Restoring Malaysia's competitive advantage in agriculture

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Restoring malaysia's competitive advantage in agriculturePresentation given at the MIFB Agribusiness Conference, PWTC, Kuala Lumpur, 12-13 July 2012

Transcript of Restoring Malaysia's competitive advantage in agriculture

  • 1. "Restoring Malaysias Competitive Advantage in Agriculture:Taking an opportunity based approach"Murray HunterUniversity MalaysiaPerlis8th Malaysian International Agro-Bio Business Conference 2012

2. Taking Perspective Agriculture in Malaysia still amounts to almost 12.0%of GDPAgriculture employs more than 1.0 million people(13.0% workforce) 3. Table 1: Crop Areas on Estates, Land Development Schemes and Individual Smallholdings in Malaysia, 2012 (000 hectares) Oil PalmRubber Rice Other Total Estates2,70761..10 2,77897.5% 2.1% 0.35%40.5% Land Development 1,243226281,479 Schemes84.0% 15.2% 0.1% 0.5% 21.5% Independent 540 960 680420 2,600 Smallholdings* 20.7% 36.9% 26.1%16.1%38.0% Grand Totals 4,490 1,247 682 438 6,85765.5% 18.2% 9.9% 6.38% * Independent smallholders 1-2 Ha. plots managed part time 4. Crop DiversityTable 2: Agriculture Land Use, Overall Value & GrowthLand Use Overall Value GrowthCrop/Activity(%) (%) (%)Palm Oil 29.29 34.40 5.5Rubber 44.006.70(1.4)Cocoa3.29 5.90(4.6)Rice/Paddy 11.6 3.50 0.2Livestock 0.6 7.60?Coconut4.33 1.69(2.9)Fruits 4.50 8.60 5.6Fisheries/AquacultureN/A14.40 ?Misc. Crops/Activities* 2.4017.21 1.2*Includes mixed horticulture, shifting cultivation, sugar, pepper, vegetables, tobacco. 5. Competitive AdvantageApproximate Costs of Plantation Development for Palm Oil, Rubber & Cocoa CropLand Costs RM Costs toRM TotalNo. of Years RM per Ha. Maturity perCoststo firstHa.harvestPalm Oil 3000+65009500+2-3Rubber 3000+ 14000 17000+5-7Cocoa3000+N/AN/A 2-3Approximate Cultivation, Harvesting and Handling Costs for Palm Oil, Rubber & Cocoa.Palm Oil RubberCocoa RM/Ha. RM/Ha. RM/Ha.Fertiliser Costs 702134 541Other Upkeep Costs 252281 893Total Upkeep Costs 9544151434Collection Costs 721 2046 901General Charges479608 969Manufacturing & Despatch 217 67 320Total Costs 2371 31353624 6. The Issues 7. Poor appreciation of the growth medium Heavy use of chemicals. Leading to declining yields. Cause of high input costs. Loss of cover protection. Leading to residuals in crops. Carrier of disease (the unrecognized problem)Loss of humusLoss of trace elementsContaminated waterCompact (inhibit root growth)Poor drainage - floodsErosionCarry away top soilsAccumulation of chemicalsGenerally afterthought poor maintenance 8. Obtaining Finance 9. Technology 10. The Necessary Skills 11. Finding New Business Models 12. Farmers 13. Mindset Barriers (Small Holders)market passivecopy cat approach quick-fix approach poor exposure and perhaps resistance to newideas, practice isolation, market isolation perception of agriculture as only a fallbackprofession fixation on a single success. 14. Knowledge Trap Professor Hans-Dieter Evers of the University of Bonn The process begins when data, knowledgeand information is taken over withoutunderstanding of the corresponding local andsite specific issues involved and this data becomes the basis to copy solutions into the local context 15. general optimism bias overconfidencemetaphoric idiom as berlagak pandai and/orsegan bertanya sesat jalan (if we feel shy to ask, then we may gounguided) 16. The World has become a somewhatintegrated market over the last fewdecades through the phenomena knownas globalization Traditional economics would explain thisphenomena in terms of specialization, comparati ve and relative advantageSociologists would talk in terms of the cosmopolitanman 17. Randomness &Changes in any of Unexpectedness Interrelated Factors A random or unexpected the factorsevent that creates an opportunitySocialEconomicStage of economicSocial and cultural trends development. and drivers.State of the economy.Reviving historical trends.Level of disposable income.Influence of international Macroeconomic, generaltrends. industry conditions, financialChanging demographics. &geographical environment. Styles, fashions & fads. Product OpportunityGapTechnologyGovernment &Current state of the art and Regulationemerging technology. Government needs &Re-evaluating and utilizing priorities.existing technology in new Restriction by Government. areas. New laws & regulations andNew knowledge. impact on product markets Invention. and supply chains.Trade liberalization.Our Inner SelfNewOur upbringing, domicile outlook, experiences,interests, skills & abilities, assumptions, beliefs, Knowledge orattitudes, perception, cognitive processes, patterningand biases, our inner psych and emotions, imagination,Information energy, and passion, etc. The way we interact and stimulated by theenvironment and make connections 18. Degree of ambiguity Active/ImaginativeAllocativeConstructionIntuitiveAnalytical Supply/Demand changesNew technologiesDemographic changesNew Business modelsValue creationnt io va no Locus of change In InductiveImitationDiscoveryDeductiveReplication & ExtensionIncongruities (Black & white) Structural changesPassive/Reactive Hunter (2012)The forms of opportunity 19. Four potential firm opportunity seeking typologies Market OrientatedBoth Market &FirmsEntrepreneuriallyHigh Orientated FirmsHigh adaptability to the environment but lowHigh adaptive and idea generative idea & strategy Market Orientationgenerative & strategy ability development ability Conservative firms Entrepreneurial FirmsLowVery lowadaptability to High generative idea environment& strategy capabilityLowHigh Entrepreneurial Orientation 20. Success in the global market would depend uponCompetitive advantage grows fundamentally out of value afirm is able to create for its buyers that exceeds the firmscosts of creating it. Value is what buyers are willing to pay,and superior value stems from providing unique benefitsthat more than offset a higher price.According to Professor Michael E. Porter 21. Restoring Competitive advantage Must move from this:Branding PromotionTo this: New & efficienttechnologies Novel newproducts 22. Its all about value (both industrial and consumer products) 23. Cuisines with most potential for growthNorth AmericaEuropeSouth AmericaAsia/Pacific USA Mediterranean influence Fusion styleFusion styleAsian InfluenceIndian influenceThai, Indonesian, Vietna Thai/Chinesemese influencesSesame, wasabi, ginger, Middle East influenceWestern/Chinese noodle and Asian Contemporary cuisine Indonesian/Thai Slow Foodcabbage American/Mediterranean Mediterranean influence Indian Influence Exotic combinationsItalianFruit, spice and toasted nuts, chutney, quinceFrenchpear, roasted coriander, pistaschio,almond & walnut Blue and goat cheese MexicoTarmarind, squash flowers, huitlacoche (corn mushroom),portobello mushroom, duck meat 24. Heaven Strategy (Dan Hill 2010) HighMore Morenegative/highpositive/higheresponser responseResponseRateMoreMorenegative/lowerpositive/lowerresponse Lowresponse Negative Positive Emotional Response 25. Industrial products with potential for growth 26. Cocoa in Samoa: Disadvantaged by distance and sea 27. A contract to grow up to 1400 hectares of Indian Sandalwood outside of Katherine is pending on assurances from the NT Government of enough water. Boutique crops with potential for growth 28. Australian Wildflower Industry global supply chain This industry developed OUTSIDE the traditionalBanksia Telopea Grevillea ProteaLeucospermum LeucadendronSerruria 29. Western AustraliaQueensland100 GrowersNew South Wales150 180 GrowersSouth AustraliaTasmania Victoria150 200 Growers30 Growers20 Growers 60 Growers 30. Victoria227,600 sq kmThryptomeneWax (Chamelaucium)Banksia SerruriaLeucadendron Protea DryandraLeucospermum Leucadendron Banksia Possibly 200 growers 43 active members of PWGA Exported via Sydney or Melbourne (Japan) Domestic market toProteaLeucospermum Sydney or MelbourneLeucadendronTasmaniaSerruria67,800sq kmBanksiaTelopeaBruniaceae20 Growers 31. New South Wales811,428 sq km Actinotus helianthi Ceratopetalum gummiferum Banksia plagiocarpa Ceratopetalum Leucadendron ProteaBanksiagummiferum Grevillea plagiocarpa 150 -200 growers Telopea 2 active associations Grevillea Good govt support Large Sydney domesticmarket Protea Leucadendron Actinotus helianthiGrevillea 32. Queensland1,787,200 sq kmStenocarpusChamelauciumTropical foliageStenocarpusLeucadendron 30 -100 Growers Domestic and export Good govt supportAnigozanthosChamelauciumOzothamnusLeucadendronProteaLeucospermum 33. South Australia984,000 sq km30 Growers10% Adelaide domestic market20-40% export50-75% Eastern states domestic marketSome large growers >20haProteaLeucadendronLeucospermumBanksiaProteaLeucadendronLeucospermum 34. Western Australia2,525,500 sq km150 180 GrowersExport to Europe and JapanSmall local domestic market2 active associationsGovt support Chamelaucium Anigozanthos Leucadendron BanksiaProteaLeucadendronLeucospermumBrunia 35. Australian Wildflower Industry Barriers to EntryLabour costs and ChallengesavailabilityExchange rateFuel and freight costs Value chain Water issuesdevelopmentDeveloping new supplyCompetitive AdvantageProduct value creationchainsBuilding an industryapproachDiversity of plants for newproducts min of 270 speciesMarket development currently sold Research &Close proximity to Eastern markets lower freight costs and good tradedevelopment relationsNational body for cohesive industry access R&D $$, local andinternationalpromotions, information flow(Industry claims) 36. SeekInnovationthrough novel means 37. Microwave Oven Pressure CookerChemicals & Spoons, etc.Glassware 38. Tissue Culture 39. Minimise Production scale to account for initial lowsales/production quantities and lower capital investment Mobile GMP Facility Simplified Technology 40. Conclusion: IntegratedCompetitive Advantage 41. The Halal/Toyyib supply chain is another example ofintegrated competitive advantage: Haram(Those things prohibited byTraceable Allah in the Al Quran) SustainableHACCPenvironment, community& businessSupply GMPChain Community B