Sabah: Bearing fruit

With Sabah’s leaders increasingly prioritising agricultural land and resources as a driver of economic growth, the state’s fruit and vegetable industry looks set for a growth surge in the months ahead.

On March 8, state news agency Bernama quoted the deputy chief minister of Sabah, Yahya Hussin, as saying he hoped to see the state producing more of its own agricultural produce as well as increasing exports to global markets. Yahya, who is also Sabah’s minister of agriculture and food industry, said during a visit to the Federal Agricultural Marketing Authority (FAMA) that Sabah’s large tracts of abandoned and undeveloped land have great potential to increase the state’s agricultural production.

“The products are there in neighbouring countries, such as the Pamelo fruit from Sabah that is exported to Brunei and Singapore, but they are not enough. According to the FAMA briefing, our local products are still not able to meet the demand from overseas,” Yahya said. He made similar comments in February, saying that to meet increasing international demand – chiefly from Europe and the Middle East – Sabah needs to double its production of fresh and value-added pineapple for export. He cited 2009 statistics indicating that Sabah has a cultivated pineapple-growing area of 1066 ha, and that it exports pineapple worth RM14,240 ($4695) per ha per year to Sarawak and Brunei.

An announcement in early March by Del Monte Philippines that it is planning a large organic pineapple plantation covering 15,000 ha of land in Sabah and Sarawak was therefore welcomed by state leaders and the Malaysian Pineapple Industry Board (MPIB). MPIB’s director-general, Sahdan Salim, told local news outlets that the deal was expected to be finalised this year, and that Sabah and Sarawak were chosen because they have suitable tracts of land for large-scale pineapple farming. The project, which will involve extensive contract farming, should create a number of job opportunities for locals.

Malaysia exported RM78m ($26m) worth of canned and fresh pineapples in 2010, and this figure is expected to reach RM100m ($33m) this year, Salim said. Global imports of tropical fruit such as pineapple, papaya, melon and star fruit increased by a compound annual growth rate of almost 10% between 2001 and 2007.

Malaysia’s location in the tropical belt and its annual average rainfall of 2000 mm make it an ideal location for farming premium tropical fruit. Western consumers have a growing taste for tropical fruit, with the EU’s annual consumption of papaya and pineapples increasing by 8% and 16% respectively over the past five years. While it follows that market opportunities for selling fresh tropical fruit are there for the picking, those in the industry complain about the Malaysian agriculture sector’s lack of a demand-driven approach.

One concern is that markets such as the EU demand pesticide-free, environmentally sustainable produce, and Sabah’s farmers have not yet embraced this type of farming. Issues of scale and shortcomings in terms of agricultural best practice and integration have also hampered the state’s ability to tap into high-value export markets for fresh fruit and vegetables.

The average fruit farm size in Sabah is 1 ha, with fruit farmers earning an average of RM1860 ($613) per month, with this including governmental support of around RM250 ($82) per tonne. With rural areas accounting for 35% of Malaysia’s population and agriculture supplying almost 44% of rural jobs, improving agriculture productivity is seen as a vital step to closing the rural-urban income gap, which in 2009 was 1:1.82.

Promoting growth in the agricultural sector is therefore high on the government’s list of long-term priorities. Incentives for farmers and investors are laid out in the government’s Economic Transformation Programme, which is made up of various National Key Economic Areas (NKEAs). The Agriculture NKEA highlights three main goals: increasing gross national income (GNI) contribution by RM28.9bn ($9.5bn) to RM49.1bn ($16.2bn) in 2020, more than double the sector’s current size; creating 74,600 job opportunities, most of which will be in rural areas; and raising participating farmers’ incomes.

The Agriculture NKEA offers 16 entry point projects (EPPs), or business opportunities, meant to jump-start the sector. Produce comes under EPP 7, which calls for upgrading the capability to produce fruit and vegetables for high-value export markets and creating contract-farming clusters. To achieve greater economies of scale, existing farms will be modernised and act as contract farmers for larger anchor companies. Around 9000 ha of oil palm plantation land has been identified for intercropping of banana and pineapple during the oil palm replanting period.

If successful, the result would be high-quality fruit and vegetables that comply with food safety standards, allowing access to high-value markets in the Middle East and Europe. Increased export market penetration would enable Sabah’s farmers to charge higher prices for their produce, raising incomes to an estimated RM4500 ($1484) per ha. In all, the EPP is expected to contribute RM1.6bn ($528m) to Malaysia’s GNI and create 9100 jobs by 2020.

Globalisation has opened up the world to international cuisine, resulting in increased demand in developed markets for a growing range of foods. As people around the world develop cravings for fare such as pineapple curry and papaya salsa, Sabah looks well placed to help meet this demand – and profit from it.