1

MALAYSIAN TOBACCO FARMERS :

SHIFTING FROM TOBACCO TO KENAF

NATIONAL TOBACCO BOARD (NTB)

PREPARED BY

WAN BAHARUDDIN WAN ISMAIL

07TH OCTOBER 2008

MANILA, PHILIPPINES.

SOCIOECONOMICGOVERNMENT’S

REVENUE/ TAXATION

(RM3 billion/ year)

PUBLIC HEALTH

CONTROL

e.g. TAK NAK

Campaign &

FRAMEWORK

CONVENTION ON

TOBACCO

CONTROL (FCTC)

GLOBALIZATION

(AFTA/ WTO) - Free

in/ Free Out 2010

POLICIES IMPACTING TOBACCO INDUSTRY

1

3

2

4

2

INDICATOR 2004 2007 2010

1 Acreage (Hectare) 13,280 7,723 ?

2 Production of Cured Tobacco

(Million Kg)

14.260 7.600 ?

3 Value of Production

(RM Million)

194.938 99.717 ?

4 Cured Leaf Price (RM/ Kg) 14.00 13.00 8.00 - 10.00

5 Number of Farmers (Families) 11,708 3,140 ?

6 Number of Grower Curers

(Families)

4,340 3,066 ?

7 Number of Joint Venture Grower

Curers (Companies)

291

(Workers)

166

(Workers)

?

DECLINING TOBACCO PRODUCTION INDICATORS

0

5000

10000

15000

20000

25000

19741975

19761977

19781979

19801981

19821983

19841985

19861987

19881989

19901991

19921993

19941995

19961997

19981999

20002001

20022003

20042005

20062007

2008

0

2

4

6

8

10

12

14

16

Hectarage Production

Tobaaco Hectarage and Production (1974 – 2008)

Hecta

re

Mil

lio

n K

g

3

1) Disciplined/ well managed growers (cluster)

2) 15,000 hectares tobacco land (mainly Beach

Ridges Interspersed With Swales – BRIS soil)

3) Infrastructure, farm machinery and services

4) Tobacco barns for drying other crops

5) Successful commercialization of BRIS soil and

contract farming with multinationals – RM4

billion produced and successfully marketed

since 70’s.

AVAILABLE TOBACCO INDUSTRY RESOURCES

Project Hectare/

Quantity

No.of

Farmers

Production Value

(RM Million)

1. Melon

2. Corn

3. Paddy

4. Sweet Potato

5. Banana

6. Pineapple

7. Chili/ Vegetable

8. Mushroom

178

114

202

186

31

25

203

0.2

149

111

70

139

60

40

287

6

1,995 (Ton)

2,226,040 (Cob)

789 (Ton)

2,280 (Ton)

422 (Ton)

1,717 (Ton)

1,199 (Ton)

16.85 (Ton)

1.220

0.914

0.666

1.453

0.425

0.901

0.728

0.058

Sub Total 939.2 862 6.365

9. Sheep/ Goat

10. Cattle

11. Aquaculture

233

524

253 ponds

7

100

41

233

524

263 (Ton)

0.073

3.321

0.124

Sub Total 148 3.518

TOTAL 1,010 9.883

CROP INTEGRATION & DIVERSIFICATION PROJECT 2007

4

Project Hectare/

Quantity

No. of

Farmers

Production Value

(RM Million)

1. Melon

2. Corn

3. Paddy

4. Sweet Potato

5. Tapioca

6. Banana

7. Pineapple

8. Chili/Vegetable

9. Mushroom

10. Cocoa

11. Pitaya

127

123

153

59

49

53

8

69

0.2

140

6

119

93

56

50

58

44

90

89

7

138

11

646 (Ton)

1,131,707 (Cob)

593 (Ton)

352 (Ton)

849 (Ton)

244 (Ton)

1,194 (Ton)

10.17 (Ton)

-

-

0.490

0.464

0.524

0.224

0.086

0.855

0.128

0.725

0.035

-

-

Sub Total 781.2 755 3.531

10. Sheep/Goat

11. Cattle

12. Aquaculture

645

356

346 ponds

32

19

41

645

356

3,645,098 (Ton)

0.421

0.389

1.859

Sub Total 92 2.669

TOTAL 847 6.020

CROP INTEGRATION PROJECT 2008 (as at 30 June)

WHY INTEGRATE TOBACCO FARMING?

1. Single crop/ year cannot sustain growers income –need to integrate/ diversify and maximize income through annual cropping system.

2. Reduce cost – optimize utilization of existing resources

3. Benefit from “seed to market” tobacco package and utilize NTB’s experience & knowledge of successful development in tobacco cultivation on BRIS soil.

4. No sustainable equivalent alternatives to tobacco w.r.t scale, market, income, stability and suitable to challenging BRIS agro-ecological conditions.

5. Replace future tobacco cultivation parallel to Malaysia’s commitment to the FCTC (either; zero domestic tobacco content in cigarettes or relocation of cigarette manufacturing to other countries.

5

KENAF

WHY KENAF ?

1. 1001 uses – not gunny sacks/

cordage, but new non traditional

applications in green building,

auto, furniture, bio-composites,

pulp and paper.

2. Green/ Sustainable – replace

artificial petroleum based and

forest based raw materials.

3. Kyoto Protocol, climate change,

increasing petroleum prices and

depleting forest resources.

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WHY KENAF ?

4. Blue Ocean opportunities to

pioneer an integrated agricultural

industry where growers are not

sellers of cheap raw materials,

but partners in a supply chain

and benefiting from more

lucrative midstream/ downstream

opportunities and returns

(Contract Farming Plus).

5. Support Government policy –

new sources of growth

1) Absorbents

Cat / Poultry Litter, Horse Bedding

Industrial absorbent

Feminine Products, Diapers

2) Paper Products

Whole stalk can be efficiently made into paper

Use as filler with other cellulose

3) High Quality Paper Pulp

Cigarette paper

Archive grade paper

Filtration paper

KENAF PRODUCTS

© 2006 NTB

7

4) Automotive Panels &

Components

Substitute for Carbon,

Glass and other mineral

fibers

Offers weight, strength and

environmental advantages

5) Cordage, Rope and Twine

6) Textiles

Industrial fabrics & lay-up

composite materials

Geo-Textiles

Commercial fabric

KENAF PRODUCTS

© 2006 NTB

7) Fibrous Reinforcement of

Plaster, cement and other

binders

Structural support building

materials

Lightweight, insulated

building blocks using local

binder

Blend in slurry with gypsum

for a wall board product,

8) Cellulosic ethanol

9) Fodder (Animal feed)

KENAF PRODUCTS

© 2006 NTB

8

Plantation of Kenaf

• Development of kenaf as an

alternative crop to tobacco in medium

to long term.

• The target area is 10,000 hectares:

Bachok / Pasir Puteh

Setiu / Marang

• Kenaf industry is expected to create

more jobs and increase income of

about 10,000 marginal tobacco

farmers.

• The project will be implemented on a

nucleus farm model whereby anchor

companies will plant kenaf as an

estate (nucleus) to support organised

smallholders.

• The anchor company will also

undertake processing of the kenaf

fiber.

Kenaf: The Tobacco Alternative

Development of the Kenaf Industry Under the National Tobacco Board

Source : ECER

Inputs

(seeds etc)Production Collection, Processing

& Packaging Centre

(CPPC)

Factories Hypermarkets

& Retail outletsConsumers

Shipping &

Forwarding Export Market

Logistics

Management

Supply Chain Management

Advantages of Supply Chain Management:

• Less market intermediary

• Reduce post harvest losses due to better handling

• CPPC will act as one stop centre

• Ensure quality of product

Source : ECER

9

Conceptual Implementation Strategy for Nucleus Farm Model

CPPC/ CPMC

MANAGEMENT FINANCINGContract

Farmers

Output

GAP Certified

GOVERNMENT

(MPIC/ NTB/

State)

INVESTORSAnchor

Company

FACTORIES

Composite (wood, roofing, panels), brown paper, insulator, plaster ceiling,

biofuel, textile, animal feed

• Organised

smallholders

• Kenaf

development

fund

• R&D

(downstream

products)

• Manufacturing

companies

• Seed production

• Soft loan

• Infrastructure

• Extension

• Marketing

• Mechanization

• Transport

• Quality control

(GAP)

• Contract farming

• Grade

specifications

Source : ECER

Official Launch of the CPPC & Malaysia’s

1st Export of 1000 Tonnes of Kenaf Fiber to Korea, 22/8/08

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KENAF PLANTED AREA

(FIBER AND CORE)

Year Hectarage

2004 1 ha

2005 42 ha

2006 112 ha

2007 285 ha

2008 1,250 ha

SEED PRODUCTION

Year Hectarage

2006 58 ha

2007 152 ha

2008 260 ha

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TRIPARTITE R&D APPROACH

1) Applied and fast track R&D involving Upstream (NTB and growers), Downstream (industry partner) and R&D institution.

2) Collaboration with 4 anchor companies (bio-composite, high quality fiber, building insulator, and powdered core applications) to develop integrated commercial model with supporting machinery, systems and services.

3) Collaboration with USM in the commercialization

of kenaf for pulp/ paper, high quality fibers, building materials and bio-composites.

ISSUES AND CHALLENGES

1. Growers mindset – change, new skills, less

lucrative crop.

2. Consumers mindset – willingness to pay

premium for green and environmentally

friendly products.

3. Maximum mechanization to be competitive

– affordable and suitable to local

environment.

4. Specifications/ price which commensurate

with costs, income and market configuration

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ISSUES AND CHALLENGES

5. Development of contract farming plus concept

with growers as partners in supply chain and

sharing returns from more lucrative downstream

activities.

6. Fast track and applied R&D - BRIS adapted

technology and techno economically viable.

7. Investment for new and unproven industry.

8. Human capital development.

9. Increasing input costs for fertilizers,

agrochemicals and mechanization.

THANK YOU