PETALING JAYA: A former Felcra chairman has poured cold water on a proposal for the merging of agricultural smallholdings for private enterprises to manage.
Nageeb Wahab said former prime minister Dr Mahathir Mohamad, who came up with the idea, had apparently not considered the inexperience of corporate entities in managing smallholdings and their lack of a social infrastructure to run estates formed from the amalgamation of such holdings.
“Smallholders aren’t used to having people tell them what to do,” he told FMT.
He said it would be difficult to get a group of smallholders, who usually own between two and three hectares of land, to band together to form a commercially viable project.
In making his proposal recently, Mahathir said the merger of smallholdings and their management by private firms could lead to improved profits for the agriculture sector.
Nageeb, who headed Felcra from 2018 to 2020, said a plot of land had to be between 1,000ha and 2,000ha to be viable under a commercial entity.
He said most plots owned by smallholders did not lie next to one another and this fragmentation presented another challenge to commercial interests.
“You also need to convince smallholders to part with their land and it is a problem to get a collective agreement from smallholders since different people have different ideas,” he said.
Nageeb said he believed it would be more efficient to let smallholders manage their own land.
He proposed that the government encourage them to enlist with agencies like Risda or Felcra, and for Felcra to extend its scope of services to smallholders.
He said they needed better access to mills, to technical support from the likes of the Malaysian Palm Oil Board and to government financial support to help them with replanting.
“Agencies like Felcra and Risda are the best options if you want to integrate smallholders and help them get the best out of their land,” he said.
Yeah Kim Leng, a professor of economics at Sunway University, said Mahathir’s proposal was “conceptually sound”, but he told FMT a number of hindrances made it difficult to carry out.
He agreed with Nageeb that one of the problems was the fragmentation of smallholdings, but he also referred to problems in the availability of technology and capital as well as those concerning risks and returns.
“Unless the venture is highly profitable, many private firms and investors tend to shy away from tying up management and capital resources in a cooperative type of venture where they either face higher uncertainties or have to contend with too many variables beyond their control,” he said.
Yeah said state agencies were better suited to undertake such risky ventures, but they lacked the entrepreneurial and innovative spirit typical of successful agricultural companies.
Another major hurdle, he said, was the absence of a successful business model that could be showcased to smallholders to convince them to pool their land banks.
Fatimah Mohamed Arshad, a fellow with the Institute for Democracy and Economic Affairs (IDEAS), said the estate model did not make clear how the proposed innovations would work, except for those concerning farm diversification and crop-mix strategy.
She said it might be less risky if the current cooperative model were to be restructured towards producers’ empowerment and involvement in agribusiness and value-added activities to enhance their income.
She proposed that government agencies empower settlers with productive and entrepreneurial skills to advance their cooperatives.
Fatimah, who also heads the agriculture and food security cluster at the Academy of Professors, said organisations like Felda should help rope in settlers into agribusiness activities such as farm diversification and the production of fertilisers.
She also said small farms should not be viewed as liabilities, noting that it had been shown they could be expanded. “More than 90% of rubber and cocoa cultivation are under smallholders,” she said.
Among the advantages of having small farms, she said, was that they could be efficiently run because maintenance costs were low.
They also tended to be more nimble in facing sudden economic shocks. “When cocoa prices plunged in the past, the estates closed shop but the smallholders remained.”
Fatimah also said profit would be the single objective of private enterprises if they were to manage the smallholders.
This would clash with the wants of small farmers who, although they are concerned about their livelihood, also held their families, their farms and the environment close to their hearts.
Source: https://www.freemalaysiatoday.com/category/nation/2021/04/22/why-merging-small-farms-wont-work/