Impressions of a Country: Malaysia

Valuechainsolutions has recently expanded its operating footprint beyond the African continent. Following a recent visit to Malaysia where we did in depth reviews on various value chains, including that of palm oil, we hereby wish to afford readers a glimpse into our impression of Malaysia as a country.

Kuala Lumpur (KL), the capital city is a convenient entry point into Malaysia with daily flight connections from most major global cities. A rapidly transforming city, KL’s developing skyline, infrastructure and hybrid atmosphere are just one product of the more than 5% average economic growth Malaysia has been able to achieve annually on average since 2010 1 . Instrumental to achieving this sustained economic growth has been the openness to trade, which the Malaysian government has prioritized, especially since 2010 with annual trade to GDP ratios averaging over 130% for the better part of the past 10 years (1*).

With a relatively small population of around 33 million people, Malaysia has been forced to look beyond its borders to countries like Singapore and China (2*) for growth opportunities for its domestic production. Once a commodity heavy export portfolio with agricultural commodities and mineral fuels making up the bulk of the portfolio, Malaysia has successfully transformed into a more industrialized economy with electrical appliances and machinery now the country’s largest export by value with mineral fuels now the second largest export by value. Vegetable oils predominantly palm oil, remain Malaysia’s largest agricultural export and 4 th largest export overall accounting for just under 5% of total exports by value in 2018 (3*).

The transition out of the urban centres into the countryside is similar to what one experiences in South Africa except with non-urban infrastructural and economic development on the upward trend compared to the lack of infrastructure investment and maintenance being experienced in similar areas in South Africa. A clear mentality of the Malaysian people we interacted with was to make provision for what is to come or to “invest ahead of the curve”. This could not be more evident than in the large emphasis from a government spend perspective which seems to be going into developing and upgrading logistic key points such as major highways, airports and ports.

Oil palm and rubber plantations are difficult to miss as one travels through the country with a blend of large commercial estates as well as small scale farmers who produce a significant share of production of both crops. A key distinguishing characteristic of Malaysian agriculture is the cultivation on peatland, specifically of oil palms and rubber. Although an environmentally contentious issue, our experience on the ground was that there exists a strong commitment to effectively manage peatland when used for agricultural cultivation especially in areas like Borneo which is often deemed the hub of peat land plantings, especially for oil palms. In general, although not on the radar for African “hungry” expansion strategies of large agribusinesses, Malaysia offers some insightful lessons for African countries just starting their economic growth curves. If business is able to pre-empt economic transformation and work hand in hand with governments in Africa to steer this transformation to the maximum benefit of African populations, sustainable economic growth and development can be made a reality.

Forested area in Sarawak, Borneo

Peatland water level management weir

Small scale aggregator delivering palm fruit

Commercial peatland estate extraction roads

Typical oil palm peatland plantings

Freshly harvested oil palm fruit bunches

 

For any queries contact Michael Day. Visit our LinkedIn page for info and regular updates.

(1*) Source: World Bank (2019).
(2*) Singapore (13.9%) and China (13.9%) combined accounted for just under 28% of Malaysian export value in 2018. Source: ITC Trademap (2019)
(3*) Source: ITC Trademap (2019)

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