Value Chain Solutions has expanded its operating footprint beyond the African continent. Following a visit to Malaysia – where we did in-depth reviews on various value chains, including that of palm oil – we compiled 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. The city is rapidly transforming and its developing skyline infrastructure and hybrid atmosphere are just a few of the outcomes of the more than 5% average economic growth Malaysia has been able to achieve on average annually since 20101
With a relatively small population of around 33 million people, Malaysia has been forced to look beyond its borders to countries such as Singapore and China for growth opportunities for its domestic production. Once in possession of 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 industrialised economy with electrical appliances and machinery now the country’s largest export by value, with mineral fuels the second largest export by value. Vegetable oils, predominantly palm oil, remain Malaysia’s largest agricultural export and 4th largest export overall, accounting for just under 5% of total exports by value in 20183.
The transition from urban centres to the countryside is similar to what is happening in South Africa – except with non-urban infrastructural and economic development on the upward trend compared to the lack of infrastructure investment and maintenance 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, seemingly placed on 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 producing a significant share of the 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 such as Borneo which is often deemed the hub of peatland plantings, especially for oil palms. In general, although not on the radar of large agribusinesses with Africa-eager expansion strategies, Malaysia offers some insightful lessons for African countries that are just starting their economic growth curves.
If businesses are able to preempt 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.
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)