Future of Palm Oil Remains Bright
By Ahmad Ibrahim
Just a year ago, palm oil was on Cloud Nine. It was the toast of the country’s economy. The price of crude palm oil (CPO) breached the RM4,000 mark to touch RM4,312 a tone on March 3, last year. Price stayed above RM3,000 for about seven months, an all-time record.
Palm oil companies were dishing out big fat bonuses for their employees. Many were declaring handsome dividends for their investors. Oil palm smallholders were enjoying lucrative returns. Nobody then thought that palm oil prices would ever drop to unprofitable levels. Most in the industry were convinced that the palm oil price would never again dip below RM2,000 a tone.
That just demonstrated the overwhelming confidence many had in the palm oil industry.
Events of recent weeks have shattered that confidence. On Oct 24, last year, palm oil prices slumped to a low of RM1,390 per tonne, a massive drop from RM4,000.
Not so long ago,such a price level would still have been considered lucrative by past standards. That was when the cost of production averaged around RM600 to RM800 per ton. That has since escalated drastically.
A large part of the blame is attributed to the rise in fertilizer cost-a major component of production. When the crude oil price rose to more than US$140 (RM520) per barrel, the price of fertilizer followed suit. Though oil has now dropped below US$40, no similar drop has been seen in fertilizer prices.
Factor in labour costs, and it is easy to understand the big jump in palm oil costs. The average cost of production for last year may have hit RM1,000-RM1,200.
Change in palm oil prices is always big news in Malaysia. This is because for many years now palm oil has dominated Malaysia’s economy, especially in the rural areas. The prosperity of rural Malaysia, for example, is almost synonymous with palm oil.
Any bearishness in the palm oil market is seriously felt there. Every time palm oil prices drop too much, oil palm smallholders are hit the hardest. This is because most depend entirely on their palm oil income. Though many attribute the current price drop to the financial turmoil that has adversely affected global palm oil demand, many believe there are other forces influencing the price movement.
Apart from market demand, it is widely known that palm oil prices are also influenced by such factors as palm oil supply, changes in regulation on import and export, oilseed demand and supply, speculative activities, crude oil prices and the global economic outlook, just to name some.
At present, the global economic slowdown is the major force no doubt. With many not discounting a repeat of a 1930s-type recession, the focus now is on how to revive confidence and remove any lingering doubts among investors about the future of palm oil.
Though prices have recovered slightly since the low of March last year, the industry has outlined six strategic initiatives to help sustain prices for palm oil. These include creating biodiesel demand, better stock management, using the big discount to other oils to expand demand, aggressive marketing, resolving environmental issues, and branding.
The biodiesel policies already enacted should be implemented without further delay. This new demand will not only help reduce palm oil stocks but can also be leveraged as a protection against low prices.
During periods of low prices, a good replanting strategy can be effective in regulating and reducing supply. This in turn can help prop up prices.
It has been suggested that at an average replanting rate of 4% of total matured acreage per year, at least 600,000 tonnes can be taken out from supply.
The industry must continue must undertake aggressive market promotion to capture the market from the more expensive oils. It needs to tackle issues on the environment now being confronted by the industry. And, last but not least, it must invest in branding and brand support. Concepts such as certified and sustainable palm oil should be exploited.
Fortunes can change in unexpected ways. In the case of the palm oil industry, that long spell of good fortune on high prices and bullish demand had to end one day. Many in the industry did not expect it to happen so suddenly, denting confidence that had always been strong in the industry.
But a recent conference in Phuket, Thailand sent a strong message that despite the recent setbacks, the long term future of palm oil remains bright. And why not? Palm oil is the most economic edible oil to produce. This, together with its other nutritional and technical attributes, ensures palm oil can never be matched by the other competing oils.
With new developments in technologies and applications, palm oil’s global competitiveness can only get stronger.
The Malaysian Palm Oil Board has been developing new products based on palm oil, while the Malaysia Palm Oil Council has been opening up new markets. With the industry always closely monitoring business changes, the industry has the armoury to face crisis in whatever form. With the right measures, there is no reason why price recovery cannot happen soon.
Note: The writer is fellow of the Academy of Sciences Malaysia
Source: New Straits Times, Thursday, March 5, 2009
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Friday, March 6, 2009
Friday, December 19, 2008
Sarawak Oil Palm Planters Seek Respite from Government
If yesterday, we heard about problems faced by seafood exporters (see yesterday blog), today in the StarBiz (Friday, 19 December 08)I read about Sarawak oil palm planters problem. They are badly hit by the fall in crude palm oil (CPO) prices, and want the Government to give them some breathing space by waiving the windfall profit tax, lowering the cess and sales taxes, and regulating high fertiliser prices.
Sarawak oil palm planters also proposed that the unused portion of the cess collected for the Cooking Oil Subsidy Scheme by the Malaysian Palm Oil Board (MPOB) be refunded directly to Sarawak plantation companies.
A waiver is also proposed for Sarawak plantation companies which are still paying their outstanding cess instalments. It is understood that Sarawak Oil Palm Plantation Owners Association has got an assurance from the Minister of Primary Industries and Commodities that the proposals would be studied by the ministry concern.
The association said that the minister had given an indication that Sarawak planters would be allowed to export their CPO tax-free, given the high national CPO stockpile.
Sarawak Oil Palm Plantation Owners will form a consortium to jointly set up own refineries if the existing four refiners in Sarawak refuse to abolish the RM40 per tonne discount on the association CPO price.
Sarawak Plantation managing director suggested that the government should use the MPOB cess on R & D to assist Sarawak planters in sustainable management of peat areas as well as cultivating more efficient agriculture practices.
For information, the Sarawak oil palm industry is still at an infancy stage with about 20% of matured oil palm areas and low yields.
It is understood that with the CPO price currently at RM1,500 per tonne, many Sarawak planters were incurring losses and cash flow squeeze, given the high cost of production at RM1,800 to RM2,000 per tonne. Planters in the Semenanjung have a cost of production of about RM1,100 to RM1,200 per tonne.
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Sarawak oil palm planters also proposed that the unused portion of the cess collected for the Cooking Oil Subsidy Scheme by the Malaysian Palm Oil Board (MPOB) be refunded directly to Sarawak plantation companies.
A waiver is also proposed for Sarawak plantation companies which are still paying their outstanding cess instalments. It is understood that Sarawak Oil Palm Plantation Owners Association has got an assurance from the Minister of Primary Industries and Commodities that the proposals would be studied by the ministry concern.
The association said that the minister had given an indication that Sarawak planters would be allowed to export their CPO tax-free, given the high national CPO stockpile.
Sarawak Oil Palm Plantation Owners will form a consortium to jointly set up own refineries if the existing four refiners in Sarawak refuse to abolish the RM40 per tonne discount on the association CPO price.
Sarawak Plantation managing director suggested that the government should use the MPOB cess on R & D to assist Sarawak planters in sustainable management of peat areas as well as cultivating more efficient agriculture practices.
For information, the Sarawak oil palm industry is still at an infancy stage with about 20% of matured oil palm areas and low yields.
It is understood that with the CPO price currently at RM1,500 per tonne, many Sarawak planters were incurring losses and cash flow squeeze, given the high cost of production at RM1,800 to RM2,000 per tonne. Planters in the Semenanjung have a cost of production of about RM1,100 to RM1,200 per tonne.
How to Become Professional Blogger
Thursday, December 18, 2008
Malaysia Seafood Export Industry Collapse
One interesting topic on theSun today (18 Dec o8): "Malaysia's RM2.5 billion seafood export industry near collapse". According to the paper, the collapse was because of the ban on Malaysian seafood by the European Union (UE) in June 2008.
For information, the Malaysian seafood industry is the country's second largest food export earner, with Europe as its main market. But, the EU has found environmental and hygiene standards in the Malaysian industry to be wanting.
The Malaysian Frozen Foods Processors Association (MFFPA) has raised an alarm that the industry has a lifeline of only three months left, as millions of ringgit in stocks languish in cold rooms, unable to be exported.
According to theSun, the situation is worsened because the product cannot be sold to other countries due to different packing and logistical requirements. MFFPA said the seafood exporters have reported an estimated loss in sales and production of more than RM1.5 billion to date. Further more, the players can no longer withstand the losses and pressure from commercial banks; and some 10,000 workers from the MFFPA's 25 member operators stand to lose jobs, alongside 50,000 indirect workers in related services. It is understood that many factories have started to retrench workers.
To add insult to injury, the Malaysian government has increased the electricity rate by 30%. Three months ago, the cabinet approved a RM500 million rescue package through soft loans to help industry players, with priority given to MFFPA members, however, the money has yet to be given out.
The Malaysian government has been given the Guidelines for export to the EU in 2005, but these were not implemented when EU inspectors came to Malaysia in April and May 2008. The inspection team's main concerns were fishing vessels, landing ports and agriculture farms. The processing factories were not the concern as most of the processing plants were audited by the EU Health Authority on an ad hoc basis.
According to MFFPA, the industry can be saved if the government acts fast.
For information, the Malaysian seafood industry is the country's second largest food export earner, with Europe as its main market. But, the EU has found environmental and hygiene standards in the Malaysian industry to be wanting.
The Malaysian Frozen Foods Processors Association (MFFPA) has raised an alarm that the industry has a lifeline of only three months left, as millions of ringgit in stocks languish in cold rooms, unable to be exported.
According to theSun, the situation is worsened because the product cannot be sold to other countries due to different packing and logistical requirements. MFFPA said the seafood exporters have reported an estimated loss in sales and production of more than RM1.5 billion to date. Further more, the players can no longer withstand the losses and pressure from commercial banks; and some 10,000 workers from the MFFPA's 25 member operators stand to lose jobs, alongside 50,000 indirect workers in related services. It is understood that many factories have started to retrench workers.
To add insult to injury, the Malaysian government has increased the electricity rate by 30%. Three months ago, the cabinet approved a RM500 million rescue package through soft loans to help industry players, with priority given to MFFPA members, however, the money has yet to be given out.
The Malaysian government has been given the Guidelines for export to the EU in 2005, but these were not implemented when EU inspectors came to Malaysia in April and May 2008. The inspection team's main concerns were fishing vessels, landing ports and agriculture farms. The processing factories were not the concern as most of the processing plants were audited by the EU Health Authority on an ad hoc basis.
According to MFFPA, the industry can be saved if the government acts fast.
Wednesday, October 24, 2007
Handling Technology Of Minimally Processed Jackfruit For Export Markets
Handling Technology Of Minimally Processed Jackfruit FOR Export Markets
Background
Jackfruit is one of the tropical fruits suitable for minimal processing. A single fruit may weigh more than 10 kg. Thus it is not convenient for the consumer to carry the whole fruit back home, or it may be too much to consume at once, particularly for smaller families. It is an aggregate fruit with numerous fruitlets, each containing one seed. The fruitlet is covered with epidermal cells and cuticle layer with a waxy appearance. The process of separating the fruitlets from the center core is quite unpleasant since the fruit is full of gummy latex that sticks to the hands and knives. The difficulty in assessing the flesh often results in an unsightly product.
At present, marketing activity of minimally processed jackfruit is mainly being conducted on daily basis. Polyethylene bag has been commonly used for packing minimally processed jackfruit at the wet market and the stalls by the roadside. However, at the dry market the minimally processed jackfruit was packed on polystyrene tray overlapped with stretched film. The fruit turns slimy and deteriorates rapidly, resulting in off-flavour. Shelf life at the supermarket shelf is only 3-4 days. Today, MARDI has developed a technology for minimally processed jackfruit, which has a potential not only for the local markets but also for export.
Technology Description
Package technology developed for minimally processed jackfruit involves various steps:-
>>Fruit harvested at commercial maturity
>>Handling operation involves:
>Sorting
>Washing
>Fruit ripening
>Precooling
>Fruit cutting – isolating the fruitlets
>Suitable retail and bulk packing
>Storage
Novelty of Technology
>>The latex problem and difficulties in separating the fruitlets from the epidermal cells can be overcome by the precooling process.
>>Firmer fruitlet as cutting process is conducted only to fruits achieving 60% skin softening.
>>The technology employed the use of modified atmosphere packaging (MAP) and low temperature storage to reduce weight loss and tissue browning even after 3 weeks.
>>The use of rigid polypropylene containers for retail packing and insulated boxes for bulk packing reduces physical injury, makes handling easier and stacking possible.
>>The use of frozen gel provides a cool environment to the packed jackfruit which slows down ripening and other metabolic processes, reduces deterioration and minimizes the ethylene effect which influence shelf life.
>>The technology can be easily adopted for local or export markets
The longer storage life enables more efficient and wider market distribution.
>>A quality assurance protocol has been developed for minimally processed jackfruit under ASEAN Australian Economic Cooperation Program to ensure safe products being delivered to the consumer.
Jackfruit in Minimally Processed Form Offer Many Advantages
>>Ease in serving portion of large and difficult to peel fruits;
>>Reduce cost in packaging and transportation;
>>Extend the shelf life;
>>Minimize the quarantine barrier;
>>The quality of the products can be seen thus provide good selection for the consumer;
>>Attractive labels can be used for product description, storage requirements and expected storage life.
Comparison to Current Products
The technology on minimally processed jackfruit offers many advantages:
>>Longer storage life. Minimally processed jackfruit can be kept for 3 weeks at 20C, 1 week at 10C and 2 days at 25C. The achievable storage life provides sufficient marketing planning for distribution both for local and export markets;
>>Ensure of safety and quality as handling operations were conducted in controlled environment following quality assurance protocols:
>>Reduction in cost of packaging and transportation;
>>Flexible production depending on market demand;
Economic Impact
>>Per-capita consumption of jackfruit fruit is expected to increase from 0.8 kg/person /yr in 2000 to 1.0 kg in 2010;
>>Production area of jackfruit is expected to increase from 6,000 hectares in 2000 to 55,000 hectares in 2010;
>>Thus it will be a good future for minimally processed jackfruit to cater the needs of the local and export markets:
>>Currently, jackfruit (whole fruit) has been exported to Singapore, Hong Kong, Netherlands, Indonesia, Middle East, United Kingdom and Thailand with the export value worth RM3 million in 2004 and targeted to increase to RM10 million 2010;
>>The demand for jackfruit in minimally processed is expected to increase as cost of transportation can be reduced with the removal of the inedible portion of the fruits (skin, epidermal layers, seeds and the center core). These inedible portion constitutes about 40-50% of the fruit weight.
Potential Users
>>The technology is targeted towards local fruit suppliers as well as exporters;
>>The technology has a potential for export not only by air but also by sea shipments to markets such as Hong Kong, China and Taiwan as traveling time is only between 5-7 days;
Export Trial
>>An Export trial of minimally processed jackfruit by air shipment to Netherlands was successfully conducted in June 2006. The trial was conducted in collaboration with counterparts in Malaysia (FAMA, DOA, fruit exporter from Selangor) and from Netherlands (fruit importer, Agriculture Atache, Matrade and Malaysian Embassy).
>>The technology of minimally processed jackfruit fruit had been successfully taken up for export by air shipment to the European markets (Netherlands, Belgium, Zurich) and also to Middle East.
For further information please contact:
Latifah Mohd Nor
Horticulture Research Centre
MARDI Headquarters, Serdang
P.O Box 12301, 50774 Kuala Lumpur
MALAYSIA
Tel: 03-8943 7545
Fax: 03-8948 7590
e-mail: Imn@mardi.my
Or write to:
Director
Horticulture Research Centre
MARDI Headquarters, Serdang
P.O Box 12301, 50774 Kuala Lumpur
MALAYSIA
Background
Jackfruit is one of the tropical fruits suitable for minimal processing. A single fruit may weigh more than 10 kg. Thus it is not convenient for the consumer to carry the whole fruit back home, or it may be too much to consume at once, particularly for smaller families. It is an aggregate fruit with numerous fruitlets, each containing one seed. The fruitlet is covered with epidermal cells and cuticle layer with a waxy appearance. The process of separating the fruitlets from the center core is quite unpleasant since the fruit is full of gummy latex that sticks to the hands and knives. The difficulty in assessing the flesh often results in an unsightly product.
At present, marketing activity of minimally processed jackfruit is mainly being conducted on daily basis. Polyethylene bag has been commonly used for packing minimally processed jackfruit at the wet market and the stalls by the roadside. However, at the dry market the minimally processed jackfruit was packed on polystyrene tray overlapped with stretched film. The fruit turns slimy and deteriorates rapidly, resulting in off-flavour. Shelf life at the supermarket shelf is only 3-4 days. Today, MARDI has developed a technology for minimally processed jackfruit, which has a potential not only for the local markets but also for export.
Technology Description
Package technology developed for minimally processed jackfruit involves various steps:-
>>Fruit harvested at commercial maturity
>>Handling operation involves:
>Sorting
>Washing
>Fruit ripening
>Precooling
>Fruit cutting – isolating the fruitlets
>Suitable retail and bulk packing
>Storage
Novelty of Technology
>>The latex problem and difficulties in separating the fruitlets from the epidermal cells can be overcome by the precooling process.
>>Firmer fruitlet as cutting process is conducted only to fruits achieving 60% skin softening.
>>The technology employed the use of modified atmosphere packaging (MAP) and low temperature storage to reduce weight loss and tissue browning even after 3 weeks.
>>The use of rigid polypropylene containers for retail packing and insulated boxes for bulk packing reduces physical injury, makes handling easier and stacking possible.
>>The use of frozen gel provides a cool environment to the packed jackfruit which slows down ripening and other metabolic processes, reduces deterioration and minimizes the ethylene effect which influence shelf life.
>>The technology can be easily adopted for local or export markets
The longer storage life enables more efficient and wider market distribution.
>>A quality assurance protocol has been developed for minimally processed jackfruit under ASEAN Australian Economic Cooperation Program to ensure safe products being delivered to the consumer.
Jackfruit in Minimally Processed Form Offer Many Advantages
>>Ease in serving portion of large and difficult to peel fruits;
>>Reduce cost in packaging and transportation;
>>Extend the shelf life;
>>Minimize the quarantine barrier;
>>The quality of the products can be seen thus provide good selection for the consumer;
>>Attractive labels can be used for product description, storage requirements and expected storage life.
Comparison to Current Products
The technology on minimally processed jackfruit offers many advantages:
>>Longer storage life. Minimally processed jackfruit can be kept for 3 weeks at 20C, 1 week at 10C and 2 days at 25C. The achievable storage life provides sufficient marketing planning for distribution both for local and export markets;
>>Ensure of safety and quality as handling operations were conducted in controlled environment following quality assurance protocols:
>>Reduction in cost of packaging and transportation;
>>Flexible production depending on market demand;
Economic Impact
>>Per-capita consumption of jackfruit fruit is expected to increase from 0.8 kg/person /yr in 2000 to 1.0 kg in 2010;
>>Production area of jackfruit is expected to increase from 6,000 hectares in 2000 to 55,000 hectares in 2010;
>>Thus it will be a good future for minimally processed jackfruit to cater the needs of the local and export markets:
>>Currently, jackfruit (whole fruit) has been exported to Singapore, Hong Kong, Netherlands, Indonesia, Middle East, United Kingdom and Thailand with the export value worth RM3 million in 2004 and targeted to increase to RM10 million 2010;
>>The demand for jackfruit in minimally processed is expected to increase as cost of transportation can be reduced with the removal of the inedible portion of the fruits (skin, epidermal layers, seeds and the center core). These inedible portion constitutes about 40-50% of the fruit weight.
Potential Users
>>The technology is targeted towards local fruit suppliers as well as exporters;
>>The technology has a potential for export not only by air but also by sea shipments to markets such as Hong Kong, China and Taiwan as traveling time is only between 5-7 days;
Export Trial
>>An Export trial of minimally processed jackfruit by air shipment to Netherlands was successfully conducted in June 2006. The trial was conducted in collaboration with counterparts in Malaysia (FAMA, DOA, fruit exporter from Selangor) and from Netherlands (fruit importer, Agriculture Atache, Matrade and Malaysian Embassy).
>>The technology of minimally processed jackfruit fruit had been successfully taken up for export by air shipment to the European markets (Netherlands, Belgium, Zurich) and also to Middle East.
For further information please contact:
Latifah Mohd Nor
Horticulture Research Centre
MARDI Headquarters, Serdang
P.O Box 12301, 50774 Kuala Lumpur
MALAYSIA
Tel: 03-8943 7545
Fax: 03-8948 7590
e-mail: Imn@mardi.my
Or write to:
Director
Horticulture Research Centre
MARDI Headquarters, Serdang
P.O Box 12301, 50774 Kuala Lumpur
MALAYSIA
Sunday, October 7, 2007
Malaysia: Agriculture the Main Thrust
Malaysia: Agriculture the Main Thrust
The East Coast Economic Region is set to be an agropolitan hub focusing on developing crop, fish and livestock clusters
Agriculture will be the main thrust of the East Coast Economic Region (ECER), generating revenue of RM8.57 billion in the three east coast states by 2020, Petronas president and chief executive officer Tan Sri Hassan Merican.
Two years ago, revenue from agriculture was about RM3.7 billion.
To help Pahang, Kelantan and Terengganu achieve this, the ECER - the latest of the country's three economic corridors introduced in the past few months - is creating an "agropolitan", literally an A-Z of an agricultural hub.
Hassan said Kelantan had been identified for the cultivation of poultry and herbs, Terengganu for goat rearing and citrus valley and Pahang, for cattle farming and pineapples.
'Our experts have identified two types of crops - citrus fruits and pineapples - as the most suitable to be cultivated in the region," he said in a statement.
In 2005, agriculture accounted for about 16 percent of the region's gross domestic product and provided 22.9 percent of the regional labour force. ECER, which also covers Mersing in Johor, makes up 51 percent of the total land areas in Peninsular Malaysia.
Agropolitan is an all-encompassing approach from providing quality seeds to good agriculture practices and business mentoring, and it will help many get a leg up. As a whole, the creation of agropolitan hubs will enhance industry practices, increase yield and supplement income stream.
This is being done by expanding large-scale commercial farming, the use of modern technology, developing value-added activities and improving supply chain management, Hassan said.
Central of the approach is the establishment of Collection, Processing and Packaging Centres (CPPCs) and Collection and Marketing Centres (CMCs). They are the nerve centre for sorting, grading and tagging of fruits and vegetables, packaging, processing, palletising, cold chain services, retails and export management and distribution.
The CPPC and CMC will also serve as a one-stop centre for services certification and accreditation. They will be connected to supermarkets and exporters for efficiency, production planning, inventory control as well as trading and negotiations.
A total of 18 CPPCs and CMCs will be built, including eight specifically to cater for fruits and vegetables. The remaining 10 will focus on kenaf (two), herbal (three), fish (two) and livestock (three).
Petronas has also proposed a number of agriculture parks. They include permanent, separate parks for agriculture food, poultry production, beef/mutton production and Aquaculture Industry Zone (AIZ).
In Pahang, some 7,400ha in Pekan and Rompin has been earmarked for pineapple parks as well 5,000ha in Ulu Tembeling and 3,500ha in Lanchang for permanent fruit parks. Terengganu gets 1,000ha in Lojing for floriculture and vegetable plantation and another 1,414ha in Dungun for a citrus fruits valley. There will be two AIZs in Terengganu (Kenyir) and Kelantan (Pergau).
Part of the agropolitan approach is to focus on developing crop, fish and livestock clusters. The strategies also require participation of private sector and government agencies like Felda as anchor companies, and the strengthening of marketing and global networking.
Strategic initiatives to develop the crop clusters will include establishing nucleus-contract farming models involving farmers and anchor companies, as well as agriculture parks including permanent food production parks, and group farming projects.
Kuala Berang in Terengganu has been picked as a production base of breeder animal stocks for goats, while Muadzam Shah in Pahang, for cattle to be distributed to commercial farmers for breeding and fattening.
SMEs (small and medium enterprises), meanwhile, will be roped in for poultry farming in at least four poultry parks in Gua Musang (Kelantan), Chendering (Terengganu), Gebeng and Gambang in Pahang.
Strategies for the fisheries clusters will include production of fish for commercial fish farming, development of downstream activities relating to fish processing and value-added products and improving output and economic standing of micro-SMEs currently involved in fish processing.
Overall, the focus on agropolitan will create jobs for more than 42,000 local populace throughout the value chain, besides entrepreneur opportunities for local companies and SMEs, Hassan said
Source: BizNews, The New Straits Times, Saturday, October 6, 2007
The East Coast Economic Region is set to be an agropolitan hub focusing on developing crop, fish and livestock clusters
Agriculture will be the main thrust of the East Coast Economic Region (ECER), generating revenue of RM8.57 billion in the three east coast states by 2020, Petronas president and chief executive officer Tan Sri Hassan Merican.
Two years ago, revenue from agriculture was about RM3.7 billion.
To help Pahang, Kelantan and Terengganu achieve this, the ECER - the latest of the country's three economic corridors introduced in the past few months - is creating an "agropolitan", literally an A-Z of an agricultural hub.
Hassan said Kelantan had been identified for the cultivation of poultry and herbs, Terengganu for goat rearing and citrus valley and Pahang, for cattle farming and pineapples.
'Our experts have identified two types of crops - citrus fruits and pineapples - as the most suitable to be cultivated in the region," he said in a statement.
In 2005, agriculture accounted for about 16 percent of the region's gross domestic product and provided 22.9 percent of the regional labour force. ECER, which also covers Mersing in Johor, makes up 51 percent of the total land areas in Peninsular Malaysia.
Agropolitan is an all-encompassing approach from providing quality seeds to good agriculture practices and business mentoring, and it will help many get a leg up. As a whole, the creation of agropolitan hubs will enhance industry practices, increase yield and supplement income stream.
This is being done by expanding large-scale commercial farming, the use of modern technology, developing value-added activities and improving supply chain management, Hassan said.
Central of the approach is the establishment of Collection, Processing and Packaging Centres (CPPCs) and Collection and Marketing Centres (CMCs). They are the nerve centre for sorting, grading and tagging of fruits and vegetables, packaging, processing, palletising, cold chain services, retails and export management and distribution.
The CPPC and CMC will also serve as a one-stop centre for services certification and accreditation. They will be connected to supermarkets and exporters for efficiency, production planning, inventory control as well as trading and negotiations.
A total of 18 CPPCs and CMCs will be built, including eight specifically to cater for fruits and vegetables. The remaining 10 will focus on kenaf (two), herbal (three), fish (two) and livestock (three).
Petronas has also proposed a number of agriculture parks. They include permanent, separate parks for agriculture food, poultry production, beef/mutton production and Aquaculture Industry Zone (AIZ).
In Pahang, some 7,400ha in Pekan and Rompin has been earmarked for pineapple parks as well 5,000ha in Ulu Tembeling and 3,500ha in Lanchang for permanent fruit parks. Terengganu gets 1,000ha in Lojing for floriculture and vegetable plantation and another 1,414ha in Dungun for a citrus fruits valley. There will be two AIZs in Terengganu (Kenyir) and Kelantan (Pergau).
Part of the agropolitan approach is to focus on developing crop, fish and livestock clusters. The strategies also require participation of private sector and government agencies like Felda as anchor companies, and the strengthening of marketing and global networking.
Strategic initiatives to develop the crop clusters will include establishing nucleus-contract farming models involving farmers and anchor companies, as well as agriculture parks including permanent food production parks, and group farming projects.
Kuala Berang in Terengganu has been picked as a production base of breeder animal stocks for goats, while Muadzam Shah in Pahang, for cattle to be distributed to commercial farmers for breeding and fattening.
SMEs (small and medium enterprises), meanwhile, will be roped in for poultry farming in at least four poultry parks in Gua Musang (Kelantan), Chendering (Terengganu), Gebeng and Gambang in Pahang.
Strategies for the fisheries clusters will include production of fish for commercial fish farming, development of downstream activities relating to fish processing and value-added products and improving output and economic standing of micro-SMEs currently involved in fish processing.
Overall, the focus on agropolitan will create jobs for more than 42,000 local populace throughout the value chain, besides entrepreneur opportunities for local companies and SMEs, Hassan said
Source: BizNews, The New Straits Times, Saturday, October 6, 2007
Thursday, September 20, 2007
Incentive For The Agricultural Sector in Malaysia
Incentive For The Agricultural Sector in Malaysia
The Promotion on Investment Act 1986 states that the term ‘company” in relation to agriculture includes:
>>Agro-based cooperative societies and association
>>Sole proprietorship and partnership engaged in agriculture
Companies producing promoted products or engaged in promoted activities (See Appendix I: List of Promoted Activities and Products - General) in the agricultural sector qualify for the following incentives:
1. Main Incentives for the Agricultural Sector
(i) Pioneer Status
As in the manufacturing sector, companies producing promoted products or engaged in promoted activities are eligible for Pioneer Status.
A Pioneer Status company enjoys a partial exemption form income tax. It pays tax on 30% of its statutory income for five years, commencing from its Production Day (defined as the day of first sale of the agriculture produce).
Accumulated losses and unabsorbed capital allowance incurred during the pioneer period by companies whose pioneer status will expire on and after 1 October 2005 are allowed to be carried forward and deducted against post pioneer income of a business relating to the same promoted activity or promoted product.
Applications received form companies located in the promoted areas i.e the States of Perlis, Sabah and Sarawak and the designated “Eastern Corridor” of Peninsular Malaysia, will enjoy a 100% tax exemption on their statutory income during their 5 year exemption period. All project applications received by 31 December 2010 will be eligible for this enhanced incentive.
Application should be submitted to MIDA.
(ii) Investment Tax Allowance
As an alternative to Pioneer Status, companies producing promoted products or engaged in promoted activities can apply for Investment Tax Allowance (ITA). A company granted ITA is eligible for an allowance of 60% on its qualifying capital expenditure incurred within five years form the date on which the first qualifying capital expenditure is incurred.
Companies can offset this allowance against 70% of their statutory income in the year of assessment. Any unutilized allowance can be carried forward to subsequent years until fully utilized. The remaining 30% of the statutory income is taxed at the prevailing company tax rate.
Application received form companies located in the promoted areas i.e. the States of Perlis, Sabah and Sarawak, and the designated “Eastern Corridor” of Peninsular Malaysia, will enjoy an allowance of 100% on the qualifying capital expenditure incurred within a period of five years. The allowances can be utilized to offset against 100% of the statutory income for each year of assessment. All project applications received by 31 December 2010 will be eligible for this enhanced incentive.
Application should be submitted to MIDA.
To increase the benefits to agricultural projects, the government has broadened the definition of qualifying capital expenditure to include expenditure incurred on:
>>Clearing and preparation of land
>>Planting of crops
>>Provision of plant and machinery used in Malaysia for the purpose of crop cultivation, animal farming, aquaculture, inland fishing or deep-sea fishing, and other agricultural or pastoral pursuits.
>>Construction of access roads including bridges, construction or purchase of buildings (including those provided for the welfare of people or as living accommodation), and structural improvements on land or other structures which are used for crop cultivation, animal farming, aquaculture, inland fishing and other agricultural or pastoral pursuits. Such roads, bridges, building, structural improvements on land and other structures should be on land forming part of the land used for the purpose of such crop cultivation, animal farming, aquaculture, inland fishing and other agricultural or pastoral pursuits.
In view of the time lag between start-up processing of the produce, integrated agricultural projects qualify for ITA for an additional five years for expenditure incurred for processing or manufacturing operations.
Applications should be submitted to MIDA.
(iii) Incentives for Food Production
(a) Incentives for New Projects
To encourage food production, a company, which invests in a subsidiary company engaged in food production, together with the subsidiary company, qualifies for one of the following incentive packages:
Incentive Package A:
>>A company which takes up at least 70% equity in a subsidiary company engaged in food production reveives a tax deduction equivalent to the amount of investment made in that subsidiary; and
>>The subsidiary company enjoys full income tax exemption on its statutory income for 10 years commencing from the first year the company enjoys profits, in which:
* Losses incurred before and during the exemption period can be brought forward after the exemption period of 10 years;
* Dividends paid from the exempt income are exempted in the hands of the shareholders.
Incentive Package B:
>>A company which takes up at least 70% equity in a subsidiary company engaged in food production will be given group relief for the losses incurred by the subsidiary company before it records any profit, and
>>The subsidiary company enjoys full income tax exemption on its statutory income for 10 years. This commences from the first year the company enjoys profits in which:
* Losses incurred during the tax exemption period can be brought forward after the exemption period of 10 years; and
* Dividends paid from the exempt income are exempted in the hands of the shareholders.
The eligible food products are as approved by the Minister of Finance. These include kenaf, deep-sea fishing, vegetables, fruits, herbs, spices, aquaculture, and the rearing of cattle, goats and sheep.
Companies should commence food production within a period of one year from the date the incentive is approved. The incentive period for this scheme is extended for applications received until 31 December 2010.
Applications should be submitted to the Ministry of Agriculture and Agro-based Industry.
b) Incentives for Existing Companies Which Reinvest
An existing company that reinvests in the production of the above food products also qualifies for the same incentives for a period of five years.
The food production project both new and existing companies should commence within a year form the date the incentive is approved. Applications should be submitted to the Ministry of Agriculture and Agro-based Industry by 31 December 2005.
c) Tax Incentives for ‘Halal’ Food Production
To encourage new investments in ‘halal’ food production for the export market and to increase the use of modern and state-of-the-art machinery and equipment in producing high quality ‘halal’ food that comply with the international standards, companies which invest in ‘halal’ food productions and have already obtained ‘halal’ certification from JAKIM are eligible for the Investment Tax Allowance of 100% of qualifying capital expenditure incurred within a period of 5 years.
This allowance can be offset against 100% of the statutory income in the year of assessment. Any unutilized allowances can be carried forward to subsequent years until the whole amount has been fully utilized.
Applications should be submitted to MIDA.
For further information on obtaining ‘Halal’ certification from JAKIM, please visit JAKIM’s website at http://halaljakim.gov.my/
(iv) Incentive for Reinvestment in Food Processing Activities
A locally-owned manufacturing company with Malaysian equity of at least 60% that reinvests in promoted food processing activities is eligible for another round of the Pioneer Status or Investment Tax Allowance (ITA) incentive. Activities located in the promoted areas, i.e the States of Perlis, Sabah, Sarawak and the “Eastern Corridor” of Peninsular Malaysia, are eligible for the Pioneer Status and ITA incentives in accordance with that given to promoted areas.
2. Additional Incentives for the Agricultural Sector
(i) Reinvestment Allowance
Persons or companies engaged for at least 12 months in the production of essential food such as rice, maize, vegetables, tuber, livestock, aquatic products, and any other activities approved by the Minister of Finance can enjoy the Reinvestment Allowance (RA).
The qualifying capital expenditure includes expenditure incurred on:
>>Clearing and preparation of land
>>Planting of crops
>>Provision of plant and machinery used in Malaysia for the purpose of crop cultivation, animal farming, aquaculture, inland fishing or deep-sea fishing, and other agricultural or pastoral pursuits.
>>Construction of access roads including bridges, construction or purchase of buildings (including those provided for the welfare of people or as living accommodation), and structural improvements on land or other structures which are used for crop cultivation, animal farming aquaculture, inland fishing and other agricultural or pastoral pursuits. Such roads, bridges, buildings, structural improvements on land and other structures should be on land forming part of the land used for the purpose of such crop cultivation, animal farming, aquaculture, inland fishing and other agricultural or pastoral pursuits.
The RA is in the form of an allowance of 60% of the qualifying capital expenditure incurred within a period of 15 years beginning from the first reinvestment is made. The allowance can be offset against 70% of the statutory income in the year of assessment. Unutilized allowances can be carried forward to the following years until fully utilized. Companies that undertake reinvestment projects in the promoted areas i.e. the States of Perlis, Sabah, Sarawak and the designated “Eastern Corridor” of Peninsular Malaysia, can offset the allowance fully against their statutory income for that year of assessment.
Claims should be submitted to the IRB.
(ii) Incentive for Reinvestment in Resource-Based Industries
This incentive is offered to companies that are at least 51% Malaysian-owned and are in the rubber, oil palm and wood-based industries products, which have export potential. Companies in these industries reinvesting for expansion purposed are eligible for another round of Pioneer Status or Investment Tax Allowance (ITA). Activities located in the promoted areas i.e the States of Perlis, Sabah, Sarawak and the designated “Eastern Corridor” of Peninsular Malaysia are eligible for higher levels of exemption/allowance under Pioneer Status or ITA in accordance with that given for promoted areas.
Applications should be submitted to MIDA.
(iii) Incentives for Modernising Chicken and Duck Rearing
To promote modernization and the usage of environment-friendly practices in the agricultural sector, chicken and duck rearers who reinvest for the purpose of shifting form the opened house system to the closed house system will be eligible for RA for a period of 15 consecutive years commencing from the first year the reinvestment is made.
This incentive is given on condition that the minimum rearing capacity of the closed house system is as follows:
>>20,000 broiler chickens/broiler ducks per cycle; or
>>50,000 layer chickens/layer ducks per cycle
>>20,000 parent or grandparent stock of chickens/ducks per cycle
All projects must be approved by the Ministry of Agriculture and Agro-based Industry.
Claims should be submitted to the IRB.
(iv) Accelerated Capital Allowance
Upon the expiry of the Reinvestment Allowance (RA), companies that reinvest in promoted agricultural activities and food products are eligible to apply for the Accelerated Capital Allowance (ACA). These activities include the cultivation of rice, maize, vegetable, tubers, livestock, aquatic products and any other activities approved by the Minister of Finance.
The ACA on the capital expenditure is to be utilized within two years, i.e. an initial allowance of 20% in the first year and an annual allowance of 40%.
Claims should be submitted to the IRB, accompanied by a letter from MIDA certifying that the companies are undertaking promoted agricultural activities or producing promoted food products.
(v) Agricultural Allowance
A person or a company carrying on an agricultural activity can claim capital allowances and special industrial building allowances under the income Tax Act 1967 for certain capital expenditure. Capital expenditure, which qualifies, includes expenditure incurred on:
>>Clearing and preparation of land
>>Planting of crops
>>Provision of plant and machinery used in Malaysia for the purpose of crop cultivation, animal farming, aquaculture, inland fishing or deep-sea fishing, and other agricultural or pastoral pursuits
>>Construction of access roads including bridges, construction or purchase of buildings (including those provided for the welfare of people or as living accommodation), and structural improvements on land or other structures which are used for crop cultivation, animal farming, aquaculture, inland fishing and other agricultural or pastoral pursuits. Such roads, bridges, buildings, structural improvements on land and other structures should be on land forming part of the land used for the purpose of such crop cultivation, animal farming, aquaculture, inland fishing and other agricultural or pastoral pursuits
A company continues to get the allowance for as long as it incurs the expenditure, regardless of whether it already enjoys Pioneer Status or ITA.
Claims should be submitted to the IRB.
(vi) Accelerated Agriculture Allowance for the Planting of Rubberwood Trees
To ensure a regular supply of rubberwood for the furniture industry, a non-rubber plantation company that plants at least 10% of its plantation with rubberwood trees is eligible for the Accelerated Agriculture Allowance whereby the write-off period on the capital expenditure incurred for land preparation, planting and maintenance of rubberwood cultivation is accelerated from two years to one year.
Application should be submitted to the Ministry of Plantation Industries and Commodities.
(vii) 100% Allowance on Capital Expediture for Approved Agricultural Projects
Schedule 4A of the Income Tax Act 1967 provides for a 100% allowance on capital expenditure for Approved Agricultural Projects as approved by the Minister of Finance. This covers qualifying capital expenditure incurred within a specific time frame for a farm that cultivates and utilises a specified minimum acreage as stipulated by the Minister of Finance.
Approved agricultural projects are those for the cultivation of vegetables, fruits (papaya, banana, passion fruit, star fruit, guava and mangosteen), tubers, roots, herbs, spices, crops for animal feed and hydroponics-based products; ornamental fish culture; fish and prawn rearing (pond culture, tank culture, marine cage culture, and off-shore marine cage culture); cockles, oysters, mussels, and seaweed culture; shrimp, prawn and fish hatchery; and certain species of forest plantations.
The incentives enables a person carrying on such a project to elect to deduct the qualifying capital expenditure incurred in respect of that project from his aggregate income, including income form other sources. Where there is insufficient aggregate income, the unabsorbed expenditure can be carried forward to subsequent years of assessment. Where he so elects, he will not be entitled to any capital allowance or agricultural allowance on the same capital expenditure.
The qualifying capital expenditure eligible for deduction includes expenditure incurred on:
>>Clearing and preparation of land
>>Planting of crops
>>Provision of plant and machinery used in Malaysia for the purpose of crop cultivation, animal farming, aquaculture, inland fishing or deep-sea fishing, and other agricultural or pastoral pursuits
>>Construction of access roads including bridges, construction or purchase of buildings (including those provided for the welfare of people or as living accommodation), and structural improvements on land or other structures which are used for crop cultivation, animal farming, aquaculture, inland fishing and other agricultural or pastoral pursuits. Such roads, bridges, buildings, structural improvements on land and other structures should be on land forming part of the land used for the purpose of such crop cultivation, animal farming, aquaculture, inland fishing and other agricultural or pastoral pursuits.
This incentive is not available to companies that have been granted incentives under the Promotion of Investment Act 1986 and whose tax relief periods have not started or have not expired.
Claims should be submitted to the IRB.
(viii) Tax Exemption on the Value of Increased Exports
A company which exports fresh and dried fruits, fresh and dried flowers, ornamental plants and ornamental fish enjoys a tax exemption of its statutory income equivalent to 10% of the value of its increased exports.
Claims should be submitted to the IRB.
(ix) Incentives for Companies providing Cold Chain Facilities and Services for Food Products
Companies providing cold room and refrigerated truck facilities and related services such as the collection and treatment of locally produced perishable food products qualify for Pioneer Status or Investment Tax Allowance (ITA). Activities located in the promoted areas are offered more attractive levels of Pioneer Status or ITA.
Application received from existing locally owned companies to reinvest in cold chain facilities and services for perishable agricultural produce are eligible for the following incentives:
a) Pioneer Status with a tax exemption of 70% (100% for promoted areas) on the increased statutory income arising from the reinvestment for a period of five years. Accumulated losses and unabsorbed capital allowances incurred during the pioneer period by companies whose pioneer status will expire on after 1 October 2005 are allowed to be carried forward and deducted against post-pioneer income of a business relating to the same promoted activity or promoted product; or
b) Investment Tax Allowance of 60% (100% for promoted areas) on the additional qualifying capital expenditure incurred within a period of five years. The allowance can be offset against 70% (100% for promoted areas) of the statutory income in each year of assessment. Any unutilized allowances can be carried forward to subsequent years until the whole amount has been fully utilized
Application should be submitted to MIDA
(x) Double Deduction for Expenses to Obtain “Halal” Certification and Quality Systems and Standards Certification
To enhance the competitiveness of Malaysian companies in the global market for ‘halal’ products (products suitable for consumption by Muslims) including “halal” food, double deduction will be given for the purpose of income tax computation to companies which incur expenses in obtaining;
a) Quality system and standards certification as well as ‘halal’ certification from the Department of Islamic Development Malaysia (JAKIM)
b) International quality systems and standards certification
Claims should be submitted to the IRB.
For further information on obtaining ‘Halal’ certification from JAKIM, please visit JAKIM’s website at http://halaljakim.gov.my/
(xi) Double Deduction on Freight Charges for Export of Rattan and Wood-based Products
Manufacturers who export rattan and wood-based products (excluding sawn timber and veneer) qualify for double deduction on freight charges.
Note: please refer to Section 17 for other incentives related to the agricultural sector.
APPENDIX 1
AGRICULTURAL PRODUCTION
1. Cultivation of tea
2. Cultivation of fruits
3. Cultivation of vegetables, tubers or roots
4. Cultivation of rice or maize
5. Cultivation of herbs or spices
6. Cultivation of essential oil crops
7. Production of planting materials
8. Cultivation of crops for animal feed
9. Floriculture
10. Apiculture
11. Livestock farming (excluding rearing of chickens, ducks or pigs)
12. Production of breeder stock
13. Spawning, breeding and culturing of aquatic products
14. Off-shore fishing
15. Cultivation of medical plants
16. Sericulture*
17. Cultivation of cocoa*
18. Cultivation of coconut*
19. Cultivation of sago palm*
20. Rearing of chickens and ducks*
PROCESSING OF AGRICULTURAL PRODUCE
1. Chocolate and chocolate confectionery
2. Fruits
3. Vegetables, tubers or roots
4. Essential oil
5. Livestock products
6. Aquatic products
7. Agricultural waste or agricultural by-products
8. Aquaculture feed
9. Plant extracts for pharmaceutical, perfumery, cosmetic or food industries
10.High fructose syrup
11. Cocoa and cocoa product
12. Illipe products*
13. Coconut products except copra or crude coconut oil*
14. Starch products*
FORESTRY AND FORESTRY PRODUCTS
1. Cultivation of timber, bamboo or cane
2. Cane products
3. Bamboo products
MANUFACTURE OF RUBBER PRODUCTS
1. Earthmover tyres, agricultural tyres, industrial tyres, commercial vehicle tyres, motorcycle tyres, aircraft tyres or solid tyres
2. Precured tread liner
3. Retreading of aircraft tyres
4. Latex products:
(a)Surgical gloves
(b)Safety/special function gloves
(c)Condoms
(d)Catheters
(e)Rubber (elastomeric) specialty coatings
(f)Rubberised fabrics
5. Dry rubber products
a. Beltings
b. Hoses, pipes and tubings
c. Rubber profiles
d. Inflatable rubber products
e. Industrial and office equipment rollers
f. Seals, gaskets, washers, packings and rings
g. Anti-vibration, damping and sound insulation products
h. Rubber linings
i. Rubber floorings
j. Rubber moulds
k. Modified natural rubber
6. Reclaimed rubber
7. Rubber support
8. Latex products*
a. Carpet underlay
b. Swimming caps
c. Ballons
d. Finger cots
e. Toys
f. Latex thread
MANUFACTURE OF OIL PALM PRODUCTS AND THEIR DERIVATIVES
1. Oleochemicals or oleochemical derivatives or preparations
2. Margarine, vanaspati, shortening or other manufactured fat products
3. Fattty acid distillate derivatives
4. Cocoa butter replace’s, cocoa, butter substitutes, cocoa butter equivalent, palm mid fraction or special olein
5. Crude palm kernel oil and palm kernel cake/expeller
6. Palm-based nutraceuticals, constituents of palm oil/palm kernel oil
7. Palm-based food products:
a. Specially animal fat replacer
b. Palm-based mayonnaise and salad dressing
c. Substituted coconut milk/powder
d. Red palm oil and its products
e. Palm-based food ingredient
f. Modified (interesterified) palm oil and palm kernel oil products
g. Microencapsulated palm-based products
8. Processed products from:
a. Palm fatty acid distillate/palm kernel fatty acid distillate
b. Palm kernel cake/expeller
c. Palm oil mill effluent
9. Products from palm biomass
10. Refining of palm oil or palm kernel oil*
MANUFACTURE OF WOOD AND WOOD PRODUCTS
1. Reconstituted wood-based panel boards or products.
2. Wooden solid or other specialized function doors or wooden solid windows
3. Multi-ply parquet
4. Wooden furniture or parts
5. Insulation for cryogenic vessels
6. All wooden products except sawn timber, veneer and plain plywood*
MANUFACTURE OF PULP, PAPER AND PAPERBOARD
1. Pulp
2. Newsprint
3. Security paper
4. Resin impregnated paper and products thereof
5. Printing and writing paper
6. Corrugated medium paper, testliner or kraftliner
7. Kraft paper
8. Paperboard
9. Moulded paper
10. Specialty paper
11. All types of paper and paper products from pulp*
Source: MIDA, Malaysia Investment In the Manufacturing Sector, February 2007
The Promotion on Investment Act 1986 states that the term ‘company” in relation to agriculture includes:
>>Agro-based cooperative societies and association
>>Sole proprietorship and partnership engaged in agriculture
Companies producing promoted products or engaged in promoted activities (See Appendix I: List of Promoted Activities and Products - General) in the agricultural sector qualify for the following incentives:
1. Main Incentives for the Agricultural Sector
(i) Pioneer Status
As in the manufacturing sector, companies producing promoted products or engaged in promoted activities are eligible for Pioneer Status.
A Pioneer Status company enjoys a partial exemption form income tax. It pays tax on 30% of its statutory income for five years, commencing from its Production Day (defined as the day of first sale of the agriculture produce).
Accumulated losses and unabsorbed capital allowance incurred during the pioneer period by companies whose pioneer status will expire on and after 1 October 2005 are allowed to be carried forward and deducted against post pioneer income of a business relating to the same promoted activity or promoted product.
Applications received form companies located in the promoted areas i.e the States of Perlis, Sabah and Sarawak and the designated “Eastern Corridor” of Peninsular Malaysia, will enjoy a 100% tax exemption on their statutory income during their 5 year exemption period. All project applications received by 31 December 2010 will be eligible for this enhanced incentive.
Application should be submitted to MIDA.
(ii) Investment Tax Allowance
As an alternative to Pioneer Status, companies producing promoted products or engaged in promoted activities can apply for Investment Tax Allowance (ITA). A company granted ITA is eligible for an allowance of 60% on its qualifying capital expenditure incurred within five years form the date on which the first qualifying capital expenditure is incurred.
Companies can offset this allowance against 70% of their statutory income in the year of assessment. Any unutilized allowance can be carried forward to subsequent years until fully utilized. The remaining 30% of the statutory income is taxed at the prevailing company tax rate.
Application received form companies located in the promoted areas i.e. the States of Perlis, Sabah and Sarawak, and the designated “Eastern Corridor” of Peninsular Malaysia, will enjoy an allowance of 100% on the qualifying capital expenditure incurred within a period of five years. The allowances can be utilized to offset against 100% of the statutory income for each year of assessment. All project applications received by 31 December 2010 will be eligible for this enhanced incentive.
Application should be submitted to MIDA.
To increase the benefits to agricultural projects, the government has broadened the definition of qualifying capital expenditure to include expenditure incurred on:
>>Clearing and preparation of land
>>Planting of crops
>>Provision of plant and machinery used in Malaysia for the purpose of crop cultivation, animal farming, aquaculture, inland fishing or deep-sea fishing, and other agricultural or pastoral pursuits.
>>Construction of access roads including bridges, construction or purchase of buildings (including those provided for the welfare of people or as living accommodation), and structural improvements on land or other structures which are used for crop cultivation, animal farming, aquaculture, inland fishing and other agricultural or pastoral pursuits. Such roads, bridges, building, structural improvements on land and other structures should be on land forming part of the land used for the purpose of such crop cultivation, animal farming, aquaculture, inland fishing and other agricultural or pastoral pursuits.
In view of the time lag between start-up processing of the produce, integrated agricultural projects qualify for ITA for an additional five years for expenditure incurred for processing or manufacturing operations.
Applications should be submitted to MIDA.
(iii) Incentives for Food Production
(a) Incentives for New Projects
To encourage food production, a company, which invests in a subsidiary company engaged in food production, together with the subsidiary company, qualifies for one of the following incentive packages:
Incentive Package A:
>>A company which takes up at least 70% equity in a subsidiary company engaged in food production reveives a tax deduction equivalent to the amount of investment made in that subsidiary; and
>>The subsidiary company enjoys full income tax exemption on its statutory income for 10 years commencing from the first year the company enjoys profits, in which:
* Losses incurred before and during the exemption period can be brought forward after the exemption period of 10 years;
* Dividends paid from the exempt income are exempted in the hands of the shareholders.
Incentive Package B:
>>A company which takes up at least 70% equity in a subsidiary company engaged in food production will be given group relief for the losses incurred by the subsidiary company before it records any profit, and
>>The subsidiary company enjoys full income tax exemption on its statutory income for 10 years. This commences from the first year the company enjoys profits in which:
* Losses incurred during the tax exemption period can be brought forward after the exemption period of 10 years; and
* Dividends paid from the exempt income are exempted in the hands of the shareholders.
The eligible food products are as approved by the Minister of Finance. These include kenaf, deep-sea fishing, vegetables, fruits, herbs, spices, aquaculture, and the rearing of cattle, goats and sheep.
Companies should commence food production within a period of one year from the date the incentive is approved. The incentive period for this scheme is extended for applications received until 31 December 2010.
Applications should be submitted to the Ministry of Agriculture and Agro-based Industry.
b) Incentives for Existing Companies Which Reinvest
An existing company that reinvests in the production of the above food products also qualifies for the same incentives for a period of five years.
The food production project both new and existing companies should commence within a year form the date the incentive is approved. Applications should be submitted to the Ministry of Agriculture and Agro-based Industry by 31 December 2005.
c) Tax Incentives for ‘Halal’ Food Production
To encourage new investments in ‘halal’ food production for the export market and to increase the use of modern and state-of-the-art machinery and equipment in producing high quality ‘halal’ food that comply with the international standards, companies which invest in ‘halal’ food productions and have already obtained ‘halal’ certification from JAKIM are eligible for the Investment Tax Allowance of 100% of qualifying capital expenditure incurred within a period of 5 years.
This allowance can be offset against 100% of the statutory income in the year of assessment. Any unutilized allowances can be carried forward to subsequent years until the whole amount has been fully utilized.
Applications should be submitted to MIDA.
For further information on obtaining ‘Halal’ certification from JAKIM, please visit JAKIM’s website at http://halaljakim.gov.my/
(iv) Incentive for Reinvestment in Food Processing Activities
A locally-owned manufacturing company with Malaysian equity of at least 60% that reinvests in promoted food processing activities is eligible for another round of the Pioneer Status or Investment Tax Allowance (ITA) incentive. Activities located in the promoted areas, i.e the States of Perlis, Sabah, Sarawak and the “Eastern Corridor” of Peninsular Malaysia, are eligible for the Pioneer Status and ITA incentives in accordance with that given to promoted areas.
2. Additional Incentives for the Agricultural Sector
(i) Reinvestment Allowance
Persons or companies engaged for at least 12 months in the production of essential food such as rice, maize, vegetables, tuber, livestock, aquatic products, and any other activities approved by the Minister of Finance can enjoy the Reinvestment Allowance (RA).
The qualifying capital expenditure includes expenditure incurred on:
>>Clearing and preparation of land
>>Planting of crops
>>Provision of plant and machinery used in Malaysia for the purpose of crop cultivation, animal farming, aquaculture, inland fishing or deep-sea fishing, and other agricultural or pastoral pursuits.
>>Construction of access roads including bridges, construction or purchase of buildings (including those provided for the welfare of people or as living accommodation), and structural improvements on land or other structures which are used for crop cultivation, animal farming aquaculture, inland fishing and other agricultural or pastoral pursuits. Such roads, bridges, buildings, structural improvements on land and other structures should be on land forming part of the land used for the purpose of such crop cultivation, animal farming, aquaculture, inland fishing and other agricultural or pastoral pursuits.
The RA is in the form of an allowance of 60% of the qualifying capital expenditure incurred within a period of 15 years beginning from the first reinvestment is made. The allowance can be offset against 70% of the statutory income in the year of assessment. Unutilized allowances can be carried forward to the following years until fully utilized. Companies that undertake reinvestment projects in the promoted areas i.e. the States of Perlis, Sabah, Sarawak and the designated “Eastern Corridor” of Peninsular Malaysia, can offset the allowance fully against their statutory income for that year of assessment.
Claims should be submitted to the IRB.
(ii) Incentive for Reinvestment in Resource-Based Industries
This incentive is offered to companies that are at least 51% Malaysian-owned and are in the rubber, oil palm and wood-based industries products, which have export potential. Companies in these industries reinvesting for expansion purposed are eligible for another round of Pioneer Status or Investment Tax Allowance (ITA). Activities located in the promoted areas i.e the States of Perlis, Sabah, Sarawak and the designated “Eastern Corridor” of Peninsular Malaysia are eligible for higher levels of exemption/allowance under Pioneer Status or ITA in accordance with that given for promoted areas.
Applications should be submitted to MIDA.
(iii) Incentives for Modernising Chicken and Duck Rearing
To promote modernization and the usage of environment-friendly practices in the agricultural sector, chicken and duck rearers who reinvest for the purpose of shifting form the opened house system to the closed house system will be eligible for RA for a period of 15 consecutive years commencing from the first year the reinvestment is made.
This incentive is given on condition that the minimum rearing capacity of the closed house system is as follows:
>>20,000 broiler chickens/broiler ducks per cycle; or
>>50,000 layer chickens/layer ducks per cycle
>>20,000 parent or grandparent stock of chickens/ducks per cycle
All projects must be approved by the Ministry of Agriculture and Agro-based Industry.
Claims should be submitted to the IRB.
(iv) Accelerated Capital Allowance
Upon the expiry of the Reinvestment Allowance (RA), companies that reinvest in promoted agricultural activities and food products are eligible to apply for the Accelerated Capital Allowance (ACA). These activities include the cultivation of rice, maize, vegetable, tubers, livestock, aquatic products and any other activities approved by the Minister of Finance.
The ACA on the capital expenditure is to be utilized within two years, i.e. an initial allowance of 20% in the first year and an annual allowance of 40%.
Claims should be submitted to the IRB, accompanied by a letter from MIDA certifying that the companies are undertaking promoted agricultural activities or producing promoted food products.
(v) Agricultural Allowance
A person or a company carrying on an agricultural activity can claim capital allowances and special industrial building allowances under the income Tax Act 1967 for certain capital expenditure. Capital expenditure, which qualifies, includes expenditure incurred on:
>>Clearing and preparation of land
>>Planting of crops
>>Provision of plant and machinery used in Malaysia for the purpose of crop cultivation, animal farming, aquaculture, inland fishing or deep-sea fishing, and other agricultural or pastoral pursuits
>>Construction of access roads including bridges, construction or purchase of buildings (including those provided for the welfare of people or as living accommodation), and structural improvements on land or other structures which are used for crop cultivation, animal farming, aquaculture, inland fishing and other agricultural or pastoral pursuits. Such roads, bridges, buildings, structural improvements on land and other structures should be on land forming part of the land used for the purpose of such crop cultivation, animal farming, aquaculture, inland fishing and other agricultural or pastoral pursuits
A company continues to get the allowance for as long as it incurs the expenditure, regardless of whether it already enjoys Pioneer Status or ITA.
Claims should be submitted to the IRB.
(vi) Accelerated Agriculture Allowance for the Planting of Rubberwood Trees
To ensure a regular supply of rubberwood for the furniture industry, a non-rubber plantation company that plants at least 10% of its plantation with rubberwood trees is eligible for the Accelerated Agriculture Allowance whereby the write-off period on the capital expenditure incurred for land preparation, planting and maintenance of rubberwood cultivation is accelerated from two years to one year.
Application should be submitted to the Ministry of Plantation Industries and Commodities.
(vii) 100% Allowance on Capital Expediture for Approved Agricultural Projects
Schedule 4A of the Income Tax Act 1967 provides for a 100% allowance on capital expenditure for Approved Agricultural Projects as approved by the Minister of Finance. This covers qualifying capital expenditure incurred within a specific time frame for a farm that cultivates and utilises a specified minimum acreage as stipulated by the Minister of Finance.
Approved agricultural projects are those for the cultivation of vegetables, fruits (papaya, banana, passion fruit, star fruit, guava and mangosteen), tubers, roots, herbs, spices, crops for animal feed and hydroponics-based products; ornamental fish culture; fish and prawn rearing (pond culture, tank culture, marine cage culture, and off-shore marine cage culture); cockles, oysters, mussels, and seaweed culture; shrimp, prawn and fish hatchery; and certain species of forest plantations.
The incentives enables a person carrying on such a project to elect to deduct the qualifying capital expenditure incurred in respect of that project from his aggregate income, including income form other sources. Where there is insufficient aggregate income, the unabsorbed expenditure can be carried forward to subsequent years of assessment. Where he so elects, he will not be entitled to any capital allowance or agricultural allowance on the same capital expenditure.
The qualifying capital expenditure eligible for deduction includes expenditure incurred on:
>>Clearing and preparation of land
>>Planting of crops
>>Provision of plant and machinery used in Malaysia for the purpose of crop cultivation, animal farming, aquaculture, inland fishing or deep-sea fishing, and other agricultural or pastoral pursuits
>>Construction of access roads including bridges, construction or purchase of buildings (including those provided for the welfare of people or as living accommodation), and structural improvements on land or other structures which are used for crop cultivation, animal farming, aquaculture, inland fishing and other agricultural or pastoral pursuits. Such roads, bridges, buildings, structural improvements on land and other structures should be on land forming part of the land used for the purpose of such crop cultivation, animal farming, aquaculture, inland fishing and other agricultural or pastoral pursuits.
This incentive is not available to companies that have been granted incentives under the Promotion of Investment Act 1986 and whose tax relief periods have not started or have not expired.
Claims should be submitted to the IRB.
(viii) Tax Exemption on the Value of Increased Exports
A company which exports fresh and dried fruits, fresh and dried flowers, ornamental plants and ornamental fish enjoys a tax exemption of its statutory income equivalent to 10% of the value of its increased exports.
Claims should be submitted to the IRB.
(ix) Incentives for Companies providing Cold Chain Facilities and Services for Food Products
Companies providing cold room and refrigerated truck facilities and related services such as the collection and treatment of locally produced perishable food products qualify for Pioneer Status or Investment Tax Allowance (ITA). Activities located in the promoted areas are offered more attractive levels of Pioneer Status or ITA.
Application received from existing locally owned companies to reinvest in cold chain facilities and services for perishable agricultural produce are eligible for the following incentives:
a) Pioneer Status with a tax exemption of 70% (100% for promoted areas) on the increased statutory income arising from the reinvestment for a period of five years. Accumulated losses and unabsorbed capital allowances incurred during the pioneer period by companies whose pioneer status will expire on after 1 October 2005 are allowed to be carried forward and deducted against post-pioneer income of a business relating to the same promoted activity or promoted product; or
b) Investment Tax Allowance of 60% (100% for promoted areas) on the additional qualifying capital expenditure incurred within a period of five years. The allowance can be offset against 70% (100% for promoted areas) of the statutory income in each year of assessment. Any unutilized allowances can be carried forward to subsequent years until the whole amount has been fully utilized
Application should be submitted to MIDA
(x) Double Deduction for Expenses to Obtain “Halal” Certification and Quality Systems and Standards Certification
To enhance the competitiveness of Malaysian companies in the global market for ‘halal’ products (products suitable for consumption by Muslims) including “halal” food, double deduction will be given for the purpose of income tax computation to companies which incur expenses in obtaining;
a) Quality system and standards certification as well as ‘halal’ certification from the Department of Islamic Development Malaysia (JAKIM)
b) International quality systems and standards certification
Claims should be submitted to the IRB.
For further information on obtaining ‘Halal’ certification from JAKIM, please visit JAKIM’s website at http://halaljakim.gov.my/
(xi) Double Deduction on Freight Charges for Export of Rattan and Wood-based Products
Manufacturers who export rattan and wood-based products (excluding sawn timber and veneer) qualify for double deduction on freight charges.
Note: please refer to Section 17 for other incentives related to the agricultural sector.
APPENDIX 1
AGRICULTURAL PRODUCTION
1. Cultivation of tea
2. Cultivation of fruits
3. Cultivation of vegetables, tubers or roots
4. Cultivation of rice or maize
5. Cultivation of herbs or spices
6. Cultivation of essential oil crops
7. Production of planting materials
8. Cultivation of crops for animal feed
9. Floriculture
10. Apiculture
11. Livestock farming (excluding rearing of chickens, ducks or pigs)
12. Production of breeder stock
13. Spawning, breeding and culturing of aquatic products
14. Off-shore fishing
15. Cultivation of medical plants
16. Sericulture*
17. Cultivation of cocoa*
18. Cultivation of coconut*
19. Cultivation of sago palm*
20. Rearing of chickens and ducks*
PROCESSING OF AGRICULTURAL PRODUCE
1. Chocolate and chocolate confectionery
2. Fruits
3. Vegetables, tubers or roots
4. Essential oil
5. Livestock products
6. Aquatic products
7. Agricultural waste or agricultural by-products
8. Aquaculture feed
9. Plant extracts for pharmaceutical, perfumery, cosmetic or food industries
10.High fructose syrup
11. Cocoa and cocoa product
12. Illipe products*
13. Coconut products except copra or crude coconut oil*
14. Starch products*
FORESTRY AND FORESTRY PRODUCTS
1. Cultivation of timber, bamboo or cane
2. Cane products
3. Bamboo products
MANUFACTURE OF RUBBER PRODUCTS
1. Earthmover tyres, agricultural tyres, industrial tyres, commercial vehicle tyres, motorcycle tyres, aircraft tyres or solid tyres
2. Precured tread liner
3. Retreading of aircraft tyres
4. Latex products:
(a)Surgical gloves
(b)Safety/special function gloves
(c)Condoms
(d)Catheters
(e)Rubber (elastomeric) specialty coatings
(f)Rubberised fabrics
5. Dry rubber products
a. Beltings
b. Hoses, pipes and tubings
c. Rubber profiles
d. Inflatable rubber products
e. Industrial and office equipment rollers
f. Seals, gaskets, washers, packings and rings
g. Anti-vibration, damping and sound insulation products
h. Rubber linings
i. Rubber floorings
j. Rubber moulds
k. Modified natural rubber
6. Reclaimed rubber
7. Rubber support
8. Latex products*
a. Carpet underlay
b. Swimming caps
c. Ballons
d. Finger cots
e. Toys
f. Latex thread
MANUFACTURE OF OIL PALM PRODUCTS AND THEIR DERIVATIVES
1. Oleochemicals or oleochemical derivatives or preparations
2. Margarine, vanaspati, shortening or other manufactured fat products
3. Fattty acid distillate derivatives
4. Cocoa butter replace’s, cocoa, butter substitutes, cocoa butter equivalent, palm mid fraction or special olein
5. Crude palm kernel oil and palm kernel cake/expeller
6. Palm-based nutraceuticals, constituents of palm oil/palm kernel oil
7. Palm-based food products:
a. Specially animal fat replacer
b. Palm-based mayonnaise and salad dressing
c. Substituted coconut milk/powder
d. Red palm oil and its products
e. Palm-based food ingredient
f. Modified (interesterified) palm oil and palm kernel oil products
g. Microencapsulated palm-based products
8. Processed products from:
a. Palm fatty acid distillate/palm kernel fatty acid distillate
b. Palm kernel cake/expeller
c. Palm oil mill effluent
9. Products from palm biomass
10. Refining of palm oil or palm kernel oil*
MANUFACTURE OF WOOD AND WOOD PRODUCTS
1. Reconstituted wood-based panel boards or products.
2. Wooden solid or other specialized function doors or wooden solid windows
3. Multi-ply parquet
4. Wooden furniture or parts
5. Insulation for cryogenic vessels
6. All wooden products except sawn timber, veneer and plain plywood*
MANUFACTURE OF PULP, PAPER AND PAPERBOARD
1. Pulp
2. Newsprint
3. Security paper
4. Resin impregnated paper and products thereof
5. Printing and writing paper
6. Corrugated medium paper, testliner or kraftliner
7. Kraft paper
8. Paperboard
9. Moulded paper
10. Specialty paper
11. All types of paper and paper products from pulp*
Source: MIDA, Malaysia Investment In the Manufacturing Sector, February 2007
Thursday, September 13, 2007
Malaysia's Agriculture: A Growing Industry
A Growing Industry
Malaysia’s agriculture sector is expected to grow 3.5 per cent this year compared to 3.1 per cent in 2006 on the back rising output in food commodities, higher oil palm and rubber production, as well as the Northern Corridor Economic Region-led projects.
Agriculture remains an important contributor to the economy, estimated to account for 7.7 per cent of Malaysia’s grass domestic product (GDP) in 2007 compared to 7.9 per cent in 2006.
Related development in the Northern Corridor could further boost the sector’s contribution to GDP growth.
Palm oil output, for instance, is expected to increase two per cent following improved yields and expansion in matured areas.
In addition, measures are being taken to boost output through the wide use of high-quality seedlings and latest technologies, as well as knowledge-based production systems, which will result in higher palm oil output.
Rubber production is also expected to expand supported by firm prices, which is likely to encourage small-holders to increase tapping activities and the utilization of better clones, stimulations and low-intensity tapping systems.
Rapid developments in the agro-food industry and promotion of other sources of growth in agriculture, including aquaculture, horticulture, seaweed, deep sea fishing as well as kenaf planting will further boost the output of the sector.
Livestock industry output is also envisaged to increase, contributed by integrated farming projects involved in rearing of goats and cattle in oil palm and rubber plantations.
With modern rearing systems, poultry and eggs production is expected to rise to meet local and external demand.
Value-added activities in the agriculture sector is estimated to ease at 3.1 per cent this year compared to 5.2 per cent in 2006, coming from higher output in food commodities, including livestock, fishing and other agriculture sub-sectors.
Higher value-added of the agro-food sub-sector is in line with the Government’s efforts to reduce the food import bill and increase meat and dairy products’ self sufficiency level – supported by initiatives to set up the National Feedlot Centre and Permanent Food Production Parks.
Crude palm oil production is expected to be lower this year at 15.7 million tonnes compared with 15.9 million tones in 2006 due to major floods that destroyed crops in the early part of the year.
Nevertheless, the new matured areas coming onstream, better estate management and higher quality agricultural inputs are expected to partially offset the negative impact of unfavourable weather.
Despite strong rubber prices, rubber production declined 3.5 per cent to 589,379 tonnes in the first six months of this year compared with 17.9 per cent to 610, 512 tonnes in the comparable period in 2006.
The fall was mainly due to the wintering season and excessive rainfall which disrupted rubber tapping activities. As a result, rubber production in 2007 is expected to expand 1.3 per cent compared with 14 per cent in 2006.
Value-added activities in the fishing industry expanded by four per cent in the first six months of 2007 compared with 9.4 per cent in the same period a year ago, attributed to higher marine fish landings due to expansion in deep sea fishing.
Values-added livestock is also projected to expand strongly by 10.1 per cent in 2007 compared with 6.9 per cent in 2006 led by integrated farming with rearing of cattle and goats in oil palm and rubber plantations.
Other agriculture sub-sectors – which include paddy, pineapples, tobacco, coconut, vegetables, fruits, tea, flower and pepper – is projected to increase strongly by five per cent this year compared with 4.2 per cent in 2006 on the back of higher production of vegetable and fruits, expansion in cultivated areas, organic and modern farming.
Source: Economic Report 2007/2008, The New Straits Times, Saturday, September 8, 2007
Malaysia’s agriculture sector is expected to grow 3.5 per cent this year compared to 3.1 per cent in 2006 on the back rising output in food commodities, higher oil palm and rubber production, as well as the Northern Corridor Economic Region-led projects.
Agriculture remains an important contributor to the economy, estimated to account for 7.7 per cent of Malaysia’s grass domestic product (GDP) in 2007 compared to 7.9 per cent in 2006.
Related development in the Northern Corridor could further boost the sector’s contribution to GDP growth.
Palm oil output, for instance, is expected to increase two per cent following improved yields and expansion in matured areas.
In addition, measures are being taken to boost output through the wide use of high-quality seedlings and latest technologies, as well as knowledge-based production systems, which will result in higher palm oil output.
Rubber production is also expected to expand supported by firm prices, which is likely to encourage small-holders to increase tapping activities and the utilization of better clones, stimulations and low-intensity tapping systems.
Rapid developments in the agro-food industry and promotion of other sources of growth in agriculture, including aquaculture, horticulture, seaweed, deep sea fishing as well as kenaf planting will further boost the output of the sector.
Livestock industry output is also envisaged to increase, contributed by integrated farming projects involved in rearing of goats and cattle in oil palm and rubber plantations.
With modern rearing systems, poultry and eggs production is expected to rise to meet local and external demand.
Value-added activities in the agriculture sector is estimated to ease at 3.1 per cent this year compared to 5.2 per cent in 2006, coming from higher output in food commodities, including livestock, fishing and other agriculture sub-sectors.
Higher value-added of the agro-food sub-sector is in line with the Government’s efforts to reduce the food import bill and increase meat and dairy products’ self sufficiency level – supported by initiatives to set up the National Feedlot Centre and Permanent Food Production Parks.
Crude palm oil production is expected to be lower this year at 15.7 million tonnes compared with 15.9 million tones in 2006 due to major floods that destroyed crops in the early part of the year.
Nevertheless, the new matured areas coming onstream, better estate management and higher quality agricultural inputs are expected to partially offset the negative impact of unfavourable weather.
Despite strong rubber prices, rubber production declined 3.5 per cent to 589,379 tonnes in the first six months of this year compared with 17.9 per cent to 610, 512 tonnes in the comparable period in 2006.
The fall was mainly due to the wintering season and excessive rainfall which disrupted rubber tapping activities. As a result, rubber production in 2007 is expected to expand 1.3 per cent compared with 14 per cent in 2006.
Value-added activities in the fishing industry expanded by four per cent in the first six months of 2007 compared with 9.4 per cent in the same period a year ago, attributed to higher marine fish landings due to expansion in deep sea fishing.
Values-added livestock is also projected to expand strongly by 10.1 per cent in 2007 compared with 6.9 per cent in 2006 led by integrated farming with rearing of cattle and goats in oil palm and rubber plantations.
Other agriculture sub-sectors – which include paddy, pineapples, tobacco, coconut, vegetables, fruits, tea, flower and pepper – is projected to increase strongly by five per cent this year compared with 4.2 per cent in 2006 on the back of higher production of vegetable and fruits, expansion in cultivated areas, organic and modern farming.
Source: Economic Report 2007/2008, The New Straits Times, Saturday, September 8, 2007
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