sabah development corridor _64

CHAPTER 3

Sustainability is the Foundation for

Growth

sabah development corridor _65

sabah development corridor _66
 CHAPTER 3
Empower Rural Participation and Enhance Agriculture Yield

The vision for agriculture is to promote Sabah as the centre of excellence and trade for
agriculture products in Asia by 2025. This will include multiplying the current agriculture
GDP by four times to RM17 billion, an average compounded growth of 8% per annum and
reducing Sabah’s net food import by 60%.

Palm oil will be the main driver of this growth in terms of yield enhancement. In addition, SDC
will focus on diversifying into high-value agriculture products such as horticulture, health-
related nature products and jatropha. Rubber will be promoted for latex and as feedstock for
wood-based industry.

In positioning itself as a centre of excellence, Sabah will continuously build on R&D to

provide high yielding planting materials, best practices in planting methods and sustainable
practices for environmental conservation. Sabah will also position itself as a trade centre for
agriculture products by taking advantage of its geographical location.

Agriculture is seen as an important means of assisting the rural population to come out
of poverty. The Sabah State Government is already actively looking into land zoning
programmes and the provision of supporting infrastructure to enable efficient operations
for rural farmers. To complement this, the SDC will look into programmes to organise farmers
in boosting productivity for food-based agriculture through the provision of high quality
planting materials, enhanced planting methods and scale increase via clustering.

3.1 Current Situation

Agriculture is the second highest contributor behind services, contributing 28% to

GDP or RM4.1 billion12 as of 2005. The growth of agriculture GDP has been at a rate of
6% from 2001-2005 which is slightly higher than Malaysia’s agriculture growth rate of 5%
per annum over the same period.

12 Department of Statistics, Sabah

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 Figure 3.1: Agriculture Share of GDP

Sabah Gross Domestic Product by Industry, 2005 Agriculture GDP

Percentage Percentage

100% = RM15.1 billion 100% = RM4.1 billion

Services
81
47%

Oil Palm
28% Agriculture

10 Fishery
7%
Forestry and 5% 13%
Logging
Manufacturing 2 Livestock
Mining and
Quarrying 1 Cocoa
1
Rubber
5
Others

Source: Yearbook of Statistics 2006, Department of Statistics Malaysia, Sabah

Figure 3.2: Breakdown of Gross Domestic Product (GDP) for Sabah, 2001-2005
(At Constant 1987 Prices)

Gross Domestic Product (GDP) for Sabah, 2001-2005

Percentage

Sector 2001 2002 2003 2004 2005

Services 46% 45% 44% 46% 47%

Agriculture 27% 26% 26% 26% 28%

Manufacturing, 11% 12% 13% 13%

13%
Forestry & Logging 3% 5% 5% 5%
5%
Mining & Quarrying 13% 12% 12% 10% 7%

Total GDP Value 12,242 13,007 13,759 14,345 15,073

(RM Million)
Value for Agriculture
3,280 3,375 3,592 3,766 4,164
(RM Million)

Source: Yearbook of Statistics 2006, Department of Statistics Malaysia, Sabah

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Exports of agriculture for 2005 were valued at over RM9 billion13. Palm oil is the largest
agriculture export with earnings accounting for about 91% of the total agriculture export
revenue and 33% of total Sabah exports. Other major agriculture exports include rubber,
coconut and cocoa, making up a combined value of over RM540 million.

Figure 3.3: Sabah Agriculture Exports 2005

Sabah Agriculture Exports, 2005

RM million

Palm Oil Cocoa Coconut Rubber Fishery and Other Total

Aquaculture Agriculture

Value
8,310 129 132 283 199 67 9,123
(RM Million)

Source: Yearbook of Statistics 2006, Department of Statistics Malaysia, Sabah

Up to 376,000 or 33% of all employed persons in Sabah are involved in agriculture; it the
second largest contributor in terms of employment across all industries in Sabah after
services.

In terms of land, a total of 2.1 million14 hectares has been identified as suitable land for
agriculture, of which 1.4 million hectares have already been developed. Remaining land
suitable for agriculture in Sabah should be mapped out in a structured format to enable
sizable contiguous land to be used for crop clusters.

13 Department of Statistics, Sabah

14 Department of Agriculture, Sabah

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 Figure 3.4: Land Suitable for Crop Agriculture 2006

Take-up of Sabah Land Area for Agriculture, 2006 Land Suitable for Crop Agriculture

Percentage ‘000 hectares

100% = 7.2 million hectares Total land = 2,100

270 Available land

430 Forest reserve

Non-suitable 71.8% 29.2% Suitable

land land for crop
agriculture

1,400 Developed land for

agriculture crops

Source: Department of Agriculture, Sabah

Figure 3.5: Developed Agriculture Land Usage by Crop 2005

‘000 hectares

Oil palm
1,231

Rubber
66

Paddy 40

Coconut 18

14
Cocoa

26
Others

Source: Department of Agriculture, Sabah

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 Agriculture is spread across all regions of Sabah. The Eastern Sub-Region mainly grows
industrial crops such as oil palm, rubber and cocoa, and hosts the major fishery and
aquaculture sites. The Central Sub-Region’s focus is on cultivation of rice, herbs, vegetables,
fruits, Specialty Natural Products (SNP) and livestock farming. Agriculture activities in the
Western Sub-Region include livestock, fisheries, rice, fruits, cocoa and coconut.

Figure 3.6: Industrial Crops Distribution and Total Hectarage by District

Source: IDS

Leading Agriculture Sub-Sectors

i) Oil Palm
Oil palm is currently the leading agriculture crop for Sabah. The economic
contribution of oil palm translates into GDP contribution of almost RM3.4 billion in
2005, with a CAGR of 9% from 1998-2005.

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Figure 3.7: Palm Oil Plantation Area in Sabah

Source: IDS

Suitable local conditions and good management of plantations in Sabah have been the main
catalyst for high yields. As shown in Table 3.1, Sabah currently produces the highest average
yields in Malaysia.

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Table 3.1: FFB and CPO Average Yields in Sabah vs. Malaysia’s Average (2000-2006)

Average Year
Yield 2000 2001 2002 2003 2004 2005 2006

Sabah FFB 19.84 21.04 20.57 21.32 21.40 22.99 23.10

Malaysia FFB 18.33 19.14 17.97 18.99 18.60 18.88 19.60

Sabah CPO 3.91 4.33 4.45 4.56 4.56 4.91 4.88

Malaysia CPO 3.46 3.66 3.59 3.75 3.73 3.80 3.93

Source: Malaysian Palm Oil Board (MPOB)

Oil palm currently takes up 1,231,584 hectares or almost 90% of all state agriculture land,
and is mostly concentrated in the palm oil belt stretching from Sandakan to Lahad Datu.
This places Sabah as the single largest contributor to the Malaysian palm oil industry with
29.8% of all Malaysian oil palm plantations being located here. Sabah produced 5.4 million
metric tonnes15 of CPO in 2006 which is equivalent to 30% of the national CPO production.

Despite the large production of CPO, currently there are minimal palm oil downstream
activities in the state. A quantum needs to be set with regard to CPO reserved for demand of
local downstream players which will emanate from the recently launched Palm Oil Industrial
Cluster (POIC). The POIC is aimed at capturing value-added downstream activities such as
oleo-chemicals and speciality fats (see Manufacturing chapter for further details).

Oil palm, a significant contributor to Sabah’s agriculture sector.

15 MPOB Book of Statistics 2006

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 ii) Other Industrial Crops
The other important industrial crops are rubber, coconut and cocoa which contribute a
total value of RM545 million to Sabah’s exports, with rubber contributing RM284
million. Sabah contributes to more than 50% of Malaysia’s cocoa production.

Currently over 66,000 hectares of land is planted with rubber, with 90% undertaken by
smallholders who are mainly located in the Western and Central Sub-Regions of the
state. Coconut is planted over 18,600 hectares, while cocoa takes up 14,100 hectares.

Other contributors to the agriculture industry are rubber and coconut.

iii) Fishery and Aquaculture

The fisheries and aquaculture industry in Sabah is predominantly private sector driven.
In 2005, fisheries contributed to 10% of agriculture’s GDP with a value of RM411 million.
Deep sea fishing is still under-developed and therefore has tremendous potential.

The SDC will emphasise aquaculture.

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Figure 3.8: Fishery and Aquaculture Areas in Sabah

Source: IDS

The main activity in the fisheries sector comprises both prawn trawling and
aquaculture. Fresh frozen prawn is the major fishery product exported from Sabah,
contributing around RM200 million to the state’s export earnings annually. Other key
exports include tiger prawns of which over 3,000 metric tonnes of product valued at RM100
million is exported. There are currently 2,073 ponds in Sabah involving 82 operators, with
Tawau being the leading area with over 2,000 metric tonnes of produce. Other areas include
Semporna, Lahad Datu and Sandakan.

The state has designated the Aquaculture Industrial Zone (AIZ) around the areas of
Sandakan, Lahad Datu, Tawau, Beaufort and Kuala Penyu, where 63,000 hectares of land
are suitable for key aquaculture activities. Seaweed cultivation in particular is a recent
high growth focus area, mainly around Semporna, Kota Belud and Tuaran. It currently

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 involves over 600 farmers and weighs in at almost 3,000 metric tonnes of product. There
is potential for downstream processing of seaweed which currently is mainly conducted
in Southern Philippines. Other high-value aquaculture products being focused on include
selected fish, prawn, crab, oyster and abalone breeding.

Sabah’s location makes it ideal for fishery activities.

iv) Other Crops

Horticulture products such as fruits and vegetables, herbs and SNP are currently
planted over approximately 23,000 hectares of land across Sabah. Smallholder
planting is concentrated in areas such as Ranau, Kudat, Penampang, Lahad Datu,
Keningau, Papar and Tambunan. The combined export value of other crops stands
at RM67 million as of 2005 with a GDP growth of 4% per annum from 1998-2005.

Vegetables and fruits planted include corn, tapioca, ginger, durian, bananas,
langsat and pineapple. SNP including kacip fatimah, hempedu bumi, cengkih,
cinnamon, pala, mengkudu, vanilla and roselle are concentrated in the Papar, Beaufort
and Keningau areas, which are in close proximity to the Sabah Agro-Industrial
Precinct (SAIP) in Kimanis.

In terms of food production, paddy and livestock are important crops that can help
Sabah reduce its food deficit of RM900 million. Paddy production’s self-sufficiency is
only at 34% and it is a crop that provides vital income to rural farmers. Paddy is
planted at over 40,000 hectares of land in areas such as Papar, Tuaran, Kota Belud,
Tambunan and Kota Marudu.

Diversified crops thrive in the state’s fertile soil.

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 v) Poultry and Livestock
As of 2005, production of poultry eggs and pork is self-sufficient while poultry
meat and dairy milk is 98% self-sufficient. Beef was only produced at a 20%
self-sufficiency level as of 2005 and has been declining at a CAGR of -9% from
1995 to 2005. Per capita consumption of beef, however, is 2.8 kg, with a CAGR of 6%
over the same period.

Livestock farmers in Sabah currently produce cattle, buffalo, poultry, swine and dairy
products. The farms are mainly located around Kota Belud, Kinarut, Keningau,
Sandakan and Tawau. Cattle meat will be geared for export as Sabah
has been declared free of Foot and Mouth Disease by the World Organisation for
Animal Health. In addition, due to the significant size of oil palm plantations in
Sabah, integrated livestock farming should be given due consideration.

Livestock farming includes cattle and poultry.

3.2 Sabah’s Key Strengths in Agriculture

i) Suitable Natural Conditions

Sabah has large tracts of land with suitable weather and land conditions for agriculture.
Sabah’s oil palm plantations have the highest average yields in the country. Suitable
land conditions have also allowed diversity in the crops being planted – industrial
crops such as rubber and cocoa, as well as other agricultural crops such as fruits,
vegetables, herbs and SNP.

ii) Natural Supply of Marine Life

Sabah has the longest coastline in all of Malaysia with more than three quarters of its
boundaries surrounded by sea totalling over 4,300 km in length. The state is rich in
marine products as the shallow water along coastal lines allows for easy
sunlight penetration for photosynthesis to occur resulting in vast population of
phytoplankton. The marine ecosystem is divided into the estuarine and oceanic
zones; the estuarine zone represents less than 10% of total oceanic area but contains
90% of all marine life.

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 iii) Livestock Free of Foot and Mouth Disease
Sabah is one of only two states in Malaysia to have been officially declared as being
free of foot and mouth disease, which enables the export of Sabah livestock
products.

iv) Strategic Location as Access Point to Key Markets

Sabah is strategically located near high growth markets such as China and Taiwan.
There is potential for companies operating out of the SDC to boost export of fresh and
downstream agriculture products to these markets.

3.3 Key Challenges and Issues Faced in Agriculture

A large portion of agriculture land in Sabah is cultivated by palm oil companies, harvesting
the best yields in Malaysia due to favourable conditions and planting practices. However, the
potential yield is not fully met yet due to gaps in planting and harvesting methods.

Smallholders in particular require basic assistance with development of good agriculture

practices, application of appropriate technology, achievement of economies of scale,
marketing and distribution.

i) Poor Application of Good Agricultural Practices and Technology by Smallholders

The State Government provides assistance to farmers via incentives, subsidies,
technology transfer, tools and training. Despite some progress being made, there is
still room for farmers to improve their skills and techniques which will result in
higher yields and quality of produce as required by major buyers such as supermarkets
and hypermarkets. Smallholders in general have not consistently applied Good
Agricultural Practices (GAP).

ii) Lack of Scale, Marketing and Distribution

Small-scale farming currently being conducted, such as paddy, livestock, fruits,
vegetables, SNP and herb cultivation, have resulted in high production cost,
inconsistent quality of output, low yield and hence low income for farmers.

The issue of lack of scale and the inability to provide a constant and large
supply of produce that meets quality standards in turn results in marketing
challenges. Fruits, vegetables and livestock farmers currently do not have the
capability to directly access large markets as they are unable to meet continuous
demand. They sell their produce at local markets or through middlemen which
limits the price they could get for their produce.

iii) Diminishing Availability of Agriculture Land

Sabah needs to focus on technology to further improve yields as suitable land for

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 agriculture is limited compared to Indonesia. Furthermore, the price of key
commodity products such as palm oil will be adversely affected when new large scale
palm oil plantations in Indonesia reach maturity in 5-7 years.

3.4 Key Strategies to Re-Vitalise Agriculture

Agriculture plays a major role in the economic development of Sabah. Strategies to enhance
the performance of the sector will focus specifically on three main areas :
• Accelerate growth of high-value products for export
• Enhance quality and productivity for food-based agriculture
• Strengthen Sabah’s lead as the palm oil centre of excellence

To support these strategies, the Government (Federal and State) will intensify efforts in
R&D, mechanisation, and GAP application to enhance quality and productivity. The
Sandakan Education Hub will also anchor a cluster of government R&D and training
centres for this purpose. Among others, the Centre of Excellence for Tropical Biodiversity will
be located here.

There will also be stations and collection centres located around Sabah to guide farmers
(especially smallholders) on planting materials, fertilisers, mechanised tools and
demonstration of GAP.

3.4.1 Accelerate Growth of High-Value Products for Export

One of the initial focus areas for agriculture is accelerating the growth of high-value and
high-potential agriculture products. Incentives and lowering costs of farming will be the key
levers in attracting participation of agropreneurs and SMEs to develop aquaculture, deep sea
fishing, non-timber forest products and horticulture.

The global aquaculture market is currently worth an estimated USD75 billion with an annual
growth rate of 8.8% since 1971. Sabah currently exports prawns, high-value fish and key
aquaculture products such as seaweed to affluent markets such as Japan, Taiwan and
China.

Other key sub-sectors would include horticulture which had a global market value of
USD80 billion in 2004 and includes floriculture in which Sabah currently is a high
producer of products such as orchids. Other products would also comprise herbs
and SNP which has a global market value of USD60 billion and a growth rate of
up to 30% per annum, and new products such as jatropha, kenaf, roselle and vanilla are
being considered.

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 Jatropha has the potential to be an alternative source of bio-fuel, which is an attractive
value proposition given the high price of fossil fuel and bio-fuel feedstock from food
items such as oil palm and sugar cane. The plant can be harvested in less than a year
and withstand prolonged draughts, rendering it suitable for planting in areas with high
incidence of poverty, low rainfall and poor irrigation access such as the Bengkoka
Peninsula, Kota Marudu, Keningau and Tenom within the Central Sub-Region. Extracts from
jatropha fruits also may be used in the cosmetic and pharmaceutical industries.

3.4.2 Enhance Quality and Productivity for Food-Based Agriculture

Another key focus for agriculture will be to elevate the quality and productivity levels of
food-based agriculture sub-sectors. The objectives include reducing the deficit of food for
Sabah which currently stands at RM900 million, enhancing the income of rural farmers, while
generating income via exports to Peninsula Malaysia and neighbouring countries.

Under the 2nd Sabah Agriculture Policy, the State Government in particular has set key targets
with regards to increasing the self-sufficiency levels for production of paddy from 30% to
60% and cattle from 23% to 30% by 2010. For paddy, the State has identified Kota Belud as
the ‘jelapang padi’ area for the state, with a paddy seed production and R&D centre being
developed there. The State has also recently introduced Permanent Food Production Zones
in Tawau, Kinabatangan, Papar and Beaufort with incentives for farmers to plant specific
crops such as papaya, pineapple, avocado, mango and banana.

Livestock farming in Sabah will be a key focus for food production as the industry has great
potential due to suitable climate conditions and as a result of being officially declared free of
Foot and Mouth Disease by the World Organisation for Animal Health. Other key crops for
production are paddy, fruits and vegetables.

Ensuring GAP is applied by smallholders will be a key factor in ensuring high yields are
obtained per hectare of land. This is especially crucial for smallholders where the extra
increase in production will translate into an increase in earnings via minimal wastage and
improved quality of produce that meet sale and export quality assurance standards.

Good agriculture practices play a vital role in enhancing quality of products.

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3.4.3 Strengthen Sabah’s Lead as Palm Oil Centre of Excellence

Oil palm is Sabah’s highest yielding per hectare crop and has tremendous value in generating
high-value jobs in downstream activities. The suitability of soil and conditions in Sabah has
contributed to Sabah achieving the highest yields in the country. Focus will therefore be on
further improving productivity and enhancing yields via technological advancements and
enhanced R&D in biotechnology and agronomy practices.

Promoting and enforcing sustainable palm oil and food traceability are necessary to ensure
continuous access to markets in developed countries. Therefore, the process for certification
and enforcement needs to be strengthened once standards are published by the Roundtable
on Sustainable Palm Oil.

3.5 Programmes

To achieve the objectives of increased agricultural growth and improvement of rural incomes,
the broad strategies will be cascaded and implemented via a number of programmes.

A three-phase approach will be adopted:

Phase 1: 9MP Phase 2: 10MP Phase 3: 11-12MP

2008-2010 2011-2015 2016-2025

Laying the foundation Accelerating agri- Becoming a leading

for growth based research and agri-resource production
business formation region in Asia

• Strengthen Sabah’s • Intensify R&D • Position Sabah as a

agriculture infrastructure leading agriculture
• Attract top researchers production centre in
• Establish focus on in specific fields Asia
key-growth and high-value
sub-sectors • Develop management
talent in agriculture in
• Empower rural collaboration with
entrepreneurship Sandakan Education Hub

• Encourage participation of
SMEs in agri-businesses

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 3.5.1 Agri-Excel Outreach Programme

The Agri-Excel Outreach Programme provides a platform for knowledge and assistance to be
disseminated to smallholders. The programme will involve setting up various centres in key
areas of agriculture in Sabah where smallholders can have access to:
• Training in good agricultural practices
• Demonstration plots for adoption of technologies
• Advisory services
• Purchase of subsidised resources (fertiliser and mechanised tools)

In addition to agencies already providing micro-finance across Malaysia, a new micro

finance scheme targeted specifically for Sabah and focused on agriculture will be set up. The
main issue at present is that due to a lack of communications access, rural farmers are not
aware of such funds. These funds need to be customised, packaged and brought to the
villages so that the farmers can understand the terms and obligations involved.

Other supporting initiatives of this programme will include relocation of rural farmers and
smallholders based on re-zoned areas. These areas will be determined by matching land
suitability to focus crops such as paddy, rubber, cocoa, fruits and vegetables. A total of
10,000 households are expected to be involved in this project. The relocation process which
will mainly involve intra-district movement of smallholders and rural farmers will allow for
easier access to resources and production of crops with scalability.

The Agri-Excel Outreach programme is aimed at producing a critical mass of rural

entrepreneurs who are enabled through education, training, awareness-building and
micro-finance. This programme is expected to have a tangible impact on poverty alleviation.
The Bengkoka Rubber Resettlement Scheme along the agropolitan model offers a good
example of a resettlement model which can be supported by the Agri-Excel Outreach
programme. Another related programme is the Jelapang Padi programme which involves
7,000 families at Kota Marudu-Kota Belud districts and the proposed SLDB Keningau-Tenom
Jatropha Scheme.

3.5.2 Agri-Business Accelerator Programme

Private sector involvement is crucial to the growth of the agriculture industry. The agri-
business accelerator programme is designed to attract SMEs and agropreneurs to undertake
promoted agricultural activities in the SDC. This programme will also encourage the growth
and development of agri-business SMEs with participation of local farmers via joint ventures
or contract farming to ensure constant income.

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SAIP, which is being developed in Kimanis, will be an integrated agrotech cluster to support
agro-based SMEs and start-ups with components such as:
• Incubator centre
• Herbal farm
• Knowledge park
• SME park
• Commercial and residential zones

The Agri-Business Accelerator Programme will seek to encourage and support participants
via incentives, funding and demarcated land for crop clusters. Approval of applications for
the incentives will be based on a transparent and comprehensive set of factors which include
the economic viability of the proposed projects and the agriculture and entrepreneurial
experience of the applicants.

The programme’s incentives include:

• Start-up funding grants
• Loans for purchase of technology
• Grants for technology transfer application
• Leasing of deep sea vessels, key machinery and facilities
• Fiscal incentives
• Business advisory and marketing support
• Incubator facilities to serve as test-bed for new technologies adopted

Development initiatives of potential high-growth sub-sectors include:

i) Aquaculture
• Development of the National Marine Aquaculture Centre for specific research in
aquaculture and promotion of sustainable techniques among local fishermen
° Development of incubator with pilot plant facilities to encourage entrepreneurs
to adopt technologies
° The research centre will align itself with Universiti Malaysia Sabah
and have strategic links with the Department of Fisheries as well as world-
renowned marine biology and aquaculture institutions
• Import of breeding technology for ornamental fish, prawns, oysters and lobsters
• Development of key collection and processing centres

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 ii) Fishery
• Ensuring licencing for deep sea fishing companies are transparent and based on
a set criteria
• Setting-up of a deep sea vessel leasing company equipped with sufficient number
of vessels for various types of deep sea fishing operations to be leased to licenced
companies
• Enhancement of infrastructure to support both coastal and deep sea fishing
at current key landing jetties and ports in Papar, Kudat, Kunak and Sandakan.
This includes facilities such as cold storage room, work platform, office
building, CIQ facillity, health facility, traffic control office, electricity and water
supply, communication, and diesel supply

iii) Livestock
• Enhancement of the Nabawan and East Coast livestock clusters with
development of common facilities such as abattoirs, storage facilities and
feedlot centres
• Development of the Keningau Integrated Livestock Centre which will focus on
improvement and multiplication of livestock and improvement of feeding
management for meat and dairy
• Development of incubator and pilot projects to serve as test-beds for new
products and technologies adopted by entrepreneurs, such as bird’s nest,
ostrich and deer farming and processing
• Usage of surrounding land to cultivate corn to reduce the reliance on imported
feed

iv) Horticulture
• Development of shared infrastructure for the cluster areas, including roads,
water supply, electricity and sanitation
• Provision of hydroponic/aeroponic systems, organic farming, precision farming,
agrobio R&D support and construction of green houses which include watering
systems, temperature and humidity control systems, lighting, pots and soil
• Development of incubator with pilot plant to support new product development
on a trial basis, such as virgin coconut oil, vanilla production and roselle based
products

sabah development corridor _84

 v) Non-Timber Forest Products
• Development of shared infrastructure for the cluster areas including roads, water
supply, electricity and sanitation
• Development of plant extraction factories, spray drying facilities and the Sabah
Herbs Trading Centre
• Bio-prospecting and product development through the Sabah Bio-X network (see
Chapter 7)

3.5.3 Modernised Collection, Packaging and Distribution Centres

Collection, packaging and distribution centres are to be located in smallholder

concentrated areas, at livestock and food crop clusters established by SMEs and near the
Permanent Food Production Parks. A dedicated Halal Park linked to the Labuan Halal and
Distribution Hub will be set up at a suitable location within the SME Agro-Food Zone to
provide easy access to Halal certification, processes, technology and advisory services.
The idea behind the collection, packaging and distribution centres is to enable producers to
meet the scale and quality expected by buyers such as processing centres and
hypermarkets. This will also enable better pricing for smallholders and agropreneurs
since the centres eliminate the middlemen and are regulated by government.

These collection centres with proper storage and quality control facilities, access to Halal
certification services and a cold-chain network need to have infrastructure support such as
roads, water, power and telecommunication. This will ensure that the quality and freshness
of produce will not be compromised thereby enabling premium prices to be obtained.

Connectivity of these collection centres will be vital to ensure that products can reach
packaging and processing plants which will be located in areas such as the Kota Kinabalu
Industrial Park (KKIP) and the SAIP in Kimanis. Transport vehicles to collect produce from
smallholder farms and deliver produce to target markets will also be made available for
leasing.

It is proposed that the pricing of products is monitored on a daily basis by the Ministry
of Agriculture and Food Industry and FAMA to ensure that smallholders will be paid in
accordance with suitable market prices indexed to a minimum price. Setting a minimum
price on various types of produce will protect the interests of the smallholders. Management
of centres will be open to business owners or SMEs. Operators selected will be in charge of
marketing the produce collected at centres to key markets.

sabah development corridor _85

 3.5.4 Building Palm Oil Knowledge Base

Sabah has 29.8% of Malaysia’s planted oil palm and the highest crude palm oil (CPO) yield.
To retain this lead and enable these companies to be more cost efficient and reap higher
yields, the focus needs to be on R&D as well as developing human capital in plantation
management and agronomy practices.

The Sandakan Education Hub will be the centre for collation and dissemination of palm oil
knowledge base, working closely with MPOB’s palm oil training centre (PLASMA). The
centre’s faculty will work with the Malaysian Palm oil Association (MPOA) to understand
the needs of plantation owners and plantation managers. Palm oil plantation
companies will also be asked to assist in practical training and allow their staff
to go on sabbatical for further studies. Training will also be done overseas via an
Agriculture Education Scholarship Fund for students to study required practices in
renowned institutions worldwide.

The Sandakan Palm Biotech R&D Centre will be established to focus on increasing palm oil
knowledge of planting materials, seed production, palm nutrition and estate mechanisation.
The centre will partner with renowned agriculture and biotechnology research centres
worldwide, and employ leading local and foreign scientists. A strong pool of international
researchers from The Royal Society and Kew Gardens will already be in situ via the Centre of
Excellence for Tropical Biodiversity Research.

Palm oil processing facilities.

sabah development corridor _86

sabah development corridor _87