| u-VIT " *9il | --L COri IER E , ii I E D I IjRePort No. FE-5 1 a ONE ' This report was prepared for use within the Bank and its affiliated organizations. They dc; not accept responsibility for its,accuracy or completeness. The report may not be published nor may it be quoted as representing their views. TxT-rTD:T:)jA TrTCWjA,T t A \Tk T:nlP P1C~PTrTTcThN A NTf ThTXT1VT ("ADM E:XZT- JIN I X.1. ~ J f.A'4 J-ħfl.L.-.- - 1 J.-SI- - ~ A..A-% .'J J ..1 .1 TINTTCVXTER ATITO ALT P\7VT CThP\1ANT ASSCInrTATTINT MALAYSIA'S DEVELOPMENT PROSPECTS AND PLANS (in four volumes) VOLUME II AGRICULTURAL SECTOR MALAYSIA February 10, 1966 Far East Department, CURRENCY EQUIVALENTS Currency Unit = Malayan dollar 1 Malayan do.llar = TT. C. do. 37 I U. S. $ = M$3. 06 M$l million = U.S. $327,000 PREFATORY NOTE This report was prepared by A. Golan based largely on a draft of a mission in May 1965 to Malaysia composed of Mr. M. F. Perkins of the Eank, and Mr. P. Peperzak of FAO. TABLE OF CONTENTS Chapter Page No. I Introduction ....................................... 1 Diversifvine and Increasing Outnut ................... 1 Land Policy ............. .... ........ 0* ....,. 2 Social Problems . . a a . -a- ..a....aa...a............ 2 Staffing Problems ......**....***.. *.* * 3 C,nvernment Organization -..-- 3 II nTvelApmenvt Dring tvhe Recen.t Past nd Prspe for 1966-70 ..................... ............ Production .. * * ............................ 4 A. Thmestic Production B. ExIport Co L . . . . . . . . . . . . . . * o*. ... . 6 B. Exporr t Acroptis - .91-5........................................ 6 Il -. A 4.L *- nZ-i _LI r 'JJVJJL It'".i, flLk ,.Lj. L,'U'Le - L V _ . . . . . . . . . . o . * * 9 7 Diversification . ....... . . .... 14 'Crospectus f'or 196U-70 IV . . . . . . ........ ..*.*.*.1 III. 1me Tasks racing the First Mvialaysian Pian .... ... i8 L-nd Development Schemes .... . LO.............. .. . 0 Human Resource Development .......................... 21 Import and Export Substitution ....... ........e. .. . 24 Production Promotion .. . .. ............. 25 Institutional Reform in Malaya ....................... 26 Planning and Organization .. . . .. ..... ..* ... ... 27 Fne Feasibility of the Plan ..... .............. 28 TH-E AGnIrULTURAL SICTOR, MALAYSIA I. Introduction 1. The problems which have faced the rural sector since the end of the war and the termination of the Emergency have been similar throughout Malaysia, with, however, different emphases over time and in different regions. The most immediate problem to be tackled was the rehabilitation of rubber as the country's most important product and foreign exchange earner. This has been successfu,ly tackled by means of replanting subsidy schemes administered by the Ministry of Commerce and Industry with the co*- operation of' the Riihhr Research Tnstitutte The risks of excessive reliance on rubber have long been recognized, and attempts to meet this problem have given impetus to schemes to diversify t-he rttern of oitpnut. However, the pressing pro-olems of rural poverty and population pressure on the land have meant that in practice ephasis has been placed on increasing outnut and incomes in rural areas, even though this has often led to continued reliance on rubber. Conditions are futher aggravated in M-laysia by the existence of distinct racial groups in many sectors of the country. The role of middle- man and, in many cases, that of moneylender is perfo.ed by the comerciaLl-y more aggressive non-Malays, whereas a majority of the smallholders are Ma:Lays or otiher indigenous peoples. This, ho-wever, is not the case in the LL tenant relationship which is generally inter-Malay. Diversifying and Increasing Output The liability of natural rubber to declining prices which implies the remote tlhreat of extinction has forced attention on the possibilities of diversification into new crops in the form of import and export substi-- tutes. Considerable emphasis has been given to the policy of expanding rice cultivation wvhich has continued with added vigor directed towards se:Lf- sufficiency. The area under irrigation was annually expanded and research was undertaken into varieties suitable for double cropping. Programs for padi attempted to increase productive efficiency and maintain prices to the producers at a stable level. Programs for other crops were also developed but these were minor compared with rubber and padi. Diversification, how.- ever, imposes problems in itself. It is difficult to find one or even several export crops which could take the place of rubber either in terms of its tremendous acreage, representing 56% of the total planted and settLed areas of Malaysia and 65% of Malaya, or in terms of its output value. More- over, rubber is ideally suited to the generally average quality soils and climatic con,litions of Malaysia and to the levels of skills possessed by the Malaysian smallholder. These favorable factors are not necessarily true of possible substitute crops. Moreover, the value of crops for the direct supply of the Malaysian domestic market is not sufficiently large, nor is domes-tic demand growing at a sufficient rate, to permit the reorien- tation of agricultural resources in this direction on a sufficient scale. There are, however, opportunities for import substitution in those fields representing imports of tronical or sub-tropical crops but the scope in the case of temperate zone crops is highly limited. 3. The problem of diversifying output and rural income is compli- cated by the fact tht that the riu-ral population is expandng at over 3% ner annum. The rate of absorption of rural labor into the non-rural sectors is inadequate to prevent the growing pressulre of rural population on thie land. In Sarawak the problem takes a form somewhat different from Malaya in that ways must be found to use land more efficiently than nder t +he s;s- tem of shifting cultivation practiced by part of the rural population. A reduction in the area under shifting cultivation and an increase in the area under settled agriculture is thus necessary as a long-run measure. In Sabah, twhere good land is available, the problem 's also one of achievlng techno- logical change from shifting to settled agriculture. Land hunger, however, is not a serious problem because of under-population and the labor short- age. Land Policy 4. Compared with most other countries in the region, Malaysia is sparsely populated and contains substantial virgin lands suitable for agri- cultural cultivation. In past years the states, who are the legal owners of the land, have pursued a restrictive land policy. While this policy was justified during the prewar rubber over-production and the postwar Emergency, its continuation at present when an expansionist policy is re- quired to alleviate population pressure on available land, has been detri- mental to the development effort. Failure to liberalize land alienation has also resulted in hampering expansionist forces in the private agricul- tural sector.l/ The estates have been prevented from developing new areas, and in some states the Chinese have tended to become land starved. In the absence of free alienation of land in sufficient volume, Moslem laws of inheritance create conditions of fragmentation as well as making it diffi- cult for rural families to move to another agricultural area. Social Problems 5. Problems of a social as well as an economic nature also exist as a result of the existence of a traditional smallholder sector only partially commercially oriented. Where traditional cultures are involved, the develop- ment problem includes not only the process of adaptation to new technological and economic processes but also to that of acquiring new values and new out- looks. The padi and rubber smallholder, the inshore fisherman as well as the shifting cultivator in Borneo are included in this category. Problems faced by this semi-traditional seetor ru]n through the whole marketing as well as the productive process and include credit and land tenure. Indifferent Droduction response is associated with a pressu3re of population iupon present'v alienated land, a small-scale unit of production, high marketing costs both for init. and outptii+, imperfect marketino conditions, indebtedness, relui- tance to investigate new economic opportunities, and an unfavorable tenure relationship.L 1/ The recent adoption of a more liberal alienation policy by the Natuonal Uand Council is a welcome reversaL of past policies. 3- Staffing Problems 6. Part of the task outlined above will be undertaken by the private sector, which has the technical and entrepreneurial ability to undertake risks associated with new development, provided a liberal land alienation policy is followed. Government-sponsored expansion in the smallholder field, however, is essential, but is faced in many fields by problems of technical verification and economic feasibility. Considerable research, extension, and demonstration is required for the further development of existing and new crops. The problem faced here is that the present staff appears to have inadequate experience and, possibly, training. This de- ficiency is aggravated by the fact that Malaysia is experiencing a rapid shift in personnel associated with the change in political status to an independent nation. In the process the senior staff associated with the previous regime is rapidly being replaced by local personnel. The result is that the development program has had to be carried out with an inadequate staff. This will continue to be a serious handicap for further expansion of agricultural development activities of the Government under the First Malaysian Plan for 1966-1970Q Coincident with in creasing emphasis on government participation is the added burden of training and recruiting sizeable nuihmers in the inntermeliate and higher ePrhelons of government serv- ice, irrespective of the acquisition of needed experience. These problems were not immediately as severe in Sarawak and Sabah in view of the slow- ness with which Malaysianization had proceeded. However, the increase in personnel reqi4red by these states 4n 1966=70 Jwtrrl-re Slmilar problems. Government Organization 7. The organization of government functions in agriculture, fisheries arnd forestr-y , so poses a problem although not as severe a one as those pre- viously discussed. There exists a division of responsibility in the govern- ment which to some extent parallels that of the estate and smallholder dualism. Estate agriculture is generally the concern of the export-oriented Ministry of Commerce and Industry. Wi".th this Ministry has been associated the Rubber Research Institute in relation to the technical and replanting proublems of the estate rubber industry. On the other hand, the economic welfare of t'he smallholders is generally the preserve of the Ministry of Agriculture and Cooperatives. This division, however, is not uniquely ob- served, for Commerce and Industry is responsible for price support programns for padi, smailholder pineapple marketing and, in conjunction with the RRI, the Smallholders' Rubber Replanting Scheme. Agriculture and Cooperatives, on the other hand, is concerned with the coconut industry, which includes estate production, and oil palms which is largely an estate operation at present. Smallholder resettlement schemes are partially the responsibility of the Federal Land Development Authority (FLDA) under the Ministry of National and Rural Development, although in Sarawak and Sabah, similar schemes are presently under the jurisdiction of the agriculture departments of the two states; other settlement schemes are also under state jurisdic- tion. With the formulation of Malaysia, jurisdiction over freshwater fish- eries was retained by Sarawak and Sabah; whereas the former relinquished control over marine fisheries to the Federal Government, Sabah did not. -4 Forestry has been transferred, within the Federal Government, from Agricul- ture and Cooperatives to the Ministry of Lands and Mines. Insofar as land is a state subject, however, forest exploitation of public lands is largely a state function. These problems of divided jurisdiction may well become more important in future as regards the planning and administration of policies such as the promotion of diversification and efficient land utili- zation. II. Development During the Recent Past and Prospects for 1966-1970 Production 8. The statistical basis for appraising performance in agriculture, fisheries and forpetrv in Malaysia Jm bhised in the direction of export crops. Except for rice and, to a certain extent, livestock products, the bulk of the production for domestic cupply goes largely unrecorded. The indices presented in Table 1, therefore, are based in part on estimates and are ina dequatte as a means o apprlaising over=all perfrmnce. Anry interpretation must bear this in mind. Table 1 LANAr AOT A Indices of Production* (1959 =,100) Percentage of Annual Rate -, Growth Commodity 1960 1961 1962 1963 1964 1964 over l97'2 Rubber 1/ 102 106 107l 112 116 3.0 Coconut Products 2/ 116 116 101 105 95 -1.0 Rice 2/ 126 137 130 139 124 4.4 Palm Oil and Kernels 3/ 124 129 148 169 165 10.5 Pineapple 3/ 103 117 130 142 147 8.0 Pepper 4/ 51 134 160 147 151 8.6 Sago Flour 5/ 111 138 179 224 336 27.0 Abaca 6/ 140 154 126 136 150 8.4 Tea 3/ 104 108 117 112 128 5.1 Livestock Products 2/ 7/ 104 112 120 121 126 4.8 Poultry and :5ggs 3/ 123 n.a., 266 n.a. 392 31.0 Fish 3/ 118 127 143 155 161 10.0 Forest Products 1/ 131 138 146' 170 191 13.8 Weighted Indices Crops and Livestock 106 110 111 116 118 3.4 Agriculture and Fish 106 111 113 118 120 3.7 Agriculture, Fish and Forestry 109 114 116 123 127 4.9 * Estimated output; selected commodities only; Note qualifications above. 1/ Malaya, SDarawak and Sabah 5/ Sarawak only 2/ Malaya and Sabah 6/ Sabah only 3/ Malaya only 7/ Excludes noultry and eggs. 4/ Malaya and Sarawak A weighted index of crops, livestock and fish output reveals a gradual in- crease throughout the five-year period, 1959-64, at an annual rate of 3.70% for Malaysia. It is inferred from the behavior of prices, income growth and population increase in Malaya, however, that the rate of growth of dolcstically- consumed but unrecorded food supplies, such as vegetables and -5 ts, lhave more or less kept pace with the growth of population. It may be concluded for Malaya that production of such crops for the domestic market in general has increased at a rate approximating 3.5% per annum. In Sarawak Ead Sabah the data yield no definite conclusion. A. Domestic Production 9. Rice is the staple food of Malaysia and while the Government has made serious efforts to attain self-sufficiency in rice during the past five years. the results are not very encouirazing. Average domestic pro- duction of rice in Malaya during 1964 provided 58.5% of total consumption; while rice irnports qounimted to M$157 million or over n of total imports. Acreage devoted to padi growing accounting for nearly 16% of total culti- vated area i!n Malaya, second only to rubber, has been axpanding slowlv at about 1.8% annually between 1953-60 and 1964. Output at the seme time has expanded more rapidly, between 1960 and 1965 the increase inrice produc- tion is estimated at 2.3% annually, with the States of Malaya which account for over 80% of total rice production providing most of the growth whle pro duction in the Borneo States seems to have been stagnant. With production expansion fa:lling short o, population gro-wth rate and rsW ng consm ption, increasing quantities of rice had to be imported. The performance of padi production in Malaya, although good in comp-arison with performance in some other countries, is somewhat disappointing in view of the effort which has gone into drainage and irrigation, incliuding the possibiltiies opened up for double cropping, the development of new varieties, and the effort ex- panded on va:r ious paci subsidy schemes to increase yields and cooperative marketing. It appears that institutional factors in smallholder padc pro- duction, expounded itn greater detail in Chapter III, have hindered the response to governmental development efforts described below. 10. The padi situation contrasts with the performance in livestock and fish. Livestock output (cattle, buffalo, pigs and goats) has gr j m at a, rate of 4.8% a year, and is mainly attributable to expansion in pig and bfLfalo production (8.5% and 6% respectively in Malaya) because the ou-Wft of cattle and goats actually declined. In the case of poultry and eggs t'.e rate of increase was 3.1%'o per annum in Malaya. A large proportion of the increase in Mlalaya represents a substitution of local production for Sin,gapore trade thereby adversely affecting the Singapore livestock industry which used to sell considerable quantities of pigs, poultry and eggs to other areas in Malaysia. Singapore has thus experienced an over-supply situation and a squeeze on profit margins. Following separation the replacement of Singa- pore's poultry and livestock industry with local products, previously an adverse development for the economy as a whole, has turned out to be a favorable step toward import substitution. -6 - 11. The expansion in both livestock and poultry production may be attributed to the private sector, in part backed by the efforts of local feed companies, plus government provision of breeding stock and other services. Although the latest developments in poultry and egg production have not been adopted, techniques have improved and the control of disease has reduced the risk of undertaking specialized large-scale operations. In- dividual ent,repreneurs with caoital and sources of credit have established themselves as commercial operators near the larger urban centers for poultry and egga production. 12. Tn the ease of' fresh fish, marine landings have marked up a rate of growth of 10% per annum in Malaya. This may be attributed largely to the mechanization of boats and gear and the utilization of trawlers of considerable tonnage in deep sea fishing. This contrasts with traditional inshore flshingr by the use of traps and small boats oerated hy consider- able numbers of native fishermen. Controversy over demarkation of the bollndaries between inshore and deep sea fishing has plagued the Industry and forced the Fisheries Department to devote effort to regulation and contl-ro'l- on . t'he interestus of trad.Ltional inshore fishing. B. Export Crrops 13. Malaysia is the world's largest producer of natual ru'bber accounting for around 40% of total production. Internally rubber is the dominant factor in the economy providing employment to nearly one third of the labor force and contributing approximately half of the country's export earnings. Little change in the predominancy of rubber has occurred although its contribution to income, Government revenues and exports varied sharply from year to year due to price fluctuations. Total acreage devoted to rubber growing in Malaya has expanded only slowly at 1.1% per annum during the past ten years and with new land reclamation proceeding at roughly the same rate, rubber continues to occupy about 65% of the entire cultivated area. Rubber acreage under smallholdings rose by 3.0% per annum barely keep- ing pace with population growth while estates holdings at the same time unde,- went a 5% decline in total acreage following a shift from rubber to new crops* primarily oil palm, and the inability of estates to expand due to a restric- tive land alienation policy. As a result of these developments smallholding acreage which accounted for 45% of the total rubber acreage in 1955 increased to 53% by 1964, although output share declined from 45%d to 42.5% reflecting the higher yields on estates. The over-all decline in estates' rubber acreage has not prevented a rise in output due to the introduction of better varieties~ and new processing techniques. Rubber production on estates increased stead- ily from 352 thousand tons in 1955 to 471 thousand in 1964, an annual rate of 3.5%, with a more rapid expansion being prevented by the extensive replant- ing program aimed at replacing old low-yielding trees with high-yielding varieties. The massive replanting program brought about a reduction in un- selected seedlings' contribution to total estates' output to 18.5% in 1964 compared with 54% in 1955 and is expected to raise annual output expansion to 6.5% or better after 1965. The increase in production of smallholder rubber was somewhat higher at 4% per annum, or from 240 thousand to 347 thousand tonis, and may be attributed to a lower initial level of productivity combined with the gradually increasing successes of the smallholder rubber replanting T:-ograin utilizing high-yielding stock nrcraced by the Rubber Reseaech Tnstitute. Furthermore, the rise in production was also linked to the increase in acreage, part of which represents transfer of planted acreage from estates to smallholdings. 14. The gradual downward trend in rubber prices during recent years has occurred not so much as a result of slackening demand - world consumption of rubber has been rising steadily - but due to a rapid increase in synthetic rubber prodLuction. Some synthetics, and natural rubber, have a high elas- ticity of substitution in the long run although in the short run - i.e.., one or two years - they are not easily interchangeable due to different processing techniques in preparing the end product. However, should persistent price dif- ference arise between synthetic and natural rubber. production technique!s can be readily converted and, except for a portion of the market where the two products are not substitutable, consumption will tend to shift toward the lower priced variety. Furthermore, since inputs used in the preparation of synthetics bear no relationship to natural rubber; production costs of t;he two are cocapletely independent. Rapid technological advancements in manu- facturing synthetin o e-1pled with a downward drift in priees for raw material inputs, have enabled producers to reduce prices forcing natural. rubber prices to follow suit. Thus, except for exceptional years like 1955 and 1959-60) when factors other than synthetic rubber production have tempo- rarily strengthened natural rubber prices, the over-ll price pattern WiS in a definite downward direction. Output, however, does not appear to have been adversely affrected by the steady decline in rubber prlces ether on estate_ or smallho:Ldings in spite of rising labor costs. This may be attributecL to the inflexhb4ility of productlion adjustment in the short runr on the one had and, in the case of estates, to the still considerable margins between unit rubber prices aud direct costs. 5-'~. 3-rn terms of acreage coconut is Malaysia's third largest crop after rubber and rice covering some 520,000 acreas or roughly 8% of total culti- vated area in Malaya. Additional holdings exist in the Borneo States but these are on a much smaller scale. The industry is mostly geared toward the production of copra for exports and domestic extraction of oil but 'here is also an active market in fresh nuts for local consumption. Production is concentrated largely in the hands of smallholders on small sized lots whicb are inadequate for subsistence without an additional crop. Estates account for about 15% of output but show little inclination to expand finding a more profitable outlet in palm oil. Although income per acre from coconut gI-OwirF is below that of palm oil, unlike estates, smallholders are unable to switIc to the more lucrative crop mostly because of the need to support processing factories, possible only under large-scale schemes. With estates lacking interest in undertaking the necessary research and the Government placing priority on rubber and rice, for a while little attention was given to the indulstry. Adverse copra prices, lack of Government support and insufficient income have caused many farmers to seek other sources of income, and althougbl total acreage was not reduced, production trends show a decline. This retro- gression in part may be attributed to a lack of progressiveness as is shown by the poor drainage conditions, over-aged trees and poor farming practices. 0- Furthermore,, no distinct improvements in varieties have been developed through research, a condition true not only in Malaysia but in other coun- tries as well. Thus, when the Government finally initiated a coconut re- habilitatiori scheme for Malaya in 1963 no improved varietal material was available and the program was limited to drainage operations and tree replanting. The introduction of the scheme is not likely, however, to affect output before the end of the decade and until then a further reduc- tion in output can be expected. The smallholder planting program, begun in Sarawak in ].959, has not had sufficient time to reverse the downward trend in output from over-age trees. The decline in coconut products' output for Malaysia in 1959-65 thus reflects apathy on the part of smallholders brought about by the low income secured from coconut growing which in turn led tc a deterioration in production. If the industry is to be revitalized the re- habilitation program will have to be continued for some time. In additicn it would alzo require the introduction of new varieties and better extension services to improve outdated farming practices. 16. Although palm oil growing existed in Malaya since the early part of the century, the industry did not really come into its own until the 1950's when it became obvious that competition from synthetic rubber was likely to cause further deteriorstion- in nttiiral ruibber nriees. Seeking to minimize the effects of declining rubber prices, numerous estates have re- sorted to palm oil growing as an alternative crop n An intensive research program undertaken by some estates into the growing of palm oil on a large scale soon bore fruits with exceptnionally high yields resulting from plant breeding and innovations in the extraction of oil. Improvements in yield proved so high as to render palm oil profiable even on 0,.ed,m qua].ity soil previously considered unsuitable, thereby partially solving the acute problem of accessible land faced by many estates. Total acreage under palm oil cul- tivation doubled over the past ten years but it still accounts for only 3.5; of the cultivated area in Nalaya. Except for a few FTLA palm oil scheles covering some 15,000 acres at the end of 1965, the entire area of 220,000 acres is accounted for by estates. The same trend prevails in Sabah where palm oil has been recently introduced on a small scale. Failure to expand palm oil as a smalliolduers ! crop 'Ls dUue bttechnical requirements in proces- sing which makes it possible only under large-scale schemes. To date, the few FLDA pilot schemes have been the sole comprehensive attempt outside the estates sector to introduce palm oil as an alternative to rubber and while they are insignificant at present, they can be expected to expand rapidly in the future. Although the rapid increase in acreage has enabled output to ex- pand Dy 9% annually over the past ten years, palm oil exports account for only 5% of total exports and are a long way from providing a substitute to rubber. 17. Pineapple production for canning has experienced a rate of increase of 8% per annum.as the industry recovered from the doldrums of the 1950's and enjoyed a favorable international market. The processing of pineapple, how- ever, continues to operate inefficiently. This is also true of the new governemnt plant recently opened to the process smallholders production. Wasteage of juice and other by-products restricts returns to the producers and hampers the competitive position of the industry abroad. Technical pro- duction problems impede a still more favorable rate of growth. *e 9 - 18. Timber in various forms, End other forest products constitute the third largest export commodity of Malaysia totalling M$297 million in 196b4 thus making Malaysia one of the world's major suppliers of tropical timber. Roughly 89,000 square miles, or 70% of Malaysia's total area of approximately 126,000 square miles, constitutes forest land with Sarawak and Malaya ac- counting for 40% and 38% respectively of the total. More than half of the forest area is designated permanent forest reserves subject to strict ex- ploitation and regeneration regulations with additional timber extraction taking place outside these reserves especially where land is being cleared for agricultural use. Production of forest products during 1961-65 has registered a rapid expansion at 11.8% annually, highest among the major crops groups, as a result of the construction boom in Malaya and growth in export deman(d in the Borneo States centered on the Jananese market. The States of tla'Laya, accounting for 43% of round timber production, had the highest rate 9f incrreae at 13.3% annually as compared with 10.8% for Sarawak and 9.9% for Sabah. Production of sawn timber, centered mostly in Malaya., develoned3 son2ewhat slower at 10.8% annually with output rising a l2% in Malaya, 8.3% in Sarawak and a slight decline being registered in Sabah. Domestic consumption. accounted for about half of production and was con- sumed, and supplied, mainly in Malaya while the Borneo States exported over 80% of their output. Both Malaya and Sarawwak restrict the export of logs in order to promote further processing. Government Activities 1961-65 19. During the period there was a noticeable tendency to expand the scope of governmenrt activi-ty. Annual recurrent expenditure ol federal and state governmrents for agriculture rose from approximately M$62 million in 1960 to M$100 million in 1965. This increase of about 10% per annum iS largely the result of expansion by the Federal Government of recurrent ex- penditure from H$30 to M$51 million during the five-year period. Recurrent expenditure by the Borneo State Governments doubled between 1960 and 1965 but as their initial level was rather small, this had little effect on over- all spending; expenditure by the Malaiyan states government on the other hand was stagnant.. The grow-th in staff positions by comparison show an over-aii increase of 8% per annum or 52% in the five years. A considerable number of new positions were not filled due to a lack of suitably qualified applicants. 20. In terms of capital expenditure the development programs were heavily weighLted in three categories: rubber replanting, settlement schemes and drainage and irrigation. Total investment for these schemes accounted for 82% of total expenditure of M$557 million in 1961-65 with a major portion, M$361 million, being undertaken by the Federal Government. The priority given to these three categories does not mean, however, that other aspects of agri- culture, such as research, extension and other crop replanting, were not given attention but in relative terms they were not emphasized. Research centers and agricultural stations were established both for crops and veterinary services. Facilities for extension services were modestly expanded, though by no means at a sufficient rate to meet the growing demand, and improve- ments were made in agricultural training, particularly for departmental - 10 - employees, btut also for adult education. Land surveys, both in general and in particular areas, were undertaken as long-term measures. Support for fisheries were initiated through port facilities improvement and specific develoyment schemes. In f.orestry the main Federal Government effort was cn research but in a modest way. Forestry programs are state subjects and here some emphasis was given to timber production. 21. Following the expansion of synthetic rubber production after World War II it became apparent that future prospects for natural rubber would be seriously handicapped by advancements in synthetic production. In an effort to alleviate the effect of adverse rubber trends uDon the econcmy, the Govern- ment considered various alternatives to rubber only to conclude that it would be impossible to replace rubber bv other crons in the foreseeable future. Instead it was decided to strengthen the competitive position of natural rubber through eoRt reducing methods, mainlv the repnlanting of low-yielding trees with new high-yielding varieties. The adoption of a rubber replanting proeram entailed Government subsidies for replanting and, in the case of smallholders., the extension of technical assistance and supervision. Alloca- tion for the progr-m in Malaya ounted to M$153 million, or over two-thfirds of total development expenditure in agriculture during 1956-60 but was subse- quently reud in-- 196=6 toKiKr M$13 mE11ons or -F% of totl publ-ic invonq+.enfrt *j _**~4J. - - -...tJ .LlU VW.~JJ t'. IIA.W . AL. J..L.**, dJ LJ~ --i. -%fl.J-- 4- --t.J. - - in agriculture. Adoption of the program with its large capital requiremerts spelled a con;t-inua-ton of ruib-b- Adomlnan-ce of 4the econo- as li4tt+'e ca-itaLl and manpower were available to undertake comprehensive diversification schemes, an ELternative that cannoW u yet bue said uo exist T he real benefis of the progrEam are expected to be realized after 1965 when output is expected to increase by 6.5O annually thereb-y mantaining the economic viability of natural rubber production despite the anticipated price decline. Total small- hldt-er acreage, replanted and new planted, under the progrtam uring 1961- was about 761,000 acres; the corresponding figure for estates was lower at; 350,000 acres. The number of acres replanted by smailholders has successi-vely increased since the initiation of the replanting program in all but two years with the 1965i figure estimated at 140,000 acres. Despite these advances EL large portion of total smallholder rubber acreage, estimated for the States of Malaya at 2.2 million acres, is still in need of further attention and should keep the program in operation for some considerable time to come. In the case of the 2,147 estates, including Sabah, about 1,420 thousand acres or 75% out of a total acreage of 1.9 million acres was high-yielding material at end 1964; 36% of the high-yielding material was still immature. The pro- portion of high-yielding material on European estates was 82.4% and on Asian estates 64%; by comparison the proportion for smallholders was 50%. 22. Estimated expenditure for settlement schemes, 1961-65, totals M$130 million in Malaya compared with M$17 million in 1956-60. This includes the FLDA program!, minor rural development schemes and group settlement. Although the investment level attained far exceeded the previous five years' level it fell short oi' the original target of M$191 million and the total of new land opened did not meet expectations, mainly because of limitations on FLDA's capacity. The 1961-65 FLDA original target involved the initiation of 12 new schemes per annum each phased over a four-year period. This called - 11 - for opening up 48,000 acres each year in the 48 schemes in operation at any one time. However, this target was not achieved, and an average of 26,000 acres a year were in fact opened up. The annual acreage has shown a gradual upward trend, however, and will probably reach 31,000 acres in 1965. Prob- lems encountered by FLDA include a scarcity of suitable land (except in Pahang, Johore and Trengganu), state parochlialism in not permitting settlers from other states on schemes established within their respective states, a scarcity of Jungle clearing contractors at prices FLDA was willing to pay, delays in village development, infra-structure placement and logging of com- mercial timber by other agencies and a shortage of qualified and experienced staff. This last problem merits further exDlanation in view of its general implications for the whole of Malaysia's development during 1966-70. For the 61 schemes currently in existence FLDA requires a full complement of 122 higher field staff. In fact they have been able to obtain only half this number and are thus seriouislv understaffPd. This can only have the effect of performance at a level below that considered satisfactory by FLDA unless improvements are quickly made. 23. Ot.'her settlement schemes in Malaya include controlled alienation which permits the purchase of land up to 10 acres by individuals. This s,herme. whi eh is administer-d by tbe States, resulted n te dtribu+ion of 14,950 acres in 1961-63. A second "fringe alienation" program opened up new land near existing, villages 4- p- -r,t e4- ,- in -4- to enlarge their land holdings but. was unsuccessful in terms of the use to which the land was pi-t.-J Drng .0.-I - a_,- II- An _________n: u.n +r: -.|>._ ''''' w .SV s -srJb u. eUd VUa - 1_U ,UUJUJ t)wUI-e wee bU Uħb L .' U JU LV U. VUI ħLu) uk J_1 schemes, ineLuding nine group settlement schemes and new block plantILig urlder the Rubber Eund Board, resulted in the settlement of 12,191 acres. 1A1so ar unknown amount of land has been developed illegally by squatters. In Sarawak land settlement has been limited to a program of assistance to native farmi,ers to further their movement from areas of land shortage to areas where land was more plentiful. Since 1964, however, new State settlement scheres comparablo to the FLDA schemes have been established. In Sabah a number of minor settle- ment schemes were initiated for some 20,000 families of which, -by 1964, some 3,800 had been settled. 24. It is estimated that around 250,000 acres of land were prepared for settlement during 1961-65 or about 50,000 acres a year. This represenits about 0.6% of the 8.5 million acres at present under cultivation in Malaysia. excluding shifting cultivation. As the rural population is expanding at a rate of at least 3% per annum and as the absorptive capacity of the non- agricultural sector is small, absolutely and proportionately to the popula- tion in the agricultural sector, it is clear that the per capita availability of developed land is shrinking. 25. Drainage and irrigation schemes have been pushed vigorously in 1961-65 as a means of developing smallholder output, particularly in padi areas (irrigeLtion) and for the coconut and rubber farmers (drainage). In the case of Mlalaya, irrigation was improved on 204,000 acres under padi and 1/ During the new Plan period a new agency - the Federai Land ConsoliduatLo and Reha'bilitation Authority - will have as one of its functions the respUoib|lity to improve such land use. 25,000 new acres were added to the total irrigated. The double cropping potential was increased from 50,000 to 153,000 acres. Total lteffectivel' acreage (i.e., the absolute amount available for cropping) counting the acreage twice on land capable of being doubly cropped), increased 11.4% during the period and the proportion of irrigated paddy land increased from 40% of the total to 64%. In addition, selected padi seed distribution increased from 6,400 gross tons in 1961 to 80,853 in 1964 and fertilizer distributed increased from 4,209 tons in 1961 to 16,565 in 1964. As is indicated above, however, the response to date has been disappointing. In the case of coconut land the acreage receiving drainage increased from 1615 to 270 thousand and for rubber land, 176 to 263 thousand. These acreages are a small proportion of total smallholders' acreage under these crops, and their ei'fect on increased production is limited. Besides, the effec- tiveness of drainage is greatly limited in the absence of communal drainage systems as contrasted with individual smallholder programs. 26. The over-all effectiveness of Government participation in agricul- ture can be measured in terms of changes in output level and structure, pro- ductivity. income and emnlovment. A concise evaluation of performance in these spheres is complicated, however, by the fact that most of the invest- ment undertaken has been of a long run nature and its effect will not be realized until the second half of the 1960's. Nevertheless, some tentative conclusions rean be drawn if we assume that developnnmnt in the agricultural sector during the next five years will largely reflect programs undertaken in 1961-65. 27. I n te s of output t m to production has no doubt been the rubber replanting scheme. Rubber output is expected to ; n1, _ _ -AOf A1 _ _ 4 ^1- e nex 14- -i a .._:_ _ _ _ ., : .A - -_1 O- ..4;+k h~ O . ; rn *--v - * -LAc;.L.LJ UJ V . J/0 UULL iL1A LJ, I1 u L _ V J GO- . z' ' W e W J * 1960-65, and on the basis of rubber price forecast it appears that the scheme has been successful in keeping r-ubber planng economically viable despite the anticipated price decline. Somewhat less successful results materialized. in padl outpiut -where the introduction oL new seeds, e2pansbion of drainage and irrigation facilities, subsidies for fertilizers and a step up in extension WV'1KL Was eAx.)ct eu toU yielU soUi-ae i medlUbtu LZUX1.UU . LJeJf9- 3.LUC U.L1. ULI1 V1VX output has been rising slowly and the average yields per acre rose by only 5% between 1960 vud 1965. The introduction o do-uble-cropping proceeded slowly and although there was a fivefold increase, padi acreage under double- cropping still accounts ror less than 7% of the total. The iong run aspects of the program are more encouraging. Output in 1966-70 is expected to in- crease at the rate of 4.8% per annua and would expand even faster thereafter when the Muda Project, for which much of the ground work has been undertaken during the past five years, comes into operation toward the end of the decad-. Introduction of the coconut rehabilitation scheme occurred rather late in the period and lhas not brought about a reversal in the downward output trend, but judging by its anticipated impact upon output by 1970, it appears to have succeeded in revitalizing a dilapidated industry. Much of the achievement in other sectors, notably palm oil, timber, livestock and fishery, has been the result of private sector initiative although the limited support extended by the Government has been instrumental in the growth of the latter two indus- tries. The over-all expansion in agriculture production of 4.8% annually in - 13 - 1961-65 has occurred largely in the export sector with production for domes- tic consumption rising more slowly at 3.8%. Unlike export crops which re- quire a long gestation period, expansion of production for the home market can be undertaken in a relatively shorter period provided the necessary research is available where new crops or industries are involved. In view of the rise of over 5% annually in imports of foodstuff it appears that despite a stated desire to introduce import substitution, the economy has failed to expand domestic production at a rate adequate to meet the increase in population and consumption levels. 28. Assuming that suitable, or more profitable, crops than the major present ones exist, their introduction can be geared either toward the ex- port market. e.g., export diversification, or for local consumption pri- marily in the form of import substitution. Given the small size of Malaysia's market, the climatin ccnditions and orientation of the aaricultural sector toward the export market, it is unlikely that import substitution schemes, even if earried to their extreme, can bring about a change in nroduction patterns. If a change is to take place, it could only occur through export aiversifiea;iv-n. There are, however, serious limitations toachange of this nature as is discussed in greater detail below. Aside from the basic limiatios wheh hlp to explair. the absence of a structuwral change in thfe economy, there was also the earlier decision, amplified through the rubber rehabilitation program, to adhLere -to rubber prdcinas well as concentra- tion on padi output both of which left little scope, either in terms of manpower or resources, for any schemes aimed at changing the structure of output. Where there was scope for diversification, as in the case of FLDA schemes, the opportunity was not seized and laud development was almost ex- clusively geared toward rubber production. Although this was later rectified and in futw e schemes FLDA is expected to empnasize palm oil it is unik'ely that this, even in conjunction with the more active private sector, will bring about a significant structural change in coming years. 29. Various programs were introduced and expanded during the period in an effort; to improve productivity through extension services, crop sub- sidies, drainage and irrigation and other schemes. If we adopt as a crude measure of productivity the ratio between the change in the number of workers engeaged in agriculture, and the volume of production, it appears that productivity rose by some 2.8% annually during 1961-65. By comparison pro- ductivity gains in the coming five years could possibly increase to 3.2%. Given the existing low level of smallholders' productivity and the consider- able exertion of effort and capital to improve it, the results are somewhat disappointing. Partially the failure to raise productivity more rapidly can be attributed to the inadequacy of extension services, and until these are expanded one cannot expect to find rapid improvements outside the estate sector. 30. One of the main targets of the development effort in 1961-65 was to bring about a change in income distribution, mainly by raising income in the non-estate rural sector. In the absence of detailed income data, onl:, tentative conclusions can be reached with respect to income distribution. On the basis of value added and population growth it appears that income in- crements of the rural population engaged in agriculture were below the coun- try's average per capita growth of 2.7% per annum despite a rapid step up in government recurrent and capital- expenditure in agriculture. The faliure was largely due to a slow rise in production and productivity, a high population growth rate, shortage of land to expand uneconomically-sized lots and thle inadequacy of changes in the institutional framework which would ensure the farmer of a larger share of his produce. 31. Expansion of employment is directly related to the rate at which new land is being opened up. With land development proceeding at a slow pace, exploayment opportunities in past years lagged behind the growth of the labor force. Total employment in Malaya increased annually by 3.0% during 1960-65 mostly as a result of rapid expansion outside the agriculture sector where annual growth rate was 1.7%. Since the rate of unemployment was main- tained at 6% it appears that the economy was able to maintain its own during the period. However, the land hunger which developed in various parts of Malaya would indicate that this was achieved at the expense of increasing, underemployment. Diversification 32. During the past five years there has been a great deal of dis- cussion devoted to diversification in view of the preponderance of rubber in the rural economy of Malaysia and the rather sober outlook for this crop., The subject may be discussed in terms of (a) import substitution and dom-* estic supply and. (b) export substitution. 33. The nossibilities for import substitution and domestic supply are largely included in the following commodities and commodity groups having regard to the e1imatic limitations of Malaysia: rice, sugar, legumes, citrus fruits, livestock products (meat, poultry, eggs), animal feeding stuffs and fish, pius some minor imports. Rice production has expanded with the effort made in irrigation, improved seed and fertilizers. Little has been done in snugar, apart from the cons-t.r1it-Aon of' rfineries to qwit.rh imports from refined to raws. Legumes and citrus fruit production probably increased at a rate srmewhat similar to population grow+h There has been progress in the use of local feedingstuffs supplies, such as rice bran, copra cake, and fish htr-' oLucts. The chief successes are to be found 4i 14i-st-ck -prodcts and fish. Substantial increases in pork production, poultry and eggs has reduced the- need to im-port -- -hs prdut - which were-1 preiosl bogh -i-lir ~ ~Jfl%. ~ JSJli ~UII~0~p4tJ W. P M 10C Wħt'.U SI _~ħjJ.u ght5 ---L~S.-J from Singapcore. In the case of fish the significant increase in the fresh fish catch has not only .e duced imp4 Morts, ut-v also resulted in a good export market for Malayan fish in Singapore during the past decade. Imports of esoteric fi14sb ar.dI prepared products on the oth-er handi- have remained III-I __nd '~~'.U~- .LL. I .L.~ I1u. J) jJ. U UU# t. ii . Ul Ldi1 iW.IiL I1ACVC .L #Z1UC.1UU.ħI I1L61,4 QIIl4 are likely to continue to be imported. A significant proportion of the trade A vIt . _ - . t _-- - 1____ ___ ___ __X _ ____1 _ _ auJut Iiitl 1'L1 VħVCu in "VC:UUti. PrUuUCL'L tuu lrtill I.bli ucCurr(-u auu wAe expense of Singapore. Thus, although the rise in livestock and fresh fish pro-u etion can presently be characterized as import substitution by virtue of separation, it was not originally envisaged so and represented merely an internal shift in the source of supply. 34. T'hese production adjustments were essentially worked out within the smallholder sector, as estates are oriented to the export rather than the domesti.c market. They also stermed largely from the private rather than the puiblic sector, if padi is excluded. Government contributions are in evidence, however, such as those of the Veterinary Division as regards disease control and the Fisheries Division relative to facilities for fishermen. The striking feature in the public sector, however, is a nega- tive one in that little was accomplished in the way of research and exten- sion in the furtherance of diversification. New padi varieties are a step in the- right direction. By and large, however, from the point of view of research, the subject of diversification was hardly touched in terms of applicable results. 35. T'he question of export substitution involves the development of new crops as an alternative to rubber. Here the nossibilities cover the whole range of tropical export crops. Amongst these possibilities the only one which has been adopted in any -,junifiteant way is oil nalm. Here . ,during the past five years, the impact has been slight in proportion to the area under rurfhbv, but shou ld begin to grow rapidly towards the end of the decade. Again, the initiative has been assumed by the private 'e,t.r, for it has been the estates which h,avre not only developed the oi:l -balm plantations but have also undertaken the research. Even in the realm of lEI:scd settlement shemes t LL has so far devoted most of its efforts to rubber rather than oil palm. In Sarawak little has been done, due to the relatively small area of land available w1hich is suitable for oil palm, but a 10,000 acre scheme may be initiated by the CDC. In Sabah an oil parm research station hsL recently bee etabClished nU preparatior. is being made for two pilot smallholder schemes. Several estates have already been planated heavily with oil palim where the-y had land reserves. Pruspecbs ior 1966-i970 36. Due to the predominant influence of tree crop culture in Malaysian Agriculture, with long gestation periods, and the long-term nature of many government development programs, positive measures to increase and diversij' the rural sector in the next five years will have relatively little effect on the level of output to 1970. Accordingly it is possible, by an extra- polation and modification of trends in the light of present knowledge, to obtain a fair idea of the prospects of production by 1970. The relevant data in terms of production index numbers are as follows for Malaysia as a whole: - 16 - Table 2 Production Indices and Annuial Rates of Growth l/ Annual Rates of Growth Weights Indices (1959=100) 1964 over 1970 over (%o) 1964 1965 1970 1959 1965 Rubber 58.5 114 121 164 2.7 6.5 Forest Products 8.2 191 196 229 13.8 3.2 Rice 7.4 135 140 177 6.2 4.8 Livestock Products 7.0 166 175 229 10.7 5.5 Coconut Products 4.7 101 102 109 0.2 1.3 Fish 4.2 157 167 224 9.4 6.o Palm Oil and Kernels 1.9 168 188 358 10.9 13.7 Other Agriculture 10.1 123 128 148 4.2 2.9 Combined Index 100.0 128 135 177 5.1 5.6 Export Com- modities 69.8 125 133 177 4.6 5.9 Domestic Comraodi- ties 30.2 136 1142 177 6.3 4.5 1/ Estimated output for all commodities. Coverage is slightly broader thanW TabLe.L lpage 4) but note q-alif.ications Jn par a.l 8 ab 37. The combined index indicates a somewhat greater rate of growth for 1966-70 at 5.60 as compared with 5.1% during the past five years. This is attributable largely to rubber which carries a weight of almost 60% in the index. The rate of rubber production is expected to rise sharply to 6.5% due, particularly, to the expansion in smallholder replantings in Malaya, aided by the fruition of programs in the Borneo States, particularly Sabah. In addition palm oil and kernels production is expected to increase at a rate of 13.7$. 38. On the other hand, the rate of expansion in forest products, livestock products and fresh fish, which increased sharply in the past five years. is exipected to decline. This is Darticularly true for forest products as the peak of expansion in the issuance of cutting licenses has now passed. In the case of livestock products and fish, import substitution has been largely completed and future output will conform more closely to the growth in the domes-tic market. Moreover. in the case of fish the rate of growth in the new technical methods for offshore fishing should slow down but ex-- nansion will continumi , '7 - 1 - 39. Riice production is not expected to increase at a rate greater than 5%, unless the adoption of double cropping and improved practices increases. The effect of major irrigation schemes, such as the Muda Project, will not be completely felt until after 1970. in the case of other agrl-. cultural products output will be dominated by domestic demand for vegetables and fruits. The upward influence of increases in output of some minor CrIops, such as pepper, sago flour, abaca, and beverages is not expected to be re- peated. Coconut output will improve but not radically. 40. Again, because of the influence of rubber and palm oil and kernels the rate of increase of export commodities may rise to 5.9% but, for reasons given above for rice, livestock products, fish and fruits and vegetables the rate for domestic crops may be less at about 4.5%. 41. Although much of the investment in the next five years will have little bearing upon output during the period, it will affect prospects in 1971-75. The opening of new land and the introduction of drainage and irri- gation schemes should begin to bear fruit during that period with the highest growth rate likelv to occur in palm oil, padi and coconut. Rubber output on the other hand will probably fall below the 1966-70 rate to 5% annually largely because the major imnact of the past replanting surge on estates will occur during the next five years. Considerable increase in over-all productivity en be expected duwring the perind as additional cadres trained during the 1atter part of the 1960's begin to enter the field in growing nmimbers- 42. The developments which occrred in 1961=65 include several ixm- portant contributions to improvement in the rural economy of Malaysia. The rui-bber rehabilit+ation pro, b which has been .ir.-all, completed on estates progressed favorably and should enable producers to continue operations on a profitable basis despite adverse price movements. A counterpart program for coconut producers initiated during the period is expected to revitalize the industr-j i the .future. Ivestmenb tain irainage nLd irrigation and' new varieties have contributed to future potentials of padi production as well as other crops Improvement in the I vestock products U'ar i fisheries industries have made significant contributions to the capacity to produce much needed protein supplies while also reducing import requirements. Prog- ress in land development programs and population relocation has been promis- lng. Finally the growth in oil palm planting, improvement in pineapple exports and above all the expansion of a vibrant timber industry lhave helped uo Uiversify exports in a small but significant way. '.0 - iu - III. The Tasks Facing the FJrst Melaxsia Plan 43. Favorable though these developments may have been, the tasks facing Malaysian rural development remain formidable. Much remains to be done both in terms of immediate expansion in the rural economy, both extensive and intensive, and the creation of a solid foundation for con- tinued long-term growth. During the First Malaysian Plan period, i966-70, therefore, effort must be continued both in the public and private sectors. The important tasks which the public sector must undertake, if the favor- able progress made in the past five years is to continue, may be clearly and easily stated. What is more difficult is the determination and imple- mentation of the most appropriate means. Land Development Schemes 44. According to the First Malaysia Plan priority will be given in coming vears to land develonment in order to enable the growing population to find ample employment opportunities; to ensure that export volume in- creases suffieiently at least to offset the decline in value thus providi.ng the country with the necessary foreign exchange and finally, to bring about an expansion of produc+ion for domestic conswmption thereby redlcing import requirements. In discussing this program attention will be directed to settlement schemes publicly sponsored and supervised and the question of private lan. development will be considered separately. Also, the problems of Ma-1laya's public land development differ somewhat from those of' the Borne States. In Malaya the public land settlement problem, aside from over-all objectives listed above, is seern in the context of a growing rural popula- tion which, at present, cannot be absorbed into the non-agricultuLral sector. A press-ure of population on existing land is thus in evidence which cannct suitably be alleviated, under present circumstances, by more intensive methods of land use. 45. During the next five years the Plan conceives the over-all task for Malaya, public and private, in terms of the settlement of 65,000 fami- lies. To achieve this end it is estimated that a total of 450,000 acres needs to be developed through government major and minor settlement schemes and private estates and smallholder expansion. There is adequate unalienateli state land available in Malaya for this purpose although there is some ques- tion as to its suitability in terms of location and availability in sizeable blocks. There are also the policy problems of state alienation and of forest reserve boundary realignment and reallocation which need prior solution. 46. The chief government organization for Malaya settlement schemes is The Federal Land Development Authority (FLDA). According to a preliminary Plan proposal FLDA schemes were to open 250,000 acres and settle some 35,000 families thus fulfilling 55% of the Plan target. This would have represented a rate of sCme 50,000 acres per annum thus nearly doubling the 1961-65 rate. In view of the financial situation and after further reconsiderations of - 19 - FLDA's capacity, the Plan target set for FLDA has been reduced to a more realistic i4i,000 acres thus representing a continuation of operations at the previous five years' level. The detail program is as follows: Tab.le 3 Federal Land Development Authority Breakdown of Estimated Expenditure and Acreage, 1/ 1961-65 and 1966-70 Expenditure (M$ million) Acreage Total New Schemes Existing Schemes Expenditure 1961-65 145,000o_ 105.9 1966 32.000 _ 58.3 58.3 1967 21,000 13.7 47.1 60.8 1968 29;000 Pr 5 3;.-3 60.8 1969 29,000 33.2 29.5 62.7 1970 30,000 52=1 10o0 62.1 1966-70 TntRl 141,000 125.5 179.2 304.7 1/ Acreage is measured at the time of settlement. Given the difficulties encountered by FLDA in the past, described in para- graph 22, the modest target set in the Plan would appear to correspond with FLDA's present capacity. However, in view of the urgent need for new land development, FLDA should be asked to achieve a target capacity of 50,000 acres a year as soon as pos,sible. This me,ao that the Authority will have to be given the necessa--y s-u oort l zc rmerv;9 including ex- traordinary measures, to solve its pre;L-nt p---:.e:-- cf - t:'2'fi (inclulding secondment, if necessary), cadet tra&i g, err;^:v of t.b-:r on land earmarked for development, acquisition of su:,-;;fb . &rli d &r,iAi!wl e clearing, etc. Furthermore, it is recommended that FLDA, be g--n i._ie nece.sary re- sources to plan now for an enlargement of its program to 75,000 acres, by 1971. This means the creation now of training schools for personnel, the acquisition of land well in advance of the clearing neriod and. if necessary, the establishment of its own facilities for jungle clearing. Plans along these lines are being undertaken in the development of the Jengka Triangle. It should be assumed that FLDA programs will continue for the next 20 years and that organizational ndri finannial arrangements made accordingly. This should also include an expansion to Sarawak and Sabah as soon as possible. 47. In Sabah and Sarawak, where land settlement problems differ in their nature from those in Ma-laya, the Plan Calls for the opening of 60,000 and 80,000 new acres, respectively. While it is true that in Sarawak, as is the case iI, MTalaya, one section of the rural population finds difficulty in getting new land, the main emphasis in the Borneo States will be in re- locating a rapidly increasing native population from a system of shiftine; cultivation, in which the development potential is small, to a settled agri- culture based either on tree crops or padi. Hience, the problem is more in- volved than in Malaya in that the majority of settlers will be adapting themselves to an entirely new fora of livelihood. Consequently, much more planning in a socio-economic, as well as in a technical sense, and a much more highly trained administrative and extension staff is needed. In the case of Sabah, where fertile land is abundant, detailed planning as to the best use to which the land can be put will have to await the conclusion of a UN Special. Fund survey. Unfortunately this excellent survey was limited to the remote Labuk Valley area, and excluded many areas near to existing population centers which might be equally suitable for development. It is to be hoped that the abundance of knowledge about the Labuk does not bias; Sabah's development away from other areas. At any rate it would seem that in view of 'Sabah's labor scarcity and the difficulties in obtaining workers from outside the region, emphasis should be on high labor productivity, such as is attainable in oil palm settlement schemes, rather than on labor- intensive pELdi farming where the potential is far more limited. 48. Aside from FLDA schemes the Plan also calls for the opening of 150,000 acres by other government land settlement schemes, including those for controlled alienation, The Plan anlso inc1ups, a nrovision for the establishment of a new agency, the Federal Land Consolidation and Rehabili- tation Authority, to engage in the rehabil tation of remiss sehemes while simultaneously attempting to bring about a redistribution of small sized lots into la-rge units so as to ensure their economic viabilitry. While the target set f'or these land development schemes is modest, their success is seriously challenged boy shortage of extensior workers and other personnel, especially at the state level. In addition to the various land development progr-ams, the Plan also makes provision for the expenditure of M$333 mlllion on drainage and irrigation schemes. Although this program does not neces- sarily -- tribute Ui>rec ly 'to tLie opening up ne%w land (in fact, of th 900,000 acres expected to benefit from the program only 100,000 acres will be uncultivated land rendered cultivable through drainage), it will allow, a more extensive use of available acreage through double-cropping while siu" 4taneously impro-ving output. The program encormpasses a var ity of small scale schemes as well as two large irrigation projects, the Muda and Kemubu projects in Malaya. Irhile some of the smaller schemes deleted fr;;m the program appear to be marginal on first inspection, it may be possible uo restore some if finance and extension services are available, and Jf appropriate analysis confirms their economic as well as technical feasi- bility. 49. Ltmd development by the private sector in Malaysia has been stifled during the past by a restrictive land alientation policy. Given the need to open some 300,000 acres on non-FLDA schemes in the next five years, prospects for fulfilling this target in agriculture, where the private sector plays a predominant role, will depend largely on the degree to which land alienation - 21 - policy can be liberalized. This does not mean that unrestricted land aliena- tion and acquisition needs to be allowed. Rather, it should call for a broader policy on a selective basis with net income per family on FLDA schemes serving as a possible criterion. Alienation would thus be permitted only to enterprises capable of generating income at or above the FLDA level. Pro- vided the necessary reforms are introduced, the Plan target calling for the opening of 150,000 acres outside the estate sector on non-FLDA schemes could possibly be attained. If the expansion does take place it would provide an opportunity to further smallholder initiative by making land available for commercial farming while also expanding the much needed production of grains, legumes, roct crops and other sources of animal feeding stuff. By making suitable land available to producers with initiative and resources for these and other purposes. the Government could facilitate expansion in agricultural production with a minimum effort on its part. 50. The Plan estimates that private estates in Malaya can be expected to onen Un between 150,000 and 200,000 new acres in 1966-70. This would in- dicate an increase of 6 to 8% compared with the slight decline in total estates' acreage during the pas+ five years. WhIle this target might in principle be feasible, the responsibility lies mainly with State Governments which woulAd probably have to depart from past policies if these targets are to be achievred. Given the high productivity attained in rubber production, several Asian estates - have indicated their willingness to expand despate the anticipated price decline. In addition there exist opportunities for expan- sion in palm oil dwhere Turopean estates have t-aken the initiative in the past. With foreigrn estates accounting for nearly two-thirds of total estates' acre- age, the necessary expansion co-uld ocCur provided tlhat external tax arrange- ments for ovrerseas enterprise are satisfactory. Several other measures will have to be introduced Dy the Government in order to faciliitate developmllerit of estates. These include the rapid formation of suitable state land alieneLtion policies on a long-term basis, the designation of available areas wnich are suitable for oil palm and the use of a foreign labor policy which would allow estates to bring in at least the minimum personnel required f-or proper administration and technical management. In the case of Sabah, where it is hoped that a large portion of the new land will be opened up by estates, the general problem of labor scarcity must first be solved before substantial expansion by estates would become possible. Human Resource Development 51. LLke previous plans the present First Malaysia Plan continues to emphasize the development of agriculture, allocating to this end M$1,087 million, or nearly a quarter of public development expenditure in 1966-70. With recurrent expenditure in agriculture also rising sharply, public ser- vices in the rural sector can be expected to expand rapidly in the coming period. This will involve a growing demand for additional trained and ex- perienced personnel in the administrative, research and extension phases of government on top of the already acute shortage of qualified men. In addi- tion to recuirements of the public sector there will also be a growing demand for a scientific and technically trained cadre in the private sector - 22 - as its activities expand. The facilities to train young people to fill currently vacant and potential posts are inadequate and constitute a bottle- neck to any rapid expansion in the agricultural sector. This is the main limiting factor in the development program under the First Malaysia Plan.. 52. An appropriate pipeline of tra'ned human resources needs to be created as an integral part of the Plan, not only to meet requirements of the presently envisaged schemes but also to prepare for the manpower requirements of schemes in future plans, in order to avoid the shortages which restrrict the current Plan. For this purpose a committee on manpower training should be convened. This could appropriately be located in the Faculty of Agriculture under the chairmanship of the Dean of Agriculture.. Its function would be to plan five to ten years ahead the facilities needed to meet the requirements for new posts and replacements at the degree and. the diploma, level in the fields of agriculture, forestry and fisheries. This should. include training for the administrative, scientific and tech-- nical fields. It would not be over-ontimistic to begin immediately to expand the capacity of the Faculty of Agriculture to 50 graduates a year. Meanwhile. a ntepn-up to this number of graduates available by 1970 should be insured by means of overseas scholarslhips. The great bottleneck in the immediate futiire, apart from research 8taff, is gsing to be in technicalLY trained people at the diploma level. Here the facilities of the College of Agrieciltii-re at Serdang are too smnall to meet the demand and the Plan's proposal to expand the college while simultaneously adding a new one shoulld help to alleviate the problem -in the 1970t' 53. ;'R-ansion of the state extension services and the research and development functions of the Division of Agriculture, and other divisions of the Minist-y of Agriculture and Cooperatives is dependent upon the train- ing of more personnel at the junior agricultural assistant and extension agent level. More schools of agriculture are required for this purpose. Of immediate importance, once buildings are planned and the process of con- stsruction is underway, is the recruitment of additional stafif lr Uiħh Faculty, the College of Agriculture and the new schools. This should be given a similar priority to that suggested for FLDA in terms of secondmeiat. Here overseas recruitment is a limited possibility. 54. A preliminary appraisal of the degree to which new personnel may be trained within the Plan period, provided that all proposals in the Plan concerning education are implemented expeditiously, is presented in Table 4 below: Table 4 Possible Training Capacity Iun, .,I LL_ tive 19^J66 1967 1968 1969 1970 Total Division I (degree) U. of m1alaya 25 25 25 50 50 175 Overseas Hire 10 25 25 25 25 110 Total 35 50 50 _5 75 285 Division II (diploma) 35 35 35 35 210 350 Division III (ag. schools)l/ 45 45 600 960 1,320 2,970 Grand Total 115 130 685 1,070 1,605 3,605 Cumulative Total 115 245 930 2,000 3,605 - 1/ Assmes acontinuation of the 17=mon+h course rather than an extension to 3 years. Estimates for Division IV personnel are omitted because their numbers could easily be increased by means of short-course, in-service training and furthermore, the required increase to implement the Plan is concentrated primarily in Divisions I, II and III. The analysis assumes a doubling of graduates frcm the faculty of agriculture at the University of Malaya in 1970 which would require a doubling in enrollment for the four years cowuse in 1966; a sixfold increase at the diploma level, possible only in 1970 de- spite plans to expand the College of Agriculture in Serdang and introduce one, and possibly two new colleges, because physical facilities for expan- sion of the three years course will not be ready in 1966, and finally, expansion of the four existing aariculture schools and the establishment of eight ne!w ones. As was noted above, these figures represent what cur.- rently appears as the maximum level of graduates attainable within the Plan framework and will be achieved by the end of the decade only if expansion starts in Tt should he noted that Table 4 eonnerns the countrv as a whole and since there will also exist a heavy demand for these graduates on the pnrt of the private seetor, the figulres do not neeossarily indicate the number of graduates available for government service. A further note of raq_tion r!n he derived9 from the Tahle. Sinene enansion of nresent-. farilities can only start in 1966, and in many cases there are likely to be further delays, a marked skewness in the flow of graduates will occ-r, with a CoI.n- centration toward the end of the decade on account of the time necessary to Co-rl -+c re,a - i omn al1r ,wnAn, +1hn ln rY-n,ranm jn Divisions I and II. This situation will require careful phasing and close coordiAnaon4- on the part of the various gove-rrment agencies who wou'd be needing the services of these professionals to ensure that demand for addi- tional manpower coi4ncid'es with 4it L 4s avaiJabilit. Iin a ll --yI, 1- hei 4ren1 4i graduates' outflow indicates that the supply of trained personnel will be insufficient, at least during the first three years oLf the Pn period, and will therefore probably constitute a bottleneck to planned development. 55. Other human resource deve'lopment in terms of education through extension ard. cooperative development, is currently limited by the avail- ability of existing staff. Any significant expansion will be difficult during the period of the First Malayrsia Plan, until the prior problem of capacity to train additional staff is solved. Import and Export Substitution 56. The possibilities for import substitution and export diversifi- cation have been discussed previously in the consideration of 1961-65 develorments. It is unlikely that the prospects will change significantly in 1966-70 in view of the lack of applicable research findings. In other words research undertaken in the First Malaysia Plan period is unlikely to materialize in the form of projects and schemes until after 1970. This is particularly true for smallholders' projects in view of the need for expansion in the extension services. However, there are some possibilities that can be undertaken in the near future. The technical situation and experience in oil palm is such that a rapid expansion in plantings could take place both in the public and private sector. It is hoped that, wherever suitable conditions exist, FLDA and state sponsored settlement schemes in Sabah and Sarawak will adhere to their stated intention in the Plan to favor this crop. 57. Further expansion in padi acreage and production is supportable through the continuation of schemes already under way, including drainage and irrigation plus new economically and administratively feasible schemes. The prospects for export bananas look sufficiently attracte f4- or investi;a- tion, and a market is available in Jrapan. However, this is not a smallholder crop due to the pro1lems encounter.ed. 1-s ult..-14y A,,-+-; 14-n 1,n e disease and the overseas marketing of an extremely perishable crop: con- side .rvabloe experience anri-d ca-pitl ls requ4re-A for the successful developmen,t of this crop. The government should be prepared to make available at least 20,000 acres ofstab-le 'lan-A near to ocean -transpor+fciiis oan4x perienced private organization with which a joint venture may be worked out. M-laysia s1hould2 -investigate the development of - sugar 4 inds- forp --se 040.0i'UU ħL 1V J u ULi~ u V L 1 U IħL 0.1 Z1. ~LA6,0. L11II.4.0 L.L J -I54 j1-' 151-S of supplying the domestic market. Feasibility studies are underway in the t112ec`hnicJA.L aS0pħeLdts ouf s--uUgar U ro--ucrL . Io L .lkely LUU productio UIwlll have to be undertaken on a fairly large scale in order to achieve economies in central factory processing. Good sugar landu will probably- be fouuu in existing padi areas. However, given current low world sugar prices and fu-tue price prospects, the production oI sugar, in the last analysis, ma;y not be profitable. 58. Coffee and tea produced in Malaysia are not of high quality but a market exists for such crops. There is scope for some expansion without great technical difficulty in cultivation, in view of the experience gained in such crops. However, in order to produce the better grades, production needs to be coordinated with adequate processing programs. 59. Field crops such as pulses, sweet potatoes and other root crops, maize, so-ya bnsnn and goni nii fort- hin,nA andnimanl onqim-tinn appear to be possibilities as second crops to padi in place of continuous padi culti vaton A steady and reasonablDy priced suppl- on 4nmal feng stuffs wouldi go far towards supplementing the development of the commercial animal ~ _A_4 prouct -nuty t- is - ossible that mixe cropping Jn -ail ~~ ~ ~ ~ ħ~11%.~.L%A Q1y * ., L.. p ~JJ~L .LC M4--A L, -- 'd areas will produce a larger return to the land and the cultivator than will A croppin _ of padi U UUL ħII.tVLLu 1looding c Lnditbons. Feasibi -l-;4 research needs to be undertaken on this question. Although the intentiorl to introduce diversification is implicit throughout the Pian, no single com- prehensive -program to guide and assist such a development is suggested. Thus the above discussion represents a multitude of possibilities, some of -w'hich have received government support and others, which remain outside any coordi- nating sphere. in view of the significance of a diversification programL the Government should set out a detailed scheme to coordinate the various re.- search efforts, both private and public, and provide producers with the necessary guideline regarding domestic demand, export prospects and tech- nical information for various potential products. Production Promotion 60. A number of schemes proposed in the Plan for Malaya, Sarawak and Sabah have been classified, for the purposes of this report, as "production promotion'" schemes. These include those schemes which aim to increase pro- duction imnediately by the supply of agricultural inputs, such as seed and seedlings, fertilizers, mechanization services, etc., usually on a subsidized basis. Many of the irrigation and drainage schemes fall into this category as supplying a means of water control. These schemes may be looked upon in general as counterparts to the rubber replanting programs for other crops, particular:ly as regards other tree crops. There are considerable differences, however, as compared with the rubber schemes: in many cases the technical possibilit;y for significant improvement is lacking due to insufficient re- search, and the supplementary extension service, such as is provided by the RRI and the rubber replanting administration, is either absent or inadequate. Moreover, there is no follow-up to the schemes which would indicate whether or not the expenditure is justified in terms of productive results or the creation of good stands of tree crops. In the absence of such information and supporting services, it is reasonable to suspect that many such schemes may not meet the test of adeauate retuirns in investment- In the First Maila'- sian Plan many such schemes are being continued from previous plans and new ones are inclTlped. Tt. is faredi t-hat. this may rsul-t. in the eynenditure of considerable sums of money without any significant results. Accordingly it is suggested that this whnle n.enanrnr of projects be reviewed nnd that only those projects be supported that can meet the tests of technical feasibility, adequatie extension suppot rtand follw-up appraisal. Institutional Reform in M1alaya 61. The problem of institutional reform is the partial responsibility of the Division of Cooperative Development. The policy supported by this Division to bring about change is the encouragement of the cooperative move*- ment backed by subsidized credit. It thus aims essentially at changes in marketing institutions. In the very long run this may provide a solution, if it can be assumed that the principle of cooperation will ultimately be fully supported by the peasantry and that further government programs will be successful in providing a solution to the other non-marketing problems of the rural peasantry in an increasingly predominant commercial world. 62. To help alleviate institutional shortcomings in the short run, the Plan provides for the establishment of two new agencies and the extension of loans to the rural cooperative movement in Malaya. Rural credit at present is largely in the hands of moneylenders who often are also the sole distri- butors of the farmers' produce and conseauentlv are in a position to charRe high interest rates. In order to remedy the situation the Plan calls for the establishment of a rural bank; Rank Buminutra which will provide farmers with credit at a reasonable rate. A further source of rural credit is to be created through government loans to rural cooperative soeieties who will sup- plement it with their own funds and use the resources to support various "production promotinon" sehemes MArketingr nroh1mn re to he tackled by a new agency, the Federal Agricultural Marketing Authority, whose function wi11 be to coordinate andsupers activties of organizations in the pri- vate and public sectors which handle the farmers' produce. In its super- viso capacity the Authority -is empo-ered t- intervene In f nav of cmnl I farmers and fisheries to ensure that they receive a fair share of their pro- duce. W hilE these measures are a step in the right direction, their impact is likely to be marginal in view of their limited scope. To bring about the desired change, marketing problems would have to be tackled in the long run on a global basis, rather than piecemeal as under the current program. 63. Mlany associated problems, such as land tenure and population con- trol, are being giver, scant attentioon. Yet the problem is a real one and has to be taeckled. No easy formula can be suggested except to say that it has to encompass the whole problem ol traditional agriculture: land utlli- zation and tenure, socio-economic institutions and population control as well as credit and other marketing institutions. This may well begin with a re- view of a few sectors: padi farming, coconut farming, and inshore fishing. Any resulting program would need to be tackled on an area by area basis rather than nation-wide and would be semi-experimental. Meanwhile the pres- ent cooperative program should not be extended, nor should it be considered as a developmental measure. At best it will result in some slight gain to peasant producers in terms of income redistribution with little in the way of net returns to the national economy. - 27 - Planning and Organization 64 T)In previous p1anl i -tjth slifle exceTitions, the proposed schemes of various government agencies have been drawn up from a technical agricultural point of view wi+h little attention given to th1e econnmic imolications. Moreover, they have been adopted to a considerable extent with no over-all fr amework 0 o inte g ra+ ed dd -nrnvided by the Plan to rectify this situation was not seized. It is recommended here that pro- sJiSons f! mde t he ea liest poss'-ibedt for~ s+_ngthonjng t'he Plnnning and Research Division in the Ministry of Agriculture and Cooperatives. The Division sho-uld be made respUnslule for ns . hp msm of' the various government agencies are coordinated and that duplicating schemes and overlapping functions, such as are present in some areas of' the Pln-, are eliminated. This Division could work in close cooperation with EPUF to this end and could at the same time assist the various agencjes enlgage fc l rural development to formulate their programs. It need not, however, c,per- ate programs of its own. 65. In the field of organization there exists a division of respOmnsi- bilities between ministries, as illustrated previously, wtich leads to con- fusion in the planning process and its implementation. This is also true between agencies in the same ministry and concerns some duplication of functions, For instance, the farmers' associations of the Division of Agri- culture are the local organizations through which the Extension Service of that Division operates; on the other hand, the Division of Cooperative Development operates through separately organized cooperative associations. Admittedly these organizations perform scmewhat differentiated functions but they a1so have many in common. Some reorganization of such governDlent services at the local level is necessary to economize on scarce staff and to permit a greater degree of coordination in the development effort at; this level, where the responsibilities of several agencies ccmbine. 66. Another area in which coordinated organization is necessary is in the field of agricultural education, at least at the degree and diploma levels. Provisions made under the Plan for expanding agricultural trainsng facilities at the University of Malaya and the creation and enlargemenl of colleges at the diploma level are likely to entail an increase in the number of administrators and faculty members. To avoid duplication in administi&- tive work and to ensure coordinated curricula, the institutions providing such training functions could well be consolidated under the supervision of the University and particularly the Faculty of Agriculture. Arrangements should also be made for exchange of faculty and cross-registration between the various institutions. Finally, attempts should be made to create a single central administrative *nnit for these institiitionn. This does not mean that future colleges will have to be restricted to a single locality but rather that throniih foornrIinn+.ion in trnining and administrative nrograms the coun1;ry could benefit from economies in staff and instruction as well as 1 ower aeri an s~trati ve coa-sts. - 28 - The Feasibi,Lity of the Plan 67. Considering the imuortance of the rural sector in Malaysia's economy and the important problems involved, a higher level of investmen1; than has occurred in the past is appropriate. The criterion, however, should not merely be the volume of investment at any given time but the degree to which investment can be profitably utilized in the sense of ulti- mately producing an increase in the output of the nation. The volume of effective phiysical investment must be considered in combination with human investment tnd other factors. Given the present situation in Malaysia as regards the volume of effective research findings, the status of the adminis- trative and technical cadres in government in terms of training and exper- ience, the size and present effectiveness of the extension service, the technical ability of the smallholder to benefit from increased investmenlt and the present institutional framework in the rural sector, any sizeable increase in the level of investment above the proposed rate is likely to be inappropriate. 68. I'otal niihz - vlopme-,t expenditure for -gricultural development,5 1966-70, proposed in the Plan is described in Table 5 below. Table 5 MAT AYSIA Public Development Expenditure for Agricultural Development, 1966-70 (M1$ million) Percentage of Total Agric. Expenditure Malaya Sabah Sarawak Malaysia for Malaysia Agriculture': 166.5 11.7 89.3 267.5 24.6 Research 17.0 4.5 1.7 23.2 2.2 Education I/ 10.0 0.8 4.9 15.7 1.14 Extension 10.6 0.4 1.5 12.5 1.2 Rubber rep:Lanting grants 93.9 5.3 61.0 160.2 14.7 Other crop subsidies 35.0 0.7 20.2 55.9 5.1] Animal Husbtndry 28.0 2.1 3.7 33.8 3.1L Fisheries 17.0 1.3 4.O 22.3 2.]. Forestry 10.0 1.1 1.3 12.4 1.2 Drainage and Irrigation 319.2 7.0 6.5 332.7 30.6 Land Development 335.0 27.8 13.1 375.9 34.6 Rural Credit; and Marketing 19.5 4.0 13.5 37.0 3.4 Emergency Contract Personnel Services 5.0 - - 5.0 044 Total 900.2 55.0 131.4 1,086.6 100.0 1/ Allocat-ion for education here does not include provisions for expansion of the present College of Agriculture, the establishment of a second agriculture college in Malaya and the expansion of the Faculty of Agri- culture, University of Malaya. These allocations appear in the Plan as part of the over-all education budget. - 29 - TABLE 6 IMalaysia: Public Development lcpenditure for AFricltlural Development,196l-65 and 1966-79 Development Ixpenditure, 196:L-65 Development E3xnenditure, 1966-70 ____ (es,timate) __…(tanret) ialELya Sabah Sarawak ialaysia __--lala Sabah "arawak 'lala-vsia Agriculture 151.1 13..2 34,,9 199.2 .41.9 :166.5 11.7 89.3 267.5 24.6 Animal Husbandry 11.3 0.,l 0,,g 12.2 2.6 2&.0 2.1 3.7 33.8 3.1 Fisheries 2.5 -- 0,4 2.9 0.6 17.0 1.3 4.0 22.3 2.1 Forestry 6.6 0.,2 1,7 8.5 1.8 10.0 1.1 1.3 12.4 1.2 Drainage and Irrigation 108).5 1.,1 2.5 112.1 23.6 319.2 7.0 6.5 332.7 30.6 Land Development 129). 3 3.,4 6.2 139.4 ;29.3 335.D 27.8 13.1 375.9 34.6 I ral Credit and Marketing 1.3 1.3 0.2 19.5 4.0 13.5 37.0 3.4 Einergency Contract Persormel Services - 5.0 - - 5.0 0.4 TOTAL 411.1 18.-0 46,,5 475.6 100.0 900.2 55.0 131.4 1,086. 6 100.0 … ___ _____ Basically the proposed public expenditure for agricultural development 1mnder the First Malaysian Plan represents a continuation of programs that have been launched in previous years and which, in view of the long range nature of some of Malaysia's inherent problerns in agriculture, are likely to be continued in future plans as well. Like the 1961-65 development ex- penditure, illustrated in Table 6, the -resent Plan continues to emphasize land deve:lopment and drainage and irrigation schemes. Expenditure for agriculture on th other hand represents a smaller percent of the total, largely as a result of a reduction in rubber replanting grants, but ex- penditure for research, education and extension is being emphasized- 69. Although Malaysia has been able in the past to double expenditures from one plan period to the next without giving rise to serious bottlenecks, the present Plan is likely to create severe pressures on various fronts- The different obstacles ranging from trained manpower shortage to institutional shortcomirngs, which have been discussed throughout this report, may welL require a slower expansion than that envisaged by the Plan if success is to be assured. whether a slowdown in expenditures would actually be neces= sary or not, it would appear appropriate to carry out the Plan with certain priorities clearly in mind. The following priorities are suggested as be- ing appropriate at this time: 1. Expansion of agricultural education facilities at the univer- sity, college and agricultural school level. Swift implementation of the program is imperative not just for the present Plan but for future develop- ment in the private sector as well. 2. Development of extension work at a rate commensurate with ability to produce well-trained personnel. Emphasis should be given here to staffingr of existing programs and delay of new ones until the necessary manpower is available. 3. Improvement in research for crops and animal production, fish.- eries, forestry and processing and marketing techniques. This should be! specifically linked to feasibility studies limited to a few crops showing the most promise in terms of diversification. 4. Land alienation for private sector development s'aould receive full support from state governments in view of the great need for aoi,Ltional land to be opened up and FLDA's limited capacity. 5. Expansion of the FLDA program to 50,000 acres a year,Os scon as possible and eventually 75,n00 acres a year, combined with Go' r-:- t support to help the Authority to overcome present bottlenecks. Al-i iAli- tional land settlemlent schemes in Sabah and Sarawak to the ex-ent tihut it can be effectively administered and supervised. 6. Implementation of drainage and irrigation schemes which are econoMically as well as technically feasible. 7 . In view of tihe suitability of rubber aid copra to smallholder production and the substantial effort and ftuids already sunk in the rubber and coconut. replanting program, a continuation of these schemes should have priority over new ones especially in terms of personnel. 8. Further reorganization of the institutional structure, partic- ularly with respect to rural credit and marketing arrangements.