Boston, MA -- (SBWIRE) -- 11/18/2013 -- We maintain our overall optimistic outlook for the Malaysian agribusiness sector, which will be bolstered primarily by government support and private sector investments in promising segments such as palm oil, sugar and cocoa. An equally potent factor driving growth in the sector will be its ability to undertake export-oriented production. In the medium and longer term, however, we warn that more concrete government policy and action will be required for the sector to achieve its potential.

Key Forecasts

- Palm oil production growth to 2016/17: 9.7% to 20.6mn tonnes. Growth will be supported as companies replant mature estates and yields improve on the back of better technology.
- Sugar consumption growth to 2017: 15.0% to 1.75mn tonnes. The dominance and continued expansionary activities of market players F&N, Permanis and Yeo Hiap Seng have fuelled considerable growth in the Malaysian soft drinks sector, a significant factor fuelling demand for sugar.
- Cocoa production growth to 2016/17: 12.2% to 10,100 tonnes. Cocoa yields on the Peninsula (the second-largest cocoa-producing region, behind Sabah) have increased, due to the Malaysian Cocoa Board (MCB)'s distribution of high-yielding seeds and incentive programmes for farmers to switch to cocoa. In 2011, the MCB also started a plan to ramp up cocoa planting areas.
- 2013 BMI universe agribusiness market value: 0.8% year-on-year (y-o-y) decrease, to US$23.2bn (contributes to 8.2% of GDP)
- 2013 real GDP growth: 4.6% (up from 3.3% in 2012, forecast to average 4.2% from 2013 to 2017).
- 2013 consumer price inflation: 2.0% (up from 1.7% in 2012, forecast to average 2.2% from 2013 to 2017).
- 2013 lending rate: 5.5% % average (same as 2012, forecast to average 5.8% from 2012 to 2017).

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Key Developments

In an effort to boost palm oil exports and avoid inventory accumulation, Malaysia left the tax on crude palm oil exports unchanged for a seventh month in September 2013. The Customs Department revealed that shipments will be taxed at 4.5% during the month, as the reference price was set at MYR2,281.72 (US$696) per metric tonne, within the minimum band for a levy to be applied. The move is broadly being seen as an attempt by Malaysia to bolster its refined exports and make them more competitive compared with Indonesia.

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