Malaysia
is an afresh commercialized economy and aims to become an established nation by
2020. The era of 1984-91 perceived an essential transformation and expansion or
development in the structure of the Malaysian economy. So, its main contributed
by the service sector followed by manufacturing, mining and agricultural
sector. Although the small in contribution, agriculture is still a vital sector
as it provisions food and creates employments for rural people. Apart of that,
this paper will discuss the issues and challenges of the national agriculture
sector. Agriculture is the most virtue sector in Malaysia. Some of the reasons
for the decline and incline of the agricultural sector were the small and
uneconomic land holdings and ageing farmers, ASEAN Free Trade Zone (AFTA) on
local agriculture producers, Domestic Agricultural Policies such as government
subsidies and tax, low productivity and the competition of land resources.

The
strengthening in agriculture comes the necessity for affordable labour.
Malaysia faces acute labour shortage foremost to employment of and to certain
extent dependent on foreign workers, another indirect way of loss of foreign
exchange. The low labour productivity of only 60% compared to the manufacturing
sector is another weakness of the agricultural sector. This is very real among
smallholders’ sector which expert low labour productivity and uneconomic farm
sizes. Because of this deficiency of domestic production besides unpredictable
supply 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 of
downstream industries. If this situation of the economic scale and low labour
productivity of small- and medium-size farms can be amended, increased by the
reinforced inter- and intra-sector connections with the care of downstream
industries, the present exports consisting mainly of primary and halfway
products and high import of raw materials for food.

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The
other issues were from ASEAN Free Trade Zone (AFTA) on the local agriculture
producers. The agriculture sector strives with other sectors for land when the
economy moves toward industrialization. So that, the cost of the production of
agricultural products in neighboring countries is inexpensive. This would be
affect international demand for local agricultural products. The lower cost of
land and labour of the neighboring countries would force Malaysia to exaggerate
on adding value to their product output (better yield outcome). The small firms
will find it nonprofit to control after the enactment of AFTA. Because of that,
they see a change from small farming to commercial plantation business
activities such as IOI group and Golden Hope. Thus, the government should
gradually withdraw subsidies to encourage productivity and formulate for
challenges of market globalization. Other than that, the stringent competition
after implementation of AFTA affects the rural economy of the country. Cheaper
imports had a severe effect on our paddy farmers. Our major concerns are
tumbling prices and the lower demands for rice is imported or rustled into the
country. As a result, farmers are abandoned to extreme paddy supply and low
prices. So, the rice industry is heavily subsidized by the government for food
security explanations via various price and fertilizer subsidies. As a result,
our farmer unable to widespread in the open market without the subsidies
provided by the government, as the production in neighboring countries is much
lower. Because of this situation, the government could ban the rice imports as
part of the measures to decrease the surplus and this measure is unsustainable
once trade liberation set in.

Moreover,
the other issues from the Domestic Agricultural Policies (Government tax and
Subsidies). The issues that have discussed were lack of policy support for
sustaining feedstock. A lot of alteration may be needed to spread the fit
bandwidth capacity limitations. This should be practical to all the eligible
renewable technologies under the fit system to permit continuous extension of
the 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 renewable
installations, should be given precedence and a better payment rate in future
fit reviews, due to their operational difficulty. The last one is the lack of a
feasible interconnection scheme. For the solution, portable the possibility of
modifying the income streams from the renewable fund to guarantee the profit
margin of the off-grid renewable vitality power producers. It is also worth
considering for the next fit amendment to include plans to encourage rural
electrification based on biomass off-grid system.