Malaysiais an afresh commercialized economy and aims to become an established nation by2020. The era of 1984-91 perceived an essential transformation and expansion ordevelopment in the structure of the Malaysian economy. So, its main contributedby the service sector followed by manufacturing, mining and agriculturalsector. Although the small in contribution, agriculture is still a vital sectoras it provisions food and creates employments for rural people. Apart of that,this paper will discuss the issues and challenges of the national agriculturesector. Agriculture is the most virtue sector in Malaysia. Some of the reasonsfor the decline and incline of the agricultural sector were the small anduneconomic land holdings and ageing farmers, ASEAN Free Trade Zone (AFTA) onlocal agriculture producers, Domestic Agricultural Policies such as governmentsubsidies and tax, low productivity and the competition of land resources.

Thestrengthening in agriculture comes the necessity for affordable labour.Malaysia faces acute labour shortage foremost to employment of and to certainextent dependent on foreign workers, another indirect way of loss of foreignexchange. The low labour productivity of only 60% compared to the manufacturingsector is another weakness of the agricultural sector. This is very real amongsmallholders’ sector which expert low labour productivity and uneconomic farmsizes. Because of this deficiency of domestic production besides unpredictablesupply caused small and medium scale agro-based firms operating below capacity,there is a need to toughen inter- and intra-sectorial linkages with the care ofdownstream industries. If this situation of the economic scale and low labourproductivity of small- and medium-size farms can be amended, increased by thereinforced inter- and intra-sector connections with the care of downstreamindustries, the present exports consisting mainly of primary and halfwayproducts and high import of raw materials for food.Theother issues were from ASEAN Free Trade Zone (AFTA) on the local agricultureproducers.

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The agriculture sector strives with other sectors for land when theeconomy moves toward industrialization. So that, the cost of the production ofagricultural products in neighboring countries is inexpensive. This would beaffect international demand for local agricultural products. The lower cost ofland and labour of the neighboring countries would force Malaysia to exaggerateon adding value to their product output (better yield outcome). The small firmswill find it nonprofit to control after the enactment of AFTA.

Because of that,they see a change from small farming to commercial plantation businessactivities such as IOI group and Golden Hope. Thus, the government shouldgradually withdraw subsidies to encourage productivity and formulate forchallenges of market globalization. Other than that, the stringent competitionafter implementation of AFTA affects the rural economy of the country. Cheaperimports had a severe effect on our paddy farmers.

Our major concerns aretumbling prices and the lower demands for rice is imported or rustled into thecountry. As a result, farmers are abandoned to extreme paddy supply and lowprices. So, the rice industry is heavily subsidized by the government for foodsecurity explanations via various price and fertilizer subsidies. As a result,our farmer unable to widespread in the open market without the subsidiesprovided by the government, as the production in neighboring countries is muchlower.

Because of this situation, the government could ban the rice imports aspart of the measures to decrease the surplus and this measure is unsustainableonce trade liberation set in.Moreover,the other issues from the Domestic Agricultural Policies (Government tax andSubsidies). The issues that have discussed were lack of policy support forsustaining feedstock. A lot of alteration may be needed to spread the fitbandwidth capacity limitations. This should be practical to all the eligiblerenewable technologies under the fit system to permit continuous extension ofthe industry.

The other issues were the less efficient conversion technology.So, the tariff level by considering the location and local was differentiate.The remote oil palm facilities, together with other far reaching renewableinstallations, should be given precedence and a better payment rate in futurefit reviews, due to their operational difficulty. The last one is the lack of afeasible interconnection scheme. For the solution, portable the possibility ofmodifying the income streams from the renewable fund to guarantee the profitmargin of the off-grid renewable vitality power producers.

It is also worthconsidering for the next fit amendment to include plans to encourage ruralelectrification based on biomass off-grid system.