This article first appeared in Forum, The Edge Malaysia Weekly, on February 1 - 7, 2016.
PRO-POOR policy has been the mantra for poverty eradication. However, pro-smallholder development policy may hold the key to equitable and sustainable growth in the agricultural and rural sectors, which support the majority of the poor.
In an era of bias against large-scale farming and agribusiness, small farms are seen as not making economic sense anymore. Big is perceived as strong and competitive and offering the advantages of economies of scale, which are lacking in small farms. Being big is the only way to survive in a highly globalised world, according to the World Trade Organization.
However, the multi-functionality of small farms may demystify this perception. Their multiple functions benefit the society and biosphere, more than just producing food and commodities.
Malaysia started its agriculture rolling through the involvement of estates in industrial crop cultivation, particularly rubber and oil palm. Big farms or estates proved to be the right business model for these industrial crops. Malaysia was the world’s largest producer of these commodities in the 1960s, 1970s and 1980s, although that is history now.
The structural change that took place in the economy, particularly industrialisation, has increased the returns to factors in the non-agricultural sector, leading to an outflow of resources — land, labour and capital — from agriculture to manufacturing, construction and services. Even the estates have diversified into property and non-agricultural services, such as health, education, recreation and manufacturing. The share of estates in oil palm, rubber and cocoa has dropped significantly while the scarcity of land has limited their expansion.
As at 2014, smallholders cultivated 94% of rubber, 96% of cocoa and 45% of oil palm in this country. As for fruits and vegetables, 97% of the farms (less than 1ha) were operated by smallholders. The same goes for aquaculture and livestock.
Clearly, the future of agriculture in this country lies in the hands of smallholders but they face numerous challenges. They lag behind the big farms in productivity and efficiency and grapple with structural issues — such as tenurial status, lack of R&D innovation, institutional support and infrastructure — and remain largely disconnected from the market information hub.
There are some small farms that have been successful, such as the horticultural producers who have been able to penetrate the export markets (for example, papaya, guava, tomato and cut flowers), although the majority of them participate only in the domestic market in small and irregular quantities.
In short, small farms are entangled in a web of problems that are vicious and systemic, an impasse, as some choose to believe. However, as proved in Thailand, Vietnam and Taiwan, size is not a barrier. Small farms can be strong and competitive, collectively, and with the right policy and institutional support. Their predominance in Malaysian agriculture, now and in the future, calls for a revisit of policy.
In the past, the government instituted a number of policies to support organised smallholders, such as those under the Federal Land Development Authority (FELDA), the Federal Land Consolidation and Rehabilitation Authority (Felcra) and the Rubber Industry Smallholders Development Authority (Risda). Strategies have similarly been formulated to help farmers organise themselves through farmer’s associations and cooperatives, apart from being provided agricultural credit, subsidies and incentives.
The impact, however, has been mixed. The industrial crop smallholders are more or less secure and protected as they are monitored regularly by their central agencies. While they are assured of support and guidance, their mobility is limited in that they remain in the primary production sector with little room for expansion beyond farms. It is a well-known fact that there is a clear divide between the agro-based downstream and upstream sectors, where the former enjoys greater profit and growth than the latter.
The food sector has shown only marginal improvement, judging from the growing import of vegetables, fruits, livestock and dairy products, and other processed food. Even the highly subsidised rice sector is not as productive as those in other developing countries.
The justification to revisit the policy on smallholders lies in their multidimensional role in the economy, which is not fully appreciated by industry players because “big” is perceived as superior. This perception may have its merits but the gap that exists between the big and small farms highlights the fact that the technologies created for small farmers are limited and probably also that the policies implemented are incorrect. In such a dichotomous situation, Schumpeter’s idea of “smallness within bigness” deserves full attention. This entails a comprehensive pro-smallholder development policy.
In the long term, the advantages and potential of small farms may outweigh its perceived “inefficiency”. For example, small farms embody a diversity of ownership of cropping systems, landscapes, biological organisation, culture and traditions. A variety of farm structure contributes to biodiversity, a diverse landscape and open space.
With the right government support, a small community is relatively efficient in managing its natural resources through a number of empowerment strategies for the locals, such as co-management of rivers and fishery resources. The community’s close contact with nature makes it a better custodian of these natural resources.
Family farms are the best premise to nurture children and to teach them good values. The skills of farming are passed on from one generation to another under a family ownership structure. When farm children do not continue to farm, farming knowledge, skills and experience are lost. In the estates, workers come and go. Hence, there is a discontinuity and opportunity loss of cumulative farming knowledge, which is crucial for advancement and sustainability.
Small farms are the bridge through which consumers are connected to the food that they eat from the local area. This brings the consumers closer to the origin of the commodity, which may encourage them to appreciate farming. Imported food does not relate the consumers to the nature under which the products or commodities are produced; hence, there is less appreciation of agriculture and nature that produce food that sustain us.
There is evidence that small farms produce more than big farms. While mono-cropping is easier to manage with mechanisation, small farmers are more likely to practise multiple cropping or inter-cropping. They may also combine or rotate crops and livestock, using the manure to replenish the soil. Hence, integrated farming systems produce far more per unit area than mono-cultures. Though the yield per unit area of one crop may be lower on a small farm than on large farms, the total output per unit area is higher.
Small farmers also utilise space and time intensively, applying far more labour per unit area than large farms, which explains the relatively high cost of production per unit area. Since family labour is used, there is generally a commitment to succeed compared with the large plantations that use hired labour. Observations show that owners of large farms and land tend to leave much of their land idle while small farmers make full use of their area to maximise output.
Unlike big farms, small farms are labour-intensive, so they can absorb far more people into the economic activity and reverse migration to urban areas. Mechanisation in the big farms means fewer people are employed.
Small farms are sustainable in a number of ways — they often use non-purchased input, like manure and compost, while large farms tend to purchase agrochemicals. Mono-cropping on a large scale has been shown to destroy biodiversity and nature, which take centuries to recover.
The diversification of crops not only makes small farmers nimble at times of uncertainty but also ensures a steady supply of food and nutrition security for their families.
In a dynamic small farm community, the income is circulated among the local businesses, generating jobs and community prosperity, whereas in corporate farms, the income earned is invested elsewhere.
Although the above arguments need further empirical support, it is clear that small farms, unlike the estates, practise multiple cropping, utilise a broad array of resources and have a vested interest in their sustainability. Their multi-functionality helps preserve biodiversity, reduce land degradation and maintain other valuable ecosystem attributes for society at large.
Smallholders may operate on a small scale but, collectively, they are ideal for the development of the “collaborative commons” through cooperative business models where members work for members for the greater good.
This model has proved effective in South Korea and Taiwan, where agricultural cooperatives are run by smallholders, indicating that size is not a constraint. With the adoption of the “internet of things” and forward integration of value-added activities, the smallholder cooperative can be larger than its components.
Of course, this move requires comprehensive and full-scale support to empower sustainable practices, knowledge and technology, ease of business and exchanges that enhance the existence of smallholders ecologically and economically.
Fatimah Mohamed Arshad is professor and executive officer at the Intell Unit, Vice-chancellor’s Office (research and innovation), Universiti Putra Malaysia
Date of Input: 12/06/2018 | Updated: 12/06/2018 | aswani
Universiti Putra Malaysia
43400 UPM Serdang