealers are eligible to receive the IPG.

Cocoa - the Malaysian Cocoa Board (MCB) introduced the Cocoa Farmers’ Field School (FFS)
training programme in 2016 to train successful smallholders, who then become “teachers” to
coach other farmers in their clusters.

Pepper - the Malaysian Pepper Board (MPB) runs a Pepper Entrepreneur programme to guide
pepper farmers in processing, packaging, branding, and marketing pepper products.

Kenaf - in addition to extension services, to support the growth of kenaf as a nascent
Agricommodity crop, the cost of kenaf production by smallholders is subsidised (61%-63%) by the
National Kenaf and Tobacco Board (NKTB).

Cash crops and livestock integration have also been introduced to generate additional incomes
for smallholders at various scales, e.g., cocoa-coconut integration and oil palm-cattle integration.

Policy Document 263

2 KEY
ISSUES

Low productivity

In Agricommodity crops that are better suited for large-scale production, such as oil palm and
rubber, smallholders have on average recorded lower productivity rates than estates. Cocoa, a
commodity that requires a lot of care due to its high susceptibility to pests and disease, has seen
smallholder yield drop from 1.44 tonnes/ha in 2010 to 0.14 tonnes/ha in 2020.

Exhibit 11.4: Productivity Levels across Palm Oil (FFB), Rubber and Cocoa (2010 – 2020)

264 National Agricommodity Policy 2021-2030 (DAKN2030)

Smallholders face low productivity mainly due to their inability to take advantage of automation and
mechanisation technologies due to lack of capital and small land areas which cause low economies
of scale in production. Other reasons include insufficient replanting of aged trees with higher-
yielding clones or poor agricultural practices such as incorrect or inadequate application of fertiliser
and stimulants – despite the availability of updated agricultural practices and inputs and supporting
extension services.

For example, a survey of independent rubber smallholders carried out by the MRB98 in 2014 showed
that among the respondents:

28% of rubber trees were more than 20 years old
30% of planted area was planted with poor materials
41% had not manured their farms for more than a year
only 4% used stimulants to increase yield

These challenges are compounded by poor accessibility and the scattered location of rural
smallholdings. As a result, it is more difficult to transport output for processing, puts smallholders at
the mercy of the few middlemen who serve their areas, and limits access to extension services that
would provide coaching, technical assistance and support.

Ageing smallholders and outmigration of youth

The Agricommodity sector is unable to recruit the next generation of smallholders due to the
migration of younger local labour force out of agriculture. First-generation smallholders have retired
or are now advanced in age. The next generation, armed with better education and aspirations for
a better quality of life, have migrated from rural to urban areas in search of higher wages from the
manufacturing and services sectors. As a result, there is a labour shortage for manual, low-skilled
jobs (often deemed ‘3D’ - Dirty, Dangerous, and Difficult). In some cases, this causes a dependence
on foreign labour, with smallholders having to contract fieldwork and harvesting to foreign workers –
resulting in a higher cost of production.

Unstable production compounded by
fluctuating Agricommodity prices

Over the last 10 years, the overall incomes of smallholders in the Agricommodity sector have not
grown much. Fluctuations in Agricommodity prices in recent years have severely affected the ability
of smallholders to earn a sustainable and stable living income. For example, average CPO prices
plummeted from RM 2,701/tonne in 2010 to RM 2,078/tonne in 2019, before landing at RM 2,686/
tonne in 2020. Similarly, the monthly average price of natural rubber (SMR20) rose to 1,600 sen/kg in
February 2011 but fell to just 548 sen/kg in 202099.

This sharp decline in commodity prices amidst the rising cost of living has severely reduced the
disposable income of smallholders, even though the Government has introduced incentives and
price support schemes to help stabilise smallholder production and incomes. Some smallholders

98 One Nation Rubber Strategy
99 Source: MRB (Averaged across January to July 2020)

Policy Document 265

also tend to switch to other income-generating activities when Agricommodity prices are low, and
only increase production and fertiliser application when Agricommodity prices start to rise. By this
time, it may be too late for them to capture peak prices, or they are unable to command better
prices due to lower quality of output.

However, a preliminary analysis of smallholder incomes for selected commodities indicates that
there is a broad range of incomes across smallholders, as shown in Table 11.1. For pepper, the
maximum income per hectare of planted area is two times more than the minimum income,
whereas for cocoa, the maximum income per hectare is double the average income. For palm oil,
it is 1.3 times the average income. Many factors could cause such an outcome, including the size of
planted area, planting materials used and application of good agricultural practices. This indicates
that there is potential for smallholders to increase productivity and output – and therefore income
levels - with the right planting materials, coaching and guidance to ensure consistent application of
best practices.

Table 11.1: Range of Smallholder Incomes (2020)

Commodity Average Smallholders’ Monthly Net Income Per hectare (RM)

Palm Oil Minimum Average Maximum
Cocoa
Pepper 369 410 534

112 368 746

1,499 2,164 2,832

266 National Agricommodity Policy 2021-2030 (DAKN2030)

3 WAY FORWARD FOR
SMALLHOLDER WELL-BEING

Smallholders remain important for the Agricommodity sector and will continue to be supported
by the Government during the upcoming policy period. MPIC will continue to coordinate and align
with all relevant ministries, agencies, State Governments and corridor authorities to ensure that
Agricommodity smallholders are supported in a holistic manner.

Overarching Strategies

The desired outcome for smallholder well-being across the Agricommodity sector is to develop
“Smart” Smallholders by modernising services and increasing use of technology. Two priorities
are highlighted for smallholders: expanding integration with cash crops or livestock to increase
incomes especially among B40 smallholders, and strengthening the role of cooperatives to ensure
better support and outcomes for smallholders. Three overarching strategies are identified to this
end:

Implement new management models or strengthen existing schemes to organise and
support smallholders (e.g., Modern Co-ops, Contract Farming arrangements, Cluster Farms,
Social Enterprises). Models to reorganise and support smallholders will be studied and
adapted for each commodity to increase competitiveness and productivity. Outcomes could
include enjoying economies of scale from bulk purchasing and application of inputs, adopting
mechanisation and automation, and application of digital technologies. Learnings from
successful examples will be amplified as well. Two existing schemes implemented for oil palm
smallholders are highlighted in the box article below, Koperasi Penanam Sawit Mampan (KPSM)
and Sustainable Palm Oil Cluster (SPOC).

EXISTING SCHEMES TO SUPPORT INDEPENDENT OIL PALM
SMALLHOLDERS

Koperasi Penanam Sawit Mampan (KPSM)

The Koperasi Penanam Sawit Mampan (KPSM) which translates to Sustainable Oil Palm Growers
Cooperative scheme has been established since 2010. KPSM is an alternative model designed to help
improve the livelihood of independent smallholders (ISH) and their community development. KPSM
encourages and empowers smallholders to manage their farm operations with a focus on increasing
livelihoods. The KPSM scheme allows for activities such as fresh fruit bunch (FFB) selling, agricultural input
sales and farm management services.

Policy Document 267

The objectives of the KPSM scheme include, among others, reducing the dependency on middlemen during
buy-sell activities; facilitating group sustainable certification for ISH; easing the distribution of various
forms of government assistance to ISH and encouraging ISH to work together towards improving their
collective well-being.

A total of 65 KPSM cooperatives have been established throughout Malaysia since 2010. Of these, 18
cooperatives are in Sarawak, 26 are in Sabah and 21 are in Peninsular Malaysia. 113,825 ISH are involved
in KPSM, while 6,525 ISH are members of cooperatives.

KPSM cooperatives provide ISH with alternative channels to effectively address their issues and concerns.
For instance, in 2020, 46 KPSM successfully carried out group selling of fresh fruit bunches (FFB) to mills
amounting to 208,807 tonnes. Group selling ensures better prices - in 2019, ISH in the KPSM programme
enjoyed higher prices of RM 8/tonne of FFB. In addition, the Government provided grants for the
establishment of FFB collection centres (ramps) and for the emolument of the cooperatives’ managers. 12
cooperatives also received revolving funds from the Government known as Skim Pembiayaan Mudah Tanpa
Faedah (SPM) as capital to implement FFB group selling.

Sustainable Palm Oil Cluster (SPOC)

A Sustainable Palm Oil Cluster (SPOC) refers to a group of ISH within a specific boundary who are committed
to producing sustainable palm oil through a cooperative structure. SPOCs were established by MPOB to
facilitate the preparation and readiness of smallholders for MSPO certification. One SPOC covers 1,000 to
2,000 independent smallholders based on the location of their smallholdings.

162 SPOCs have been established nationwide, involving 252,186 ISH. The ISH are organised into groups
headed by a TUNAS officer who is known as the Group Manager (GM), and assisted by an Internal Control
System (ICS) as shown in the diagram below. Through the SPOC, all extension activities such as Good
Agricultural Practices (GAP) and sustainable group certification audits are conducted according to
sustainability requirements.

Diagram: Structure of Sustainable Palm Oil Clusters (SPOC)

Source: MPOB

268 National Agricommodity Policy 2021-2030 (DAKN2030)

Optimise social safety net programmes to help smallholders maintain income streams, starting
with profiling smallholders to understand their needs (e.g., age, succession plans, location,
income levels, sources of income, health and welfare), including leveraging data from other
ministries/agencies. This will enable the Government to provide more targeted, needs-based
assistance to support those who truly need it, including to diversify sources of income where
necessary. Finally, tracking of outcomes will be improved so that programme evaluation is timely
and revisions can be done promptly.

Expand service delivery methods through increased use of technology to connect with and
support smallholders, e.g., online information-sharing, platforms to access technical knowledge
and online advisory services. Delivery of extension services will also be expanded, for example
through mobile counters to reach smallholders wherever they are, and collaboration with
Social Enterprises and NGOs. Knowledge-sharing within MPIC and its agencies, and with other
organisations, will be increased to ensure that best practices and new approaches are applied
consistently. Better knowledge-sharing will also minimise reinventing the wheel, thus saving
time and cost for the Government.

Commodity-specific strategies to improve
the overall well-being of Agricommodity
smallholders

Several commodity-specific strategies have also been identified in support of Agricommodity
smallholders’ development and prosperity in the coming decade. These strategies have been
described within the respective commodity chapters.

Table 11.2: Commodity-specific Strategies to Improve Smallholder Well-being

Commodity Commodity-Specific Strategies to
Palm Oil Improve Smallholder Well-being

Rubber Refine models to improve livelihoods of independent smallholders (ISH)

Cocoa Optimise government support with targeted assistance, e.g., data governance and income-
generation programmes
Pepper
Revive smallholders’ sector through strengthened cooperatives, institutional alignment and
Plant-based cross-functional reform initiatives
Fibres (Kenaf)
Strengthen advisory and extension services to smallholdings

Increase adoption of digital tools for establishment of a comprehensive database

Advance income-generation opportunities for smallholders, e.g., integrated cocoa and agro-
tourism clusters by adopting the “Farm to Table” model

Expand extension programmes to coach and build capacity of smallholders

Foster better farming practices with more extension support services to smallholders

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

Develop Smallholder Cooperatives to achieve economies of scale

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

1 CURRENT Policy Document 269
STATUS
BUMIPUTERA
ADVANCEMENT

The Bumiputera community is a driving force of the Agricommodity sector, especially in the
upstream segment. For purposes of DAKN2030, the definition of Bumiputera includes the Malay
community, Orang Asli of Peninsular Malaysia and Orang Asal / Natives of Sabah and Sarawak. At
present, Bumiputera make up 69.6% of Malaysia’s population100.

In accordance with the SPV2030 and Malaysia’s commitments to the SDGs, strengthening
Bumiputera advancement is crucial towards closing wealth and income inequalities in the country.
The Bumiputera poverty rate was 7.2% in 2019, the highest among the major ethnic groups in
Malaysia (1.4% for Chinese Malaysians and 4.8% for Indian Malaysians). Bumiputera ownership
of equity in the corporate sector was 16.2% in 2015, compared to 30.7% among non-Bumiputera
Malaysians101.

The Government is committed to continue supporting the advancement of the Bumiputera
community. Recent developments include the formation of the Bumiputera Prosperity Council
(MKB) and the appointment of the Bumiputera Agenda Steering Unit (TERAJU) as the main
coordinating agency for all matters related to the Bumiputera socio-economic agenda. Three well-
established special purpose entities also continue to boost Bumiputera development as a whole, i.e.,
Majlis Amanah Rakyat (MARA), Ekuiti Nasional Bhd (EKUINAS), and Pelaburan Hartanah Bhd (PHB).

THE BUMIPUTERA ECONOMIC TRANSFORMATION ROADMAP 2.0

The Bumiputera Economic Transformation Roadmap (BETR) 2.0 reflects the Government’s commitment
towards Bumiputera economic empowerment complemented with Bumiputera Well-being Transformation
efforts including aspects such as education, health and socio-cultural development. Five key thrusts are
being implemented:

i. Strengthening human capital
ii. Promoting higher value employment and income
iii. Increasing Bumiputera corporate value and share of equity
iv. Strengthening entrepreneurship
v. Increasing wealth ownership and non-financial assets

100 DOSM (Current Population Estimates, Malaysia, 2020), published 15 July 2020
101 BERNAMA News Article 7 SEPT 2020, accessed from Prime Minister’s Office Website (https://www.pmo.gov.my/2020/09/various-factors-

are-taken-into-account-in-poverty-eradication-programme-pm-muhyiddin/)

270 National Agricommodity Policy 2021-2030 (DAKN2030)

Two programmes that are particularly relevant to the Agricommodity sector are:

Skim Usahawan Permulaan Bumiputera (SUPERB) - established in 2014 to encourage innovation
among entrepreneurs and assist start-ups through grants of up to RM500,000 to young entrepreneurs.
In 2020, the SUPERB programme focused on six (6) priority areas, all of which have relevance
to Agricommodity, i.e., agro/agri business, food innovation, digital economy, IR 4.0, social
entrepreneurship/sharing economy, and creative/the arts/health/fashion102

Dana Kemakmuran Bumiputera (DKB)103 - an RM 100 million fund launched in August 2020 to
promote investments in strategic sectors including those related to Agricommodity, i.e., agriculture
and bioindustries, manufacturing, logistics and the digital economy. Up to RM2 million in funding is
provided to support qualifying investments by companies with at least 60% Bumiputera ownership.

Source: Teraju website; Bumiputera Economic Transformation Roadmap 2.0 (2017)

Within the Agricommodity sector, Bumiputera participation is largely seen among smallholders and
as employees within Agricommodity-related government-linked companies (GLCs). Commodities
that are heavily smallholder-oriented such as rubber, cocoa and pepper tend to have a high
proportion of Bumiputera participation in the upstream segment. When it comes to palm oil,
Bumiputera participation comes indirectly through employment in large GLCs, and directly through
organised and independent smallholders. Bumiputera participation in timber is limited. For
example, Bumiputera entrepreneurs contributed just 1% of total timber and timber product exports
in 2019104. In addition, the number of timber-related factories owned by Bumiputera is small at 370
out of an estimated total of 3,500 factories, and nearly 95% of them are micro- or small enterprises105.

The Government has also implemented a number of programmes in support of the Bumiputera
Agenda in the Agricommodity sector through MPIC, as shown in the table that follows.

Table 11.3: Examples of Bumiputera Programmes implemented by MPIC

Commodity Bumiputera Programme Outcomes
Palm Oil 2018: 2 international champions
Grants for Bumiputera entrepreneurs
Rubber producing palm-based food and animal (revenue RM1.1 million and RM7.5 million)
food products
2019: 3 national champions identified
Incentives for Bumiputera entrepreneurs (achieved targets up to Sept 2019)
producing palm-based food products

Usahawan Bumiputera Industri Getah
(UIBG) Programme - courses, incubator
and product development at MRB

102 TERAJU (https://superb.teraju.gov.my/kriteria)
103 TERAJU (http://www.teraju.gov.my/dana-kemakmuran-bumiputera/)
104 Simposium Usahawan Perabot Bumiputera Kebangsaan 2019
105 ibid

Policy Document 271

Commodity Bumiputera Programme Outcomes
Timber
Machinery sponsorship as part of a project 2016-2018: RM35 million worth of loans
Cocoa – “Increasing Production Capacity at disbursed to Bumiputera entrepreneurs for
Pepper Bumiputera Entrepreneur’s Woodworking the purchase of advanced/ automated and
Kenaf Factories” high-capacity woodworking machinery

Skim Usahawan Perabot Bumiputera Bumiputera entrepreneur participation in
Certified Timber and Credible Suppliers entrepreneurship programmes
• 2018: 72
(CTCS) • 2019: 107
Loans for Bumiputera to purchase high- • 2020: 80

end machinery and raw materials to National Champions in Furniture Industry:
increase mill capacity • 2018: 5 (revenues ranged from
A revolving fund amounting to RM16 RM6.1 million – RM23.2 million)
million was provided to assist Bumiputera • 2019: 5 (revenues ranged from
entrepreneurs to purchase raw materials to RM5.6 million to RM20.1 million)
support their market endeavours • 2020: 3 (revenues ranged from
RM5.4 million to RM12 million)
Downstream Innovation Programme –
to create a National Champion Cocoa 2018: 1 national champion
Entrepreneur from the Bumiputera (revenue RM 338,000)
community
2019: 1 national champion
Involvement of Bumiputera MSMEs in (revenue RM 175,000)
various local and international expo/
seminar/ exhibition to build market 2020: Programme postponed
knowledge and connect with buyers/
importers 2018: 1 national entrepreneur
(revenue RM 354,000)
Bumiputera Entrepreneur Programme
(Usahawan Pusat Pemprosesan Kenaf 2019: 1 downstream entrepreneur
in-situ PPKI) – to produce value-added (revenue RM 303,861)
kenaf products. Support provided includes
infrastructure, raw materials, sales and 2020: 1 downstream entrepreneur
promotions activities, business matching (revenue RM223,506)
and product marketing
2018: 1 national champion
(revenue RM 476,000)

2019: 1 national champion
(revenue RM 1.25 million)

2020: 1 national champion
(revenue RM 1.08 million)

Other ministries and agencies also offer programmes in support of the Bumiputera Agenda, with
some related to the Agricommodity sector. Two examples of programmes implemented by the
Ministry for Rural Development (KPLB) are highlighted below:

Project Ladang Masyarakat Orang Asli (PLMOA) implemented by Jabatan Kemajuan Orang
Asli (JAKOA) – 2,440 participants with a total land area of 3,014 ha (average of 1-3 ha per person)
were provided with planting materials for high-yield rubber clones. Extension services are also
provided to help them manage their smallholdings more effectively and increase incomes
sustainably.

Majlis Amanah Rakyat (MARA)’s Furniture Industry Technology Centre (FITEC) offers four
programmes to build the capacity of Bumiputera youth to become furniture entrepreneurs:
• Furniture Technology Programme: transferring knowledge and manufacturing technology
• Furniture Vendor Development Programme: securing market access for Bumiputera
furniture entrepreneurs
• Graduate Employability Training Scheme (GETS): training graduates to get jobs in the
furniture industry
• Diploma in Design Technopreneurship and Furniture Production (KBNET): developing
furniture technopreneurs with simultaneous accreditation to Level 5 of Diploma Lanjutan
Kemahiran Malaysia (DLKM) Level 5 by the Skills Development Department (JPK)

272 National Agricommodity Policy 2021-2030 (DAKN2030)

2 KEY
ISSUES

Insufficient technical knowledge or skills for
downstream participation

The downstream sector requires higher capabilities due to the need for technical expertise, for
example, in producing designer furniture or advanced wood products, or for complex processing
such as chemical modification of fats and oleochemicals. Bumiputera graduates or entrepreneurs
tend to have limited exposure to such technologies, or limited access to capital to invest in the
specialised equipment that is needed. In addition, they face challenges in establishing access to new
markets. Therefore, they remain at a disadvantage when it comes to increasing Bumiputera market
share106.

Limited access to funding to venture into
downstream as entrepreneurs

Expansion into the downstream segment typically requires access to equipment or machinery
for processing, and space to conduct such activities. These often prove to be challenging for
Bumiputera entrepreneurs who have not got access to capital or funding for these investments.
While there are many entrepreneurship programmes and funds aimed at the Bumiputera
community, they typically require a track record before funding is provided, or a significant amount
of documentation. This becomes a challenge for young or new Bumiputera entrepreneurs, who are
more likely to be keen on such ventures.

106 11th Malaysia Plan Mid-Term Review

Policy Document 273

3 WAY FORWARD FOR
BUMIPUTERA ADVANCEMENT

In line with the national agenda, advancing Bumiputera participation and ownership in the
Agricommodity sector will continue to be a priority during this policy period, especially focusing on
the next generation of smallholders. Bumiputera in the Agricommodity sector will be encouraged to
maximise opportunities arising from the various government programmes to support Bumiputera
development and growth. In addition, commodity-specific strategies will be implemented.

Overarching Strategies

The primary objective for Bumiputera in Agricommodity is to build Next-Gen Bumiputera
entrepreneurs in the midstream and downstream segments. Three overarching strategies will be
implemented:

Support Bumiputera Agricommodity entrepreneurs to navigate and maximise all forms
of support currently provided by the Government, e.g., micro-credit programmes under
Amanah Ikhtiar Malaysia and Tekun Nasional; entrepreneur development programmes under
SME Corp, MARA and Ministry of Entrepreneur Development and Cooperatives (MEDAC);
and accelerator programmes under TERAJU. This goes beyond general information – specific
and relevant content will be shared in a targeted manner, helping them to identify the most
appropriate programmes to apply for. Most critically, handholding will be provided throughout
the application and interview processes, including completing forms, compiling supporting
documents and preparing for interviews.

Create new opportunities to develop a pool of high potential Bumiputera entrepreneurs,
especially youth and the next generation of smallholders, using technology and digital
marketing to increase awareness of opportunities in the Agricommodity sector. Opportunities
will be provided for talented Bumiputera entrepreneurs to expand into midstream and
downstream manufacturing and services, e.g., commercialisation of technologies and products,
collection and processing services, mechanisation and automation support. GLCs will also be
encouraged to play a role, for example, incubating ventures through intrapreneur programmes
and funding staff who have the technical skills and business acumen to develop midstream and
downstream businesses.

Develop Smart Partnerships to match Bumiputera with Joint-Venture and Commercialisation
opportunities, including access to funding. Existing platforms will be leveraged for this purpose,
creating networks and publicising opportunities while also providing guidance and support.
An important longer-term effort will be to gather and analyse data to better understand
Bumiputera Agricommodity businesses’ needs and provide more targeted support.

274 National Agricommodity Policy 2021-2030 (DAKN2030)

Commodity-specific Strategies to Advance
Bumiputera in Agricommodity

Several commodity-specific strategies have also been identified to further advance the Bumiputera
community within the Agricommodity sectors. These strategies are also included within each
commodity chapter. It is pertinent to note that the majority of cocoa and pepper farmers are
Bumiputera, hence specific programmes are not highlighted here. All cocoa and pepper strategies
and programmes are targeted towards this segment, especially in advancing upstream players
towards midstream and downstream activities.

Table 11.4: Commodity-specific Strategies for Bumiputera Advancement

Commodity Commodity-Specific Strategies for
Palm Oil Bumiputera Advancement

Rubber Empower Bumiputera for increased participation across upstream, downstream and
Timber midstream

Plant-based Fibres Increase support for local Bumiputera enterprises
(Kenaf)
Empower Bumiputera participation in the timber industry through smart-
partnership activities

Enhance entrepreneur development via an infant industry programme for
Bumiputera

1 CURRENT Policy Document 275
STATUS
ENTREPRENEURSHIP
AND MSME GROWTH

Entrepreneurs are individuals who display the readiness to take risks with new or innovative ideas
to generate new products or services107. For the purposes of the DAKN, the term Micro, Small and
Medium Enterprises (MSMEs) refers to enterprises within the Agricommodity sector that meet a
certain scale, i.e., micro, small and medium-sized business entities as per the definition set by SME
Corporation Malaysia (SME Corp)108. The table below shows these definitions, which are based on
turnover or the number of employees.

Table 11.5: Definition of MSMEs in Malaysia (SME Corp)

Type of Manufacturing Sector Services and Other Sectors
MSME
Micro Annual sales less than RM300,000 Annual sales less than RM300,000
OR OR
Small Full-time employees less than 5 people Full-time employees less than 5 people

Medium Annual sales from RM300,000 to less than Annual sales from RM300,000 to less than RM3
RM15 million million
OR OR
Full-time employees: 5 to less than 75 people Full-time employees: 5 to less than 30 people

Annual sales from RM15 million to RM50 million Annual sales from RM3 million to RM20 million

OR OR

Full-time employees: 75 to 200 people Full-time employees: 30 to 75 people

Source: SME Corp

Entrepreneurs and MSMEs in Malaysia make up 98.5% of registered business entities and provide
66% of total jobs in the country. However, they contribute just 37.4% of total GDP, compared with 60%
contribution to GDP in Singapore, and 41% in Viet Nam109.

In the Agricommodity sector, MSMEs are directly involved in the downstream segment and the
provision of ancillary services. There are currently 2,787 known Agricommodity enterprises110, of
which more than 70% are in timber. The remaining are scattered across palm oil, rubber, cocoa,
pepper and plant-based fibres (kenaf).

107 SME Corp Annual Report 2015-2016
108 SME Corp: https://www.smecorp.gov.my/index.php/en/policies/2020-02-11-08-01-24/sme-definition
109 National Entrepreneurship Policy 2030, Ministry of Entrepreneur Development and Cooperatives, Malaysia (MEDAC), 2019
110 Ministry of Plantation Industries and Commodities (MPIC), December 2020

276 National Agricommodity Policy 2021-2030 (DAKN2030)

Table 11.6: Known Agricommodity MSMEs as at December 2020

Breakdown of Agricommodity MSMEs (December 2020)

Commodity Status Micro Small Medium TOTAL
Palm Oil 200
Bumiputera 75 90 35 -
Rubber 11
Non-Bumiputera - - - 204
Timber 482
Bumiputera 1 9 1 1,538
Cocoa 216
Non-Bumiputera 6 135 63 16
Pepper 35
Bumiputera 328 152 2 7
Plant-based Fibres 69
(Kenaf) Non-Bumiputera 202 1,082 254 9
2,787
Bumiputera 194 22 -

Non-Bumiputera 14 2 -

Bumiputera 19 16 -

Non-Bumiputera 2 5 -

Bumiputera 50 19 -

Non-Bumiputera 5 4 -

TOTAL

Source: MPIC - BISS, GET, IKL, MCB and KTK (FEB2021)

The role of MSMEs in the Agricommodity sector is likely similar to that of other sectors – ancillary and
supporting. In the upstream segment, their role is in the supply of products and services (e.g., seeds,
fertilisers, transport) and also as a marketing channel (e.g., buyers or traders). In the downstream
segment, their role is more sophisticated as they are also machinery and technology suppliers,
automation specialists, training providers, chemical suppliers, technical advisors or providers of
consultancy services.

The table that follows shows examples of Agricommodity MSME activity. For example, MSMEs
in palm oil are involved in the production of refined and fractionated products and basic
oleochemicals. Rubber MSMEs are in SMR and non-sophisticated rubber products where technical
standards are limited. In timber, they are mainly Original Equipment Manufacturers (OEM) in
rubberwood furniture production, while cocoa MSMEs are in cocoa grinding and small-scale
chocolate production111.

Agricommodity MSMEs also serve customers or other businesses in traditional areas such as
logistics, packaging, trading, or information and communication technology (ICT) services. Studies
have shown that MSMEs in the major Agricommodity industries have been responsible for many
innovations, whether it is in rubber, palm oil or timber industries112. Most of these innovations are
generated in-house, without any formal support.

111 MPIC
112 Seyed Mehrshad Parvin Hosseini (2013) “Innovative capabilities among SMEs in Malaysian manufacturing: An Analysis using Firm Level

data”, (available at https://doi.org/10.1080/00779954.2013.874398 and accessed 15 December 2020; Chew Ging Lee and Cassey Lee (2007)
“SME Innovation in Malaysian Manufacturing Sector”, Economic Bulletin 12(30), November; SMI Development Plan (2001-2005), Small and
Medium Industries Development Corporation

Policy Document 277

Table 11.7: Examples of Agricommodity Enterprises’ activities

Commodity Examples of Activities/Products
Palm Oil
Rubber FFB collection centres, nurseries, food products, cosmetics, oleochemicals, fertiliser,
Timber machinery and equipment

Cocoa Foam products, rubber toys, balloons, adhesive, shoe soles, inner tubes and other general
Pepper rubber goods
Kenaf
Wood-carving, wooden household decorative items, wooden souvenirs, wooden furniture
(for schools, homes, offices) and repair/restoration of antique furniture, kitchen cabinets, saw
logs, plywood, sofas, beds

Semi-finished products (e.g., cocoa butter, cocoa paste, cocoa powder) and chocolate
products

Production of pepper and pepper products, e.g., black pepper sauces, white pepper powder,
curry pastes, black pepper balm, black pepper oil

Non-woven thermobonding, food pellets, fibre and pulp processing, kenaf mattress,
construction raw material, brown paper, biodegradable utensils, particleboard

To increase the quality of entrepreneurship in Malaysia, and increase the GDP contribution of
MSMEs, the Government offers over 150 entrepreneurship development programmes in the form of
loans, soft loans, grants, guarantee support, equity and venture capital funding. These are delivered
through more than 60 agencies across Government. A total of RM13.7 billion was allocated in 2018113,
coordinated and overseen by MEDAC.

During the 11th Malaysia Plan period (2015-2020) MPIC, through its agencies, offered 11 programmes
to develop and grow entrepreneurs across palm oil, rubber, timber, cocoa, and pepper. These
included initiatives such as upskilling entrepreneurs and business owners through short courses,
loaning of machinery and equipment, and incubator programmes. Incentives were also provided for
entrepreneurs aspiring to produce palm oil-based food products and for chocolate entrepreneurs.
In the timber industry, MTIB introduced a design programme for the furniture industry that
brought together local and international designers into a local factory environment to develop
better-designed furniture products or better-engineered products. A similar set of programmes are
planned for implementation during the Twelfth12th Malaysia Plan period (2021-2025) as well.

113 National Entrepreneurship Policy 2030, Ministry of Entrepreneur Development and Cooperatives, Malaysia (MEDAC), 2019

278 National Agricommodity Policy 2021-2030 (DAKN2030)

2 KEY
ISSUES

Limited Access to Financing

MSMEs in general – and in the Agricommodity sector - lack the financial capacity to support
their development, growth and expansion. MSMEs typically face a challenge in securing funds as
investors, venture capitalists and financial institutions are typically less tolerant to risks from starting
a new business or investing in an unproven innovation. According to a study on the digital economy
in Malaysia by the World Bank in 2018, access to capital is a “moderate to very severe problem” for
more than half of the firms in Malaysia, including MSMEs. Although there are a plethora of financing
programmes available to eligible MSMEs, their limited capacity to manage the complex application
processes often make such programmes inaccessible.

Unexplored Potential in High Value-Added
Activities

The value of the Agricommodity sector as a whole is shifting downstream in terms of output, export
value and skilled employment opportunities. MSMEs can play a role to accelerate the shift towards
higher value-added activities through the adoption of technology, development of new, innovative
products or new applications for existing products, as well as the provision of services within the
Agricommodity sector.

The agriculture sector (including Agricommodity) has a much lower rate of utilisation of e-commerce
compared to the manufacturing and services sector114, resulting in slower movement towards higher
value-added activities. The barriers to entry are high: skills availability, cost of technology, ability to
grasp commercial and business opportunities, and operating in an environment where the linkage
with research, development and commercialisation (R&D&C) is weak, especially for MSMEs.

Limited access to skilled talent

The rapid growth of the Malaysian economy continues to increase demand for skilled talent.
However, the talent gap is severe, with a lack of the right type and mix of skills for industry needs.
MSMEs face this problem more seriously because they cannot afford (or perceive that they cannot
afford) the prevailing market rate for skilled talent. Furthermore, MSMEs in the Agricommodity
sector tend to be less-preferred places to work, due to widespread misconceptions about the lack
of advancement opportunities, and the ‘3D’ nature of Agricommodity jobs. While generally true, it is
also not well-known that MSMEs in the downstream segment for palm oil, rubber, timber and cocoa
do employ skilled personnel such as technicians, engineers, designers and food technologists.

114 Malaysia’s Digital Economy, 2018, World Bank.

Policy Document 279

3 WAY FORWARD FOR
ENTREPRENEURSHIP AND MSME
GROWTH

In line with the national agenda of creating an Entrepreneurial Nation in Malaysia by 2030115, the
integrated development of entrepreneurs and MSMEs is important to ensure sustainable and
balanced socio-economic development. In the past, the Government has focused on building
the capacity of Agricommodity-based entrepreneurs through the provision of training, skills
enhancement and technology transfer, supplemented by measures to enhance market access.
These priorities remain during this policy period too.

Overarching Strategies

Moving forward, the goal is to expand services and drive innovation for Agricommodity MSMEs.
Three overarching strategies will be implemented to this end:

Develop Smart Services to empower entrepreneurs and MSMEs to provide Agricommodity
services, e.g., digital services, development of technology applications, repair of automation and
mechanisation equipment, logistics and stock management. New business models that could
transform the entire value chain of the industry through application of digital technologies will
be prioritised.

Support MSME-led innovation by continuing to raise innovation capability through industry
linkages, including providing opportunities for coaching and mentorship to increase MSMEs’
exposure to new technologies. An Agricommodity Innovation Venture Fund similar to the
Collaborative Research in Engineering, Science and Technology Centre (CREST) model for the
electronics industry will be set up to finance R&D, prototype development and scale-up.

Attract upstream Agricommodity entrepreneurs to ensure that the upstream segment is
not left behind when it comes to the application of technologies and new ways of working.
Entrepreneurs will be funded to work with cooperatives in a partnership model to introduce
commercial farming, digital procurement and digital marketing methods. Social enterprises will
be encouraged to work with smallholders to improve farming practices, develop farm-to-table
products and create access to markets, including through the use of digital storytelling and
marketing

115 National Entrepreneurship Policy 2030.

280 National Agricommodity Policy 2021-2030 (DAKN2030)

Commodity-specific Strategies to Foster the
Growth of Agricommodity Entrepreneurs
and MSMEs

Specific strategies to support enterprises within each commodity have been identified, especially
focused on technology adoption and to move up the value chain. These strategies are discussed in
the individual commodity chapters as well.

Table 11.8:Commodity-specific Strategies for Entrepreneurship and MSME Growth

Commodity Commodity-Specific Strategies for
Palm Oil Entrepreneurship & MSME Growth
Rubber
Timber Promote new technologies to MSMEs, associations and agencies

Cocoa Increase support for MSMEs and local Bumiputera enterprises

Pepper Elevate the industry’s initiatives towards ODM, OBM, and production of ‘Made in
Malaysia’ timber products
Plant-based Fibres
(Kenaf) Advance income-generation opportunities for entrepreneurs/ MSMEs, e.g.,
expanding the chocolate entrepreneur programme

Advancing small business growth in the downstream segment

Implement dedicated programmes to develop Pepper Agripreneurs

Enhance entrepreneur development via an infant industry programme for MSMEs

1 CURRENT Policy Document 281
STATUS
IMPACTFUL
DELIVERY

The Government has worked to improve service delivery in support of industry development across
the Agricommodity sector, including sustaining strong working relationships with industry players.
In addition, the Government has started to expand strategic partnerships beyond the private sector
to engage with social enterprises, non-governmental organisations (NGOs) and the community to
create better outcomes for all. Coordinating actions to address broad implementation barriers are
also in place, for example, securing the supply of labour and creating decent working conditions,
intensifying industry-backed R&D&C for productivity and attracting investments, especially in the
downstream segment.

The Government is continuing to strengthen alignment to ensure coherence and reduce duplication
of efforts across the Federal Government, State Governments and corridor authorities, including for
the implementation of the SPV2030 through SEPADU, the Shared Prosperity Delivery Unit.

THE SHARED PROSPERITY DELIVERY UNIT (SEPADU)

The Government is committed to continuously improve the implementation of policies and programmes in
an effective way. In line with the purpose of SPV2030, the Shared Prosperity Delivery Unit (SEPADU) was set
up on 10 March 2020.

SEPADU functions as a facilitating agency to strengthen economic activities among industry players towards
achieving shared prosperity, with a focus on MSMEs within the B40 group. SEPADU is also responsible for the
preparation of the SPV2030 blueprint that will provide guidance to Ministries/Departments/Agencies about
the implementation of programmes, and to track delivery of SPV2030 outcomes.

The agency has been actively involved in implementing a number of strategic and quick-win projects thus
far, in collaboration with the private sector and government agencies, reflecting a new way of working
through strategic partnerships. Among the many projects that are being implemented, is a smart farming
project through mini-fertigation implemented through a collaboration between the Federal Territories
Islamic Council (MAIWP) and the Department of Agriculture (DOA)

282 National Agricommodity Policy 2021-2030 (DAKN2030)

2 WAY FORWARD FOR IMPACTFUL
DELIVERY

Going forward, a focus on efficiency and effective implementation is key to the success of the
DAKN2030. This includes digital transformation, simplifying processes and speeding up decision-
making to facilitate industry growth and development. For the Agricommodity sector in particular,
strategic partnerships for implementation are important to secure the supply of raw materials,
catalyse downstream industries in under-represented areas, attract and facilitate investments, and
expand support to smallholders, Bumiputera and MSMEs.

Overarching Strategies

The desired outcome for Impactful Delivery is to increase efficiency for maximum impact. This
involves four overarching strategies:

Reprioritise focus areas to align all programmes and activities to the five DAKN policy thrusts.
Less impactful programmes that do not match with the policy thrusts or do not contribute
towards DAKN2030 targets will be deprioritised. Where collaboration is needed with other
ministries or agencies, the Government will ensure that it is well-coordinated to provide
clarity for industry and related stakeholders. This will also help to address perennial issues that
span across industrial and jurisdictional borders such as sustained access to foreign workers,
increasing adoption of automation and mechanisation, and securing investment for downstream
expansion. Such complex issues require a whole of government approach, addressing them
strategically and in an integrated manner. To this end, MPIC and its agencies will review
their policy mandates, and work collaboratively across Government to resolve overlapping
jurisdictions.

Digitalise end-to-end services building on learnings from the COVID-19 pandemic which has
forced digital adoption and increased remote working. Online interactions within Government
and with industry players have proven to be effective in expanding participation and increasing
engagement while saving travel time and cost. Digitising end-to-end processes and encouraging
hybrid ways of working, for example through mobile counters offering digital access to services,
will improve the delivery of services. Continuing to strengthen online stakeholder engagement
sessions, business matching and trade expos will enable Agricommodity businesses to reach
more customers around the world as well.

Strengthen performance management through tracking of DAKN2030 implementation.
Performance reviews will be conducted quarterly at the ministry level and also by the respective
agencies to ensure that DAKN2030 implementation is on track, and to enable shifts in strategies
as needed. Data collection, management and analysis will be strengthened to provide
transparent and accurate, up-to-date information, including a simple dashboard to provide
timely data. Having reliable data sets will also ensure that accurate and up-to-date data is
available to enable realistic target-setting or revisions of strategies.

Policy Document 283

Prioritise talent attraction and development within the ministry and across all agencies
to ensure that the right expertise and skills are in place to meet the changing needs of each
commodity. A wider variety of skills are needed to respond to new challenges in the coming
decade. Human capital development within MPIC and agencies will focus on building analytical
and technical skills, and the application of digital technologies. Cross-fertilisation programmes
with industry and the advancement of technical knowledge through online learning will be
prioritised. Succession planning and knowledge transfer will be strengthened to reduce gaps in
technical knowledge once senior officers retire, and to empower the next generation of leaders
to develop a more strategic mindset.

Commodity-specific Strategies to ensure
Impactful Delivery of DAKN2030

For each commodity, specific strategies for impactful delivery have also been identified. These
strategies are focused on strengthening the way each commodity-specific division and agency work,
towards ensuring more effective delivery of services for industry development.

Table 11.9: Commodity-specific Strategies for Impactful Delivery

Commodity Strategies/Enablers to ensure Impactful Delivery
Palm Oil
Rubber Strengthen consultation and alignment with State Governments on land use and
planning for oil palm plantations – work closely to improve monitoring, licensing and
Timber enforcement on forest clearing as well as issuance of plantation licenses before planting
starts

Increase coordination with delivery agencies within other ministries and agencies (e.g.,
KPLB, MAFI) for joint planning and development of smallholders’ income-generation
programmes to ensure more effective implementation

Forge closer cooperation and streamline functions amongst various rubber-related
agencies for implementation of coherent replanting, new planting, and collection of raw
materials initiatives

Improve inter-agency working arrangements and coordination for cohesive policy and
programme planning and implementation for smallholders

Work with social enterprises to provide extension services and support smallholders to
increase their income through other income-generation activities

Shift more services online to reach more smallholders and industry players, e.g., expansion
of the MyRol system

Strengthen training and skills development programmes within MPIC and MRB to build
capacity within Government to support industry development

Forge closer strategic collaborations with relevant agencies/GLCs, industry and
universities to improve technical proficiency in wood engineering and to promote and
intensify the application of such materials in the construction sector

Increase engagement across ministries, agencies and State Governments to ensure that
timber industry development policies are consistent with forestry management and
conservation policies to create a conducive environment for the growth of the industry as
a whole while protecting biodiversity and ensuring long term sustainability

284 National Agricommodity Policy 2021-2030 (DAKN2030)

Commodity Strategies/Enablers to ensure Impactful Delivery
Cocoa
Collaborate with Cooperatives and Social Enterprises to support extension programmes
Pepper and develop income-generation programmes for cocoa farmers, e.g., agro-tourism, “bean-
Plant-based to-bar” chocolate-making
Fibres (Kenaf)
Biomass Address trade barriers or related issues to secure a consistent supply of certified
Biofuels sustainable cocoa beans to meet local grinding and manufacturing needs

Facilitate importation processes to reduce time and cost for local grinders and
manufacturers

Restructure the MCB to strengthen service delivery, including commercialisation of R&D
and provision of extension services through external partnerships

Improve the MPB’s functions and operations on extension services, including through
strategic partnerships and collaboration

Collaborate with existing training institutions in areas where pepper is farmed, to provide
training and skill-building courses for local pepper farmers

Increase strategic partnerships with the private sector and relevant agencies to develop
and promote potential high value-added kenaf/fibre-based products

Revise NKTB’s mandate from solely kenaf and tobacco-based industries to include all
activities related to plant-based fibres, thus broadening the growth potential for plant-
based fibres.

Develop the Agricommodity Biomass Strategy 2030
Align roles and governance of Agricommodity biomass to ensure optimal implementation
Develop skilled human capital within MPIC to set the direction for Agricommodity

biomass, and facilitate industry partnerships to capture its potential

Update the National Biofuels Policy 2006 to incorporate the latest developments and
needs of the sector, taking into consideration industry maturity, new developments, and
long-term commitments to drive adoption of biofuels

Address barriers to adoption and fund the cost gap – consider “total cost of ownership”
and define options to create a sustainable financing mechanism that reduces the need
for government subsidies

Policy Document 285



Advancing
Agricommodity Together

Conclusion

288 National Agricommodity Policy 2021-2030 (DAKN2030)

The importance of the Agricommodity sector is multifaceted. For decades, it has helped lift
rural households out of poverty and raised smallholder income levels across the country. The
Agricommodity sector has contributed towards the thriving manufacturing sector in the country,
putting Malaysia on the global map for a number of products. Today, Agricommodity is a source of
income for almost one million smallholders and their families, a key contributor to national GDP and
a vital source of export revenues.

The next 10 years from 2021-2030 are crucial, starting with post-COVID recovery over 2021-2023, and
shifting towards continued advancement of the Agricommodity sector to 2030. The DAKN2030 lays
out a policy framework that sets a clear direction and targets for the sector across five policy thrusts:
Sustainability, Productivity, Value-creation, Market Development and Inclusiveness. Strategies and
enablers will be implemented across the eight commodities and related products, as well as delivery
of the four Cross-cutting Priorities.

Over the next 10 years, it is expected that strong domestic and international demand for
Agricommodity products will boost growth of the downstream segment, and create more
opportunities to scale-up the circular economy. Advances in technology adoption and application,
and increased value-creation across all commodities, including through ‘waste to wealth’ initiatives
as part of the circular economy will create more jobs for high-skilled Malaysians. Smallholder well-
being will be improved with better coordination of resources across Government, and through
strategic partnerships with the private sector and social enterprises. Sustainability will continue to be
prioritised - from an environmental, social and economic perspective, especially with the application
of circular economy principles.

These outcomes, and the DAKN2030 targets to 2025 and 2030, will only be achieved through
effective implementation. The Government is committed to continue taking a whole of government
approach to develop the Agricommodity sector in this new normal. Collaboration with all
stakeholders will ensure that together, we will create positive impact for the Agricommodity sector
and for Malaysia.

Policy Document 289

APPENDICES

Appendix 1

Way Forward Tables for each Commodity

Appendix 1.1: Way Forward – Palm Oil

PALM OIL: INDICATORS, TARGETS
AND STRATEGIES 2021-2030

Policy Thrust Indicators Baseline 2020 Target 2025 Target 2030 Strategies
99.8% 100% To maintain
SUSTAINABILITY 1. Percentage 100% planted Strengthen
Capture the planted area 31.6% 95% area certified sustainability
leading position of certified under the measures and
in sustainability sustainable palm 98.5% 100% MSPO mechanisms, including
oil (Plantations) Certif ication implementation and
95% of 457 To maintain Scheme standards of MSPO
2. Percentage mills certified 100% of mills
planted area certified under To maintain Enhance and
of certified Processing the MSPO 100% of mills strengthen traceability
sustainable palm Facilities under Certif ication certified under of certified sustainable
oil (Independent SCCS: 75% of Scheme the MSPO palm oil
Smallholders) 649 facilities To maintain Certif ication
certif ied at least 90% Scheme Encourage industry-
3. Percentage of processing To maintain driven responsible
planted area RM18 million facilities at least 98% practices across the
of certified spent by certified under of processing value chain on workers’
sustainable palm the MSPO facilities rights and welfare,
oil (Organised MPOC through Certif ication certified under safety standards and
Smallholders) MPOWCF Scheme the MSPO compliance
Certif ication
4. Certif ied since 2006119 90% of total Scheme Increase environmental
processing units: funds over 5 conservation and
Percentage of Mills 90% of total management efforts
certified under years funds over 5
MSPO Part 4
years
5. Certif ied
processing units:
Percentage
of Processing
facilities certified
under SCCS (Mills,
refineries, kernel
crushers, oleo-
chemical and
biodiesel facilities)

6. Percentage
of MPOGCF
funds spent on
conservation
efforts/
programmes (RM
million)118

118 Generated from cess of RM1 from every ton of CPO produced, collected under the MPOGCF. Estimated collection is RM 20 million per year.
119 Private companies have spent almost more than twice the amount through their own conservation efforts

290 National Agricommodity Policy 2021-2030 (DAKN2030)

Policy Thrust Indicators Baseline 2020 Target 2025 Target 2030 Strategies
4.00
PRODUCTIVITY 7. Productivity 3.33 3.70 19.50 Invest in market-driven
Expand R&D&C to increase the
productivity Oil Yield (Tonnes/ 16.73 18.25 20.50% supply of high-yielding
improvement Ha) 12 : 1 planting materials
efforts, especially 19.92% 20.25%
in the upstream FFB Yield (Tonnes/ 10% Accelerate the
and midstream Ha) 10 : 1 11 : 1 adoption of best
segments 30% agricultural practices
Oil Extraction Rate 10% 10% (Harvesting)
(OER) (Percentage) Facilitate the adoption
2% 10% 35% of automation,
8. Labour intensity- (Harvesting) (Harvesting) (Other mechanisation
Land to Labour mechanisation and Industrial
ratio (ha : worker) 16.2% 25% activities) Revolution 4.0 (IR 4.0)
(Other (Other 69,075 technologies for higher
9. Transfer/ mechanisation mechanisation 41,931 output and quality
licensing and activities) activities) 27,144
commercialisation 48,321 57,656 1 : 0.85 Promote new
rate of R&D technologies to
projects 36,869 39,751 34,500 MSMEs, association
11,451 17,905 84,000 and agencies
10. Mechanisation 1 : 0.8 1 : 0.82
Rate (Percentage) 21,000 Expand market-driven
57,000 product development
VALUE-CREATION 11. Contribution to focused on specialised
Accelerate the GDP (RM million) products such
shift to higher- as performance
value activities, Upstream oleochemicals and
and capture biofuels, functional
circular economy Downstream foods and ingredients
opportunities
12. Utilisation Intensify R&D efforts
rate (Ratio of to produce a higher-
Production: valued and more
Domestic diversified range of
Utilisation)120 palm and kernel oils

MARKET 13. Total Exports: 26,587 31,000 Ensure compliance
DEVELOPMENT 73,253 75,000 to international and
Industry- Volume (‘000 importing countries’
led Strategic tonnes) 19,885 20,500 food quality and safety
Partnerships 51,102 50,000 standards
Value (RM million)
6,701 10,500 Capture opportunities
14. Exports 22,151 25,000 for a zero-waste
Upstream121 circular economy

Volume (‘000 Improve market
tonnes) access through trade
agreements and
Value (RM million) strengthen existing
markets, especially
15. Exports Southeast Asia, China,
Downstream122 India and Middle East

Volume (‘000 Collaborate with
tonnes) industry to strengthen
communication on
Value (RM million) sustainability practices

13,500
27,000

120 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)])

121 Includes palm oil, palm kernel oil and palm kernel cake
122 Includes oleochemicals, finished products and biodiesel

Policy Document 291

Policy Thrust Indicators Baseline 2020 Target 2025 Target 2030 Strategies

INCLUSIVENESS 16. Ratio of Upstream 79 : 21 66 : 34 61 : 39 Refine models to
Lead the way in to Downstream improve livelihoods
smallholder well- exports of independent
being smallholders (ISH)
17. Balance of Trade 62,576 64,200 71,500
(RM million) Optimise government
support with targeted
18. Smallholders Income (RM) - Average income per month per assistance, e.g., data
smallholding governance and
income-generation
Net income 1,560 1,540 1,580 programmes
(MONOCROP) (MONOCROP) (MONOCROP)
Empower Bumiputera
1,940 1,960 2,040 for increased
(INTEGRATED) (INTEGRATED) (INTEGRATED) participation across
upstream, midstream
Gross income 3,020 3,020 3,400 and downstream
(MONOCROP) (MONOCROP) (MONOCROP)

3,560 3,620 4,050
(INTEGRATED) (INTEGRATED) (INTEGRATED)

19. FFB price RM8/tonne RM8/tonne RM8/tonne
premium received
by smallholders
in cooperatives
over independent
smallholders

292 National Agricommodity Policy 2021-2030 (DAKN2030)

Appendix 1.2: Way Forward - Rubber

RUBBER: INDICATORS, TARGETS
AND STRATEGIES 2021-2030

Policy Thrust Indicators Baseline 2020 Target 2025 Target 2030 Strategies

SUSTAINABILITY 1. Planted area – 20,000 25,000 25,000 Revive smallholders’
Transform rubber replanting sector through
upstream (Ha) strengthened
through cooperatives,
increasing raw 2. Number of Malaysian standards and other recognised standards used institutional alignment
material supply to enhance the quality of rubber products and cross-functional
and quality reform initiatives
assurance Accredited testing Baseline Additional number of standards
number of based on accredited testing Identify and ear-mark
PRODUCTIVITY standards suitable areas for large-
Expand scale rubber cultivation
productivity 437 10 10
improvement Implement a quality
efforts across Product Baseline Additional number of standards assurance scheme to
upstream, certif ication number of based on product certification regulate imports of
midstream and standards rubber products, and
downstream to support trade and
17 3 3 domestic consumption
of rubber and rubber-
3. Yield (Kg/Ha) 1,415 1,820 1,950 related products
4:1 4:1 4:1
4. Labour intensity – 10% Strengthen advisory
Land : Labour ratio 13% 15% and extension services
(ha : worker) 1,107,881 to smallholdings
1,106,861
5. Transfer/ Introduce incentives
licensing and 1,020 and encourage
commercialisation progress towards IR4.0
rate of R&D 515 for modernisation
projects 515 of the midstream
N/A segment
6. Planted area (Ha)
34 1,120,860 1,115,860
Total 34 1,100,860 1,095,860
N/A 20,000
Rubber Plantation 20,000

Rubber Forest 690 810
under Forest 640 760
Plantation 30 30
Development
Programme 70 100
70 100
7. Production N/A N/A
(’000 Tonnes)

Total

Rubber Plantation

Rubber Forest
under Forest
Plantation
Development
Programme

8. Latex production
(’000 Tonnes)

Total

Rubber Plantation

Rubber Forest
under Forest
Plantation
Development
Programme

Policy Document 293

Policy Thrust Indicators Baseline 2020 Target 2025 Target 2030 Strategies
1,222 1,150 1,250
9. Natural Rubber
Imports 14,520 24,423
2,444 3,032
(’000 Tonnes) 12,076 21,390
1 : 1.1
10. Contribution to 1:1 37,004 Strengthen R&D&C
GDP (RM million) 3,701 capabilities and
33,304 coordination between
Upstream GDP 1 : 1.4 industry, academia and
research institutions
VALUE-CREATION (RM million) 70,500 with a specific focus on
1,350 developing specialised
Strengthen Downstream GDP 10,000 and high value-added
(RM million) 57,000 products
R&D&C for greater 3,500
49,100 Extend financial
commercialisation 11. Utilisation support for
commercialisation of
of products rate (Ratio of products with high
potential
Production:
Promote the transition
Domestic of high-potential
companies into
Utilisation) higher-value industries
as well as higher-
MARKET 12. Total Exports 48,536 58,000 value branding and
DEVELOPMENT (RM million) 1,072 1,190 distribution
Grow markets 6,153 7,700
through industry- Exports - Natural 40,967 Intensify promotional
led Strategic Rubber 1,415 48,000 efforts to increase
Partnerships 30,854 2,300 global market share
(’000 Tonnes) 38,700 for specialty and dry
15 : 85 rubber products,
Exports - Natural 90 : 10 15 : 85 creating Malaysia’s
Rubber 85 : 15 presence in higher
value product
(RM million)
17 : 83
Exports - Rubber 80 : 20
Products

(RM million)

Exports - Other
Rubber

(RM million)

12. Balance of Trade
(RM million)

Ratio of Exports

Upstream:
Downstream

Latex-based
Products : Dry
Rubber Products

294 National Agricommodity Policy 2021-2030 (DAKN2030)

Policy Thrust Indicators Baseline 2020 Target 2025 Target 2030 Strategies

INCLUSIVENESS 15. Smallholders Income (RM) – Average income per month per Increase support
Enhance smallholding for Bumiputera
Bumiputera enterprises
participation Net Income 589 1,250 1,580
and safeguard (MONOCROP) (MONOCROP) (MONOCROP) Increase adoption
smallholders’ of digital tools for
wellbeing 2,030 2,550 establishment of
(INTEGRATED) (INTEGRATED) a comprehensive
database
Gross Income 902 1,730 2,170
(MONOCROP) (MONOCROP) (MONOCROP)

2,720 3,480
(INTEGRATED) (INTEGRATED)

16. Contribution of RM2.4 billion RM3.4 billion RM4.4 billion
Agricommodity-
based MSMEs to
Agricommodity-
based output (RM)

17. Percentage of 4% 7% 9%
Bumiputera (13/325)3% (23/325)6% (33/367)8%
MSMEs in
midstream &
downstream
segments–
especially “Next
Gen” Bumiputera
Entrepreneurs

18. Local : Foreign
worker ratio

Midstream 64 : 36 66 : 34 68 : 32

Downstream 53 : 47 55 : 45 57 : 43