Restoring Malaysia's competitive advantage in agriculture
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Transcript of Restoring Malaysia's competitive advantage in agriculture
"Restoring Malaysia's Competitive Advantage in Agriculture:
Taking an opportunity based approach"
Murray Hunter University
Malaysia Perlis8th Malaysian International Agro-Bio Business Conference 2012
Agriculture in Malaysia still amounts to almost 12.0% of GDP
Agriculture employs more than 1.0 million people (13.0% workforce)
Taking Perspective
Oil Palm Rubber Rice Other TotalEstates 2,707
97.5%61
2.1%.. 10
0.35%2,778
40.5%
Land Development Schemes
1,243 84.0%
226 15.2%
2 0.1%
8 0.5%
1,479 21.5%
Independent Smallholdings*
540 20.7%
960 36.9%
680 26.1%
420 16.1%
2,600 38.0%
Grand Totals 4,490 65.5%
1,247 18.2%
682 9.9%
438 6.38%
6,857
Table 1: Crop Areas on Estates, Land Development Schemes and Individual Smallholdings in Malaysia, 2012 (‘000 hectares)
* Independent smallholders 1-2 Ha. plots managed part time
Crop Diversity Table 2: Agriculture Land Use, Overall Value & Growth
Crop/Activity
Land Use (%)
Overall Value (%)
Growth (%)
Palm Oil 29.29 34.40 5.5 Rubber 44.00 6.70 (1.4) Cocoa 3.29 5.90 (4.6) Rice/Paddy 11.6 3.50 0.2 Livestock 0.6 7.60 ? Coconut 4.33 1.69 (2.9) Fruits 4.50 8.60 5.6 Fisheries/Aquaculture N/A 14.40 ? Misc. Crops/Activities* 2.40 17.21 1.2
*Includes mixed horticulture, shifting cultivation, sugar, pepper, vegetables, tobacco.
Competitive AdvantageApproximate Costs of Plantation Development for Palm Oil, Rubber & Cocoa Crop Land Costs
RM per Ha. RM Costs to Maturity per Ha.
RM Total Costs
No. of Years to first harvest
Palm Oil 3000+ 6500 9500+ 2-3 Rubber 3000+ 14000 17000+ 5-7 Cocoa 3000+ N/A N/A 2-3
Approximate Cultivation, Harvesting and Handling Costs for Palm Oil, Rubber & Cocoa. Palm Oil Rubber Cocoa RM/Ha. RM/Ha. RM/Ha. Fertiliser Costs 702 134 541 Other Upkeep Costs 252 281 893 Total Upkeep Costs 954 415 1434 Collection Costs 721 2046 901 General Charges 479 608 969 Manufacturing & Despatch 217 67 320 Total Costs 2371 3135 3624
The Issues
Heavy use of chemicals. Leading to declining yields. Cause of high input costs. Loss of cover protection. Leading to residuals in crops.
Loss of humus Loss of trace elements Compact (inhibit root growth) Erosion Accumulation of chemicals
Carrier of disease (the unrecognized problem)
Contaminated water Poor drainage - floods Carry away top soils Generally afterthought – poor maintenance
Poor appreciation of the growth medium
Obtaining Finance
Technology
The Necessary Skills
Finding New Business Models
Farmers
“Mindset Barriers”(Small Holders)
• market passive • copy cat approach • ‘quick-fix approach’ • poor exposure and perhaps resistance to new
ideas,• practice isolation, • market isolation • perception of agriculture as only a fallback
profession • fixation on a single success.
“Knowledge Trap”Professor Hans-Dieter Evers of the University of Bonn
The process begins when data, knowledge and information is taken over without
understanding of the corresponding local and site specific issues involved and this data
becomes the basis to copy solutions into the local context
general optimism bias – overconfidence metaphoric idiom as ‘berlagak pandai’
and/or
‘segan bertanya sesat jalan’ (if we feel shy to ask, then we may go
unguided)
Culture of Competi ti veness
The wall between farming and business
The biggest barrier
The World has become a somewhat integrated market over the last few decades through the phenomena
known as globalization
Traditional economics would explain this
phenomena in terms of specialization,
comparative and relative advantage
Sociologists would talk in terms of the ‘cosmopolitan
man’
Product Opportunity
Gap
Social Social and cultural trends
and drivers. Reviving historical trends. Influence of international
trends. Changing demographics. Styles, fashions & fads.
Economic Stage of economic
development. State of the economy.
Level of disposable income. Macroeconomic, general
industry conditions, financial &geographical environment.
Technology Current state of the art and
emerging technology. Re-evaluating and utilizing existing technology in new
areas. New knowledge.
Invention.
Government & Regulation
Government needs & priorities.
Restriction by Government. New laws & regulations and impact on product markets
and supply chains. Trade liberalization.
Our Inner Self Our upbringing, domicile outlook, experiences, interests, skills & abilities, assumptions, beliefs,
attitudes, perception, cognitive processes, patterning and biases, our inner psych and emotions, imagination,
energy, and passion, etc. The way we interact and stimulated by the
environment and make connections
Randomness & Unexpectedness A random or unexpected
event that creates an opportunity
Changes in any of the factors
New Knowledge or Information
Interrelated Factors
Construction New technologies
New Business models
Imitation Replication & Extension
Allocative Supply/Demand changes
Demographic changes
Discovery Incongruities
Structural changes
Locus of change
Value creation
Analytical
Deductive (Black & white)
Intuitive
Inductive
Degree of ambiguity Active/Imaginative
Passive/Reactive The forms of opportunity©Hunter (2012)
Market Orientated Firms
High adaptability to the environment but low
generative idea & strategy ability
Conservative firms
Very low adaptability to environment
Both Market & Entrepreneurially Orientated Firms
High adaptive and idea generative & strategy development ability
Entrepreneurial Firms
High generative idea & strategy capability
Mar
ket
Ori
enta
tion
Entrepreneurial Orientation
High
High
Low
Low
Four potential firm opportunity seeking typologies
Success in the global market would depend upon……
Competitive advantage grows fundamentally out of value a firm is able to create for its buyers that exceeds the firm’s costs of creating it. Value is what buyers are willing to pay, and superior value stems from… providing unique benefits that more than offset a higher price. According to Professor Michael E. Porter
Restoring Competitive advantage
Must move from this:
To this:Branding
Promotion
New & efficient technologies
Novel new products
Its all about value (both industrial and consumer products)
USAAsian Influence
Sesame, wasabi, ginger, noodle and Asian
cabbage
Indian Influence
Fruit, spice and toasted nuts, chutney, quince
pear, roasted coriander, pistaschio,almond &
walnut
Blue and goat cheese
MexicoTarmarind, squash
flowers, huitlacoche (corn mushroom),
portobello mushroom, duck meat
North AmericaCuisines with most potential for growth
Mediterranean influence
Indian influence
Middle East influence
Slow Food
Europe
Fusion style
Thai, Indonesian, Vietnamese influences
Contemporary cuisine
Mediterranean influence
Exotic combinations
South America
Fusion style
Thai/ChineseWestern/ChineseIndonesian/Thai
American/Mediterranean
Italian
French
Asia/Pacific
The New marketing
Heaven Strategy (Dan Hill 2010)
Emotional Response
Response Rate
Negative Positive
Low
High
More negative/high
response
More positive/lower
response
More negative/lower
response
More positive/highe
r response
Industrial products with potential for growth
Cocoa in Samoa: Disadvantaged by distance and sea
Samoan cocoa into the finest handmade chocolate
Boutique crops with potential for growth
Sandalwood goes nuts in Katherine 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.
Australian Wildflower Industry
Protea Leucospermum LeucadendronSerruria
Banksia Telopea Grevillea
This industry developed OUTSIDE the traditional global supply chain
Queensland
100 Growers
New South Wales
150 – 200 GrowersVictoria
60 Growers
South Australia
30 Growers
Tasmania
20 Growers
Production areasWestern Australia
150 – 180 Growers
• Possibly 200 growers• 43 active members of
PWGA• Exported via Sydney or
Melbourne (Japan)• Domestic market to
Sydney or Melbourne
Victoria227,600 sq km
ThryptomeneWax (Chamelaucium)BanksiaLeucadendronLeucospermum
ProteaLeucospermumLeucadendronSerruriaBanksiaTelopeaBruniaceae
ProteaLeucadendronBanksia
Tasmania67,800sq km
20 Growers
DryandraSerruria
New South Wales811,428 sq km
• 150 -200 growers• 2 active associations• Good govt support• Large Sydney domestic
market
Actinotus helianthiCeratopetalum gummiferumBanksia plagiocarpaLeucadendronProteaGrevillea
TelopeaGrevillea
ProteaLeucadendron
GrevilleaActinotus helianthi
Ceratopetalum gummiferumBanksia
plagiocarpa
Queensland1,787,200 sq km
Tropical foliageStenocarpusLeucadendron
AnigozanthosChamelauciumOzothamnusLeucadendronProteaLeucospermum
30 -100 GrowersDomestic and exportGood govt support
Stenocarpus Chamelaucium
South Australia984,000 sq km
30 Growers10% Adelaide domestic market20-40% export50-75% Eastern states domestic marketSome large growers >20ha
ProteaLeucadendronLeucospermum
BanksiaProteaLeucadendron
Leucospermum
ProteaLeucadendronLeucospermumBrunia
ChamelauciumAnigozanthos LeucadendronBanksia
Western Australia2,525,500 sq km
150 – 180 GrowersExport to Europe and JapanSmall local domestic market2 active associationsGovt support
Australian Wildflower Industry
Barriers to Entry
•Labour costs and availability•Exchange rate•Fuel and freight costs• Water issues•Developing new supply chains
Challenges
•Value chain development•Product value creation•Building an industry approach•Market development• Research & development
Competitive Advantage
•Diversity of plants for new products – min of 270 species currently sold•Close proximity to Eastern markets – lower freight costs and good trade relations•National body for cohesive industry – access R&D $$, local and international promotions, information flow (Industry claims)
Seek Innovation
through novel
means
Microwave Oven Pressure Cooker
Chemicals & Spoons, etc. Glassware
Tissue Culture
• Minimise Production scale to account for initial low sales/production quantities and lower capital investment
• Mobile GMP Facility
• Simplified Technology
Locked into old paradigms of business
We need to move from here…
To Here …
Conclusion: Integrated Competitive Advantage
Haram (Those things prohibited by
Allah in the Al Qu’ran)
HACCP
GMP
Sustainable environment, community
& business
Community Benefit
Toyyibaan
Clean Healthy
Non-exploitive
Traceable
Supply Chain
Ethical
The Halal/Toyyib supply chain is another example of integrated competitive advantage:
Non-Muslim concepts of ethics, sustainability, and goodness are merging with Islamic concepts
Summary• The “good times” of palm oil and rubber demand and prices has caused great complacency• The sector is heavily reliant of foreign labour where sources may dry up relatively quickly•New crops initiatives are slow – some hope with “Crops for the Future” initiative• Perceptions about university-industry linkages poor•The paradigm that “agriculture” is a business just like any other business does not exist•A risk that the farmer may become “an extinct species”•The whole “rice” paradigm has to be overturned with a “new approach”•“New crops” research, knowledge, and dissemination and “extension” are critical• Agro-entrepreneurship pedagogy and delivery needs to be re-examined.
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