Introduction

Background Information

Malaysia is located in Southeast Asia and consists of 13 provinces with 3 federal districts. It lies on latitudes 1 and 8 N of the equator and between longitudes 99 and 120 E. It has entire land mass of 329,847sqkm ( 127,350sqmi ) . The population is 27.5million ( 2010, nose count ) and the denseness is 83.57/km2 ( 216.45/sqmi ) . It is separated by the South China Sea into two parts, peninsular Malaysia and Malaysia Borneo ( besides known as West and East Malaysia severally ) . It portions land boundary lines with Thailand, Indonesia and Brunei ; and nautical boundary lines exist with Singapore, Vietnam and Philippines.

The major tree harvest of economic importance is oil thenar, because it contributes the highest in footings of GDP when compared to other harvests. The works thrives good in an country with 1600mm rainfall per annum and grows good on clay-loamy dirt. The temperature demand is 22-32oc. The harvest grows good throughout Malaysia. The oil thenar is purely lowland-tropical, thrives under high well-distributed rainfall and is tolerant of acid, aluminiferous dirts. Well managed, it is capable of sustained outputs of 6tonnes/ha/yr of high quality oil and production can be increased to between 7 and 8 metric tons /ha/yr if clonal planting stuffs are used. Oil thenar is productive for 20-25years.

The oil thenar is a indigen of tropical West Africa. Fruits have long been gathered in West Africa ( and still are ) and the thenar entered commercial cultivation merely around 1900, foremost in West Africa, and shortly afterwards in southeast Asia, particularly in Malaysia and Sumatra ( Webster and Wilson, 1998 ) .

In another history, the African oil thenar Elaeis guineensis is endemic to the full Guinean zone of West Africa. It was postulated that the oil thenar natural home ground is likely to be within the West Africa oil thenar belt chiefly in the south eastern portion of Nigeria and south western portion of the Cameroons. The commercial development of the oil thenar is of recent beginning though it has been used by adult male in West Africa since antediluvian times ( PORIM, 1992 ) .

The oil thenar was foremost introduced into Malaysia in 1902 and 1905 by the section of Agriculture as experimental thenar. The Centre of biological diverseness of the thenar lies in West Africa where it has been cultivated since at least 3000BC. By the fifteenth century, Lusitanian adventurers found the usage of palm oil nutrient merchandises to be widespread along the Gulf of Guinea ( Webster and Wilson,1998 ) .

The oil thenar tree was introduced to Malaysia, which was so Malaya, by the British in early 1870 ‘s as an cosmetic works. In 1917, the first commercial planting took topographic point in Tennamaran Estate in Selangor, thereby puting the foundation for the huge oil thenar plantations and the palm oil industry in Malaysia today. The oil thenar plantations in Malaysia are mostly based on the estate direction system and smallholder strategies. The country of land under oil thenar cultivation is 4.49million ; bring forthing 17.73million metric tons of palm oil and 2.13tonnes of thenar meat oil. The industry provides employment for more than half a million people and support to an estimated one million people ( MPOC,2010 ) .

Oil thenar gives the largest outputs per hectare of all oil harvests at nowadays. The high and increasing outputs of the oil thenar have led to a quickly spread outing universe industry, now based in the tropical countries of Asia, Africa and America. The fruit of the thenar is a cardinal hard-shelled nut surrounded by an outer mush ( mesocarp ) which contains the normal palm oil of commercialism ( Corley and Tinker, 2003 ) .

Palm oil is rich in carotenoids, ( pigments found in workss and animate beings ) from which it derives its deep ruddy coloring material, and the major constituent of its acylglycerols is the concentrated fatty acid palmitic. Because of its economic importance as a high-yielding beginning of comestible and proficient oil, the oil thenar is now grown as a plantation harvest in most states with high rainfall ( minimal 1600mm/yr ) in tropical clime within 10o degree Celsiuss of the equator ( fao.org ) .

Oil thenar trees start fruit bearing when they are over 30months old on the field and will go on to bring forth fruits 20-30years after that and this ensures oil supply consistence. The mature Bunches are known as Fresh Fruit Bunches ( FFB ) .The oil thenar is the most efficient oil bearing harvest in the universe necessitating merely 0.026hectares of land to bring forth one metric ton of oil.

Oil thenar industry comprises production ( cultivation ) and processing of the harvest works. The growing of the industry depends on these single factors ; without cultivation there is nil to procedure and without efficient processing, production will non achieve the expected or required degree. The success of oil thenar industry is hence based on effectual cultivation patterns and efficient processing. The two widely consumed oil from oil thenar ( palm oil and thenar meats oil ) are got from processing, these are the primary merchandises. The more efficient the processing of oil thenar, the higher the growing of the industry because this promotes market acceptableness.

Palm oil is the universe ‘s most traded vegetable oil. It is produced more expeditiously in footings of land usage than any other harvest and has seen planetary production double in each of the last three decennaries. Production is reasonably vertically integrated. The palm oil sector provides income and employment for a important figure of persons in developing states. Indonesia and Malaysia produce the majority of the universe ‘s palm oil, with Colombia, Thailand, Nigeria and Cote d’ivoire besides bring forthing important sum ( IFC ) .

There is no addition stating that oil thenar is the chief stay of the agricultural sector in Malaysia and its part to the overall economic system of the state can non be over emphatic. The oil thenar industry in Malaysia formed the economic base towards making the current wealth of the state. The industry earned a healthy RM60million in 2010 which was an addition of RM10million compared to 2009.The economic part of oil thenar and other plantation harvests provided the confidence of a beginning of income and limitless employment chances for the people of Malaysia. A twenty-four hours ‘s work of crop of oil thenar fruits can supply a individual with an income of more than 30USD ( Basiron, 2011 ) .

The fact that Malaysia has a comparative advantage in oil thenar production viz a viz other comestible oil bring forthing harvests and other states in the universe is established. In footings of production, $ 350 is used to bring forth a tone of palm oil and it is sold at $ 1000 which is rather more profitable when compared with soya bean which is produced at $ 735/tone of soybean oil. Harmonizing to Carter ( 2007 ) , oil thenar has been able to capture a important portion of planetary oil end product and trade because it commands lower monetary values than the major alternate veggie oils and it is cheaper to bring forth than the major option oils.

In the last 10 old ages, oil thenar has expanded to 4.69million hectares in Malaysia in footings of deep-rooted country of which harvest home is carried out in 4million hectares. The fresh fruit Bunches ( FFB ) produced as at 2008 was above 87,000tonnes and oil output per hectare was 20.18tonnes in 2009. The mean monetary value of FFB per metric ton was RM2777.50 and entire figure of workers employed was above 500,000 ( MPOB, 2009 ) .

Harmonizing to Webster and Wilson ( 1998 ) , in order to stay in concern the oil thenar industry of the hereafter needs to put in research and development in order to increase outputs of improved quality oil. This will let larger volumes to be processed thereby working economic systems of graduated table. New and bing cognition on improved production methods must so be applied through better direction to cut down the cost of production. He went farther by stating cut downing overhead and direction cost will travel a long manner in cutting down the cost of production.

The success in the oil thenar industry did non occur by opportunity, in fact a batch of attempts were made by the power that be at different stages of oil thenar development to do the industry what it is today. Government supported in countries like research which led to technological promotion and this greatly assisted in the development of the industry in Malaysia.

Government policies have played of import functions in hiking the oil thenar industry. The different national agricultural policies had different aims and ends they were meant to accomplish and emphasis were placed on productiveness, efficiency, fight, merchandise based attack and export oriented variegation ( which resulted in deliberate export displacement from rough palm oil ( CPO ) to refined merchandises, motivated merchandise development and encouraged competition and market efficiency ) .

These policies have led to intercessions from the authorities such as subsidies on thenar oil for place ingestion in order to cut down the consumer ‘s monetary value, input subsidies, revenue enhancements and so on. Government intercession can falsify market operations thereby bring forthing monetary values that may differ from free market monetary values. As a consequence, comparative end product and input monetary values within a state are altered therefore impacting the form of production inducements.

The present authorities has plans developed to transform the economic system, one of such is the National Key Economic Areas ( NKEAs ) and agribusiness is one of the sectors on focal point. It is of import to add at this occasion that oil thenar policy execution is under the legal power of a board specifically established for the intent, which is the Malayan Palm Oil Board. This board has what is called the 8 Entry Point Project which set out to implement some major policies in oil thenar production ; among these are, speed uping the replanting of oil thenar and bettering Fresh Fruit Bunch output.

Originally, the chief push of the Asiatic enlargement was in Malaysia but its place as the universe ‘s largest manufacturer of oil thenar has been overtaken by Indonesia where the major enlargement is now taking topographic point. The current issue is how to keep Malaysia ‘s place as a prima palm oil manufacturer and cut down susceptibleness to monetary value fluctuations. This survey hence aims at happening out the fight of the industry within the state and how authorities policies have affected the industry.

1.2 Statement of the job

In position of the fact that land available for turning oil thenar is exhausted in peninsular Malaysia, and as a affair of fact in the nearest hereafter East Malaysia is traveling to confront same job. It is hence necessary to look at the comparative advantage of oil thenar in relation with authorities policy intercession at national degree in order to guarantee the continued production of the harvest even after complete exhaustion of land for enlargement.

Other challenges confronting the oil thenar industry in Malaysia which need to be addressed in earnest if the state is to keep its place as the universe ‘s prima palm oil manufacturer are ; labour deficit ( this is a critical job as the ratio of land to labor is 6.5:1 ) , new countries of land for enlargement of oil thenar cultivation is exhausted in Peninsular Malaysia, and the independent smallholders, who constitute 12.98 % of entire oil thenar planted country, lack economic systems of graduated table and proper agronomic direction patterns ensuing in comparatively lower output.

One of the policy intercessions of the authorities in the early yearss of the debut of oil thenar to Malaysia was the encouragement of private people to travel into fresh fruit clump production, and the authorities besides set up its ain plantation which incorporated the persons who did non hold land to cultivate the harvest. As such, three plantation ownership constructions were formed ; the private plantation, authorities strategy ( supported or organized smallholders ) and independent little holders and they account for 59.84 % , 27.18 % and 12.98 % severally of entire deep-rooted country ( MPOB,2009 ) . It should be noted that the ownership construction of plantation plays a cardinal function in the development of the oil thenar industry in Malaysia, nevertheless, despite the fact that the part of the independent smallholders is important there is increasing concern that they are being disadvantaged.

As of now, the national mean rough palm oil fresh fruit clump ( FFB ) end product is 20.2tonnes per hectare. This is low sing the fact that production can be boosted much more above this present degree. Independent smallholders account for 12.98 % of Malaysia oil thenar plantation and generate lowest FFB output ( 17 metric tons /ha/yr ) . Their limited secret plan size ( 3.9 ha/family ) and deficiency of exposure to outdo patterns are the major factors straight impacting outputs. Independent smallholders are scattered all over Malaysia, disorganized and extremely dependent on jobbers to impart their FFB to Millss. ( htpp: physician ) .

Ahmad ( 2001 ) , argued that though smallholders contribution in agricultural sector is important, they constitute the majority of low income groups in the state and suffer the most due to uneconomic land size, monetary value diminution in trade goods like oil thenar, lifting production cost and relentless low productiveness and income.

The difference between the authorities schemes smallholders and the independent smallholders reflects the prejudiced allotment and distribution of inducements installations and public support in add-on to agronomic and related jobs, engineering and entree to capital and direction input ( Zulkifly,1983 ) .

Government provides inducements in the signifier of discounts to clonal research labs, fiscal aid to husbandmans to replace old trees with new 1s every bit good as offering replanting grant to smallholders. All this is done in order to do the Malayan authorities ‘s program to raise national rough palm oil fresh fruit clump ( FFB ) end product to 35tonnes/ha by 2020 become a world ( icis.com,2010 ) .

In position of the fact that oil thenar industry is turning at a really fast rate and will

continue to make so if the recent dictum by the Malayan authorities on enlargement of land for oil thenar cultivation in Sarawak is anything to travel by, there is need to look at the past and present agricultural policies, have they been able to accomplish the initial set aims, have they met the demand of the multitudes or society, if non, what are the accommodations to be made, which countries in the policy preparation need accommodation in order to promote the fight of oil thenar.What is the hiccough in the present policy that requires attending so that the industry can travel frontward.In what manner can authorities intervene and at the same clip non falsify the market.

This research hence seeks to happen out whether or non these different ownership constructions, in peculiar, the independent smallholders have comparative advantage in fresh fruit clump production and whether they fare better in the production of nutrient harvests. The survey will besides happen out the consequence of authorities intercession on the FFB production, as an addition in the fight of an industry, perchance as a consequence of authorities support, does non needfully connote an addition in national public assistance.

All these jobs will be addressed in the class of the research with the purpose of happening solutions that will both be socially acceptable and delighting to the policy shapers.

1.3 Aims of the survey

The general aim of the research is to mensurate the comparative advantage of oil thenar fresh fruit clump in the country of survey.

The specific aims are:

To place authorities policies on oil thenar production

To analyse the impact of authorities policy intercession in the oil thenar industry on comparative advantage

To place the relationship between authorities policy and comparative advantage

To place the socio economic features of plantation proprietors

To mensurate manufacturers profitableness.

Chapter TWO

LITERATURE REVIEW

2.1 Comparative Advantage

The rule of comparative advantage is the Southern Cross of neoclassical trade theory and it was foremost described by David Ricardo in 1817. It is based on the constructs of chance cost and factor gift, ( the two Swedish economic experts Eli Hecksher and Bertil Ohlin attributed differences in factor gift to why there are different rates of productiveness among states ) . It addresses how two states or parts can profit from each other through trade. It states that states should take advantage of the trade goods or merchandises they produce at lower monetary values compared to other provinces or state and merchandise them or export and import those trade goods they produce at higher cost compared to other states.According to Kannapiran and Flemming ( 1999 ) , comparative advantage is about apportioning resources expeditiously at the national degree. It is a theory explicating trade and optimum public assistance in an undistorted universe.

It indicates whether it is economically advantageous for a province, part or state to merchandise a trade good or spread out its production. As a consequence, its application is utile to both inter and intra industry comparings within a state. Harmonizing to Ricardo ( 1817 ) , the specialisation good in each state should be the good in which the state has a comparative advantage in production.

To place a state ‘s comparative advantage good requires a comparing of production costs across states. However, one does non compare the pecuniary costs of production or even the resource costs ( labor needed per unit of production ) of production. Alternatively, one must compare the chance costs of bring forthing goods across states.

There are two important points in the production and selling procedure where measuring of comparative advantage can be made, at the farm gate, which covers production merely and at the point of export, which includes processing, selling and production.

When we talk about comparative advantage in relation to states, we discuss the benefits that states derive from one another by traveling into trade. A state will merchandise in the trade good in which it has comparative advantage or border over the other state ( Ettlinger,1991 ) . There are times when a state has merchandising advantage in more than one trade good, in this instance it is ever better to take one out of the two trade goods that has the higher advantage in footings of lower production cost. In this survey nevertheless, comparative advantage will be viewed from intra state facet. Different surveies have been carried out to find the comparative advantages of assorted harvests ( Amirteimoori and Chizari 2008, Asif et al 2006 and Junning et al 2007 ) The comparative advantage of one industry which is the oil thenar industry in this instance will be studied in different provinces in Malaysia, this will enable us to find whether or non the production of the FFB is advantageous in those provinces or if non, is the advantage limited to specific province.

It is no intelligence that Malaysia has comparative advantage in oil thenar production as it is one of the two states that produce the majority of the universe ‘s palm oil and looking at the fact that land good for oil thenar production in peninsular Malaysia has been exhausted and attending is now switching to the Borneo island, Sarawak, to be specific, there is need to cognize the existent part of high bring forthing provinces in the peninsular, this will assist in finding what class of action to take. Although a batch of intercession programmes are under manner, like the replanting plan which aims at extinguishing all the old oil thenar trees in stages and replacing them with new 1s, thereby increasing the productiveness of different degrees of plantation proprietors by encouraging/enforcing the usage of intercrossed seeds which will increase production per hectare. This peculiarly applies to the smallholders as it has been found harmonizing to ( beginning ) that they produce the lowest output.

Any treatment or work or analyze on comparative advantage is non complete without a reference of the bookmans who are the advocates of the theory. This brings us to the reappraisal of plants of the likes of Ricardo, Balassa, Heckscher, ohlin and porter if one wants to include fight which some bookmans believe can non be talked about without adverting comparative advantage. Porter ( 2000 ) himself talked /discussed widely on this.

It should be noted that comparative advantage is extremely hinged on factors of national comparative advantage form can be measured in a batch of ways the best of which is by comparing cost of production with value of merchandise. Opportunity cost at domestic degree is used to value non-traded goods like land, pesticides and involvement while

production and engineering.

Comparative advantage applies to bury and intra-industry comparing within a state in the traded good sector ( Warr, 1994 ) and engineering and factor gift have been found to be its two major beginnings. Though ‘ the incidence of poorness among oil thenar smallholders has been negligible in Malaysia since the early 1980 ‘s compared to little scale manufacturers of other agricultural trade goods such as fish and rice, among whom poorness has persisted ( Simeh and Ahmad, 2001 ) ‘ , it is still necessary to cognize if the independent smallholders have comparative advantage in turning oil thenar.

In his survey, Papentus ( 2000 ) reported that the factors lending to low output of oil thenar production and constantly low profitableness by smallholders included usage of seeds that are non intercrossed which will subsequently develop to unproductive trees with low output, non seting at the needed spacing, holders refusal to do usage of fertiliser or the usage of deficient measure due to miss of cognition, every bit good as bad direction patterns like hapless weed control, sniping and pest direction.

Furthermore, Fairhurst ( 2003 ) , reported that there is rapid proliferation of the oil thenar processing installations in Malaysia and this has created a much more unfastened market for fresh fruit clump, thereby leting considerable growing in the independent smallholders sector.

Junning et Al ( 2007 ) reported that comparative advantage reflects comparative fight, and this is measured by market portions. If a state ‘s market portion of merchandise A is greater than that of merchandise B, so the state is more competitory in merchandise A than in merchandise B. This means it has a stronger comparative advantage in merchandise A than in merchandise B.

In another survey by Fang et Al ( 2000 ) , comparative advantage and protection of agricultural harvests was assessed utilizing the modified policy analysis matrix and they concluded that the forms of comparative advantage and protection mirror each other and the least competitory harvests tend to be the most protected 1s.

The policy analysis matrix is used to deduce of import policy parametric quantities like the nominal protection coefficient ( NPC ) , effectual protection coefficient ( EPC ) and the domestic resource cost ( DRC ) . The PAM has been applied to several states [ Akhtar et Al ( 2007 ) , and Al bin Ahmed et Al ( 2007 ) ] .

Okoruwa ( 2011 ) , Eddine ( 2010 ) and Gholibagloo ( 2005 ) , all reported the usage of the Domestic Resource Cost in developing states to mensurate efficiency or comparative advantage and besides to steer policy reform.

2.2 Government policy/intervention

Harmonizing to Pearson et Al ( 2003 ) , policies are authorities actions intended to alter behaviour of manufacturers and consumers, they are the instruments that authoritiess can use to alter economic results and it is necessary to hold a good understood model for agricultural policy analysis which will help determination shapers and involvement groups to understand the effects of policy actions.He stated that a model is an organized and consistent attack for clear thought without which policy argument can rapidly turn to misconstruing and show of emotions.

He went further and said the model for agricultural policy analysis is a logical system for analysing public policies impacting manufacturers, sellers and consumers of harvests and farm animal merchandises. This model has four constituents which are aims, restraints, policies and schemes. The ends of authorities normally fall under either one of these cardinal aims ; efficiency, equity or security. It should hence be noted that in this model, any end that a policymaker is trusting to accomplish through authorities intercession will be incorporated within one of the aims mentioned above. Agricultural monetary value policies, macroeconomic policies and investing policies are the different classs of policies that influence the agricultural sector.

The authorities of Malaysia has over the old ages intervened in the growing and development of the oil thenar industry through the preparation of policies. Get downing with the New Economic Policy ( 1970-1990 ) . The authorities subsidizes and controls monetary values on a batch of indispensable points to maintain the monetary values low and palm oil is one of such points. The authorities has considered remotion of subsidies but a formal program had yet to happen as of 2007.

In the attempts to excite growing and at the same clip to heighten distribution or redistribution of income, there has been turning authorities intercession via active and direct populace sector engagement in the development of agribusiness, specifically smallholder sector and execution of public policies in support of agribusiness. The authorities ‘s enterprise to back up smallholder agribusiness has been mostly through significant allotments of public development outgo for development of agricultural programmes and the financial every bit good as other steps. Aid in the signifier of agricultural inducements viz subsidies, monetary value support and credits among others has been a common characteristic.

Bruno ( 2010 ) , argued that authorities can act upon market ( or intervene ) in many ways, foremost, advancing some activities over others through subsidies, revenue enhancements e.t.c ; 2nd, increasing the supply of accomplishments by increasing the figure of schools and by giving companies incentives to carry on on-the-job preparation and 3rd, through institutional support to better technological capablenesss.

The Malayan authorities has intervened in oil thenar production. The first measure taken in this way was the encouragement the authorities gave to private sector to travel into big scale cultivation of thenar in topographic point of gum elastic. Subsequently, the authorities supported in the country of research and development ; development of skilled labor, which was done by the constitution of Universiti Pertanian Malaysia in 1973 to develop agricultural and agro-industrial applied scientists and agro-business alumnuss. Research and development is another country where authorities intercession has paid off, different research establishments were established which are MARDI, MPOB. One other country of intercession is institutional support in the signifier of proviso of substructure and recognition for husbandmans, constitution of the Federal Land Development Authority ( FELDA,1957 ) , Federal ( FELCRA,1966 ) . These strategies were designed to form smallholder husbandmans into collectives in order to help their production. And because the state is of course endowed with factors which support the growing of the harvest, the intercession has paid off as seen in the place of Malaysia in the universe today as a major oil bring forthing state.

2.3 An overview of Malayan Agricultural Policy

The chief policies regulating the oil thenar industry in Malaysia are the National Agricultural Policy ( NAP ) and Industrial Master Plan ( IMP ) . Oil palm cultivation was promoted through the engagement of the private sector under NAP while conserving on scarce resources. Value add-on was encouraged under IMP through a assortment of inducements ( Asopa,2006 ) .

Under the Third National Agricultural Policy attempts to heighten productiveness have been taken through the use of high giving up ringers and betterments in agronomic patterns among smallholders and plantations every bit good as increased mechanisation. In add-on, the proviso of equal support services and substructure in the agricultural production countries is expected to further better productiveness in the sector. It is besides envisaged that productiveness will besides be increased through wider application of the latest engineering and knowledge-based production systems.

It is utile to advert here that execution of the old two national agricultural policies since 1984 has enabled the agricultural sector to achieve a growing rate of 3.2 % per annum for the period from 1985-1995. The schemes taken under these two agricultural policies deserve good virtue due to the fact, the governments developed new agricultural land to enable the constitution of economic farm units. Efficient agricultural patterns have been fostered and land has been provided to agricultural husbandmans for turning new harvests. Institutional development of land was besides carried out in order to decide the jobs of uneconomic farm sizes, wasteful harvests and low degrees of productiveness. Agricultural incentives support service such as research, extension, selling, financial and societal and institutional development was besides provided by the Ministry of Agriculture.

The agricultural sector of Malaysia had experienced several jobs and challenges in 1980s. The land job was so considered as foremost. It can moderately be argued that the best manner for agribusiness to spread out is through the transition of new land for seting. In Malaysia, more agricultural land was taken over for industrial, infrastructural and lodging intents. Furthermore there was less market protection for agribusiness sector as it enjoyed really small in contrast to the fabrication sector. Export revenue enhancements had been imposed on thenar oil, gum elastic and Piper nigrum and ( Am. J. Environ. Sci. , 4 ( 6 ) : 608-614, 2008 ) agricultural production had declined as the consequence. Fabrication sector was able to offer higher rewards and better conditions of work. As a consequence agricultural workers were so discouraged and the sector had to offer higher rewards simply to extenuate the escape.

Agricultural employment in 1990 was about at the same degree as in 1985 despite a larger work force in the state. The agricultural sector besides experienced challenges of natural jobs as it ne’er had comparative advantage in the production of nutrient. Production of beef and mouton, for illustration, suffered from a deficiency of croping land, low production through reduced nutrient consumption by animate beings as a consequence of the hot and humid clime and the high import costs of animate beings. The production of rice has continued to fall short of a series of in turn lower marks. Table 3 shows that Malaysia still does non hold autonomy in many of import nutrient trade goods including rice, veggies, beef, mouton and myocardial infarction lk. Upon recognizing deficits and inefficiencies of the agricultural sector the Second National Agricultural Policy ( 1992-1997 ) was revised in 1998.

2.4 Smallholders and oil thenar

Ismail ( 2003 ) reported that the productiveness of the independent smallholders, which is lower than that of estate proprietors, can take to lower net incomes from an hectare of oil thenar. He hence argued that if the independent smallholders can be encouraged to better productiveness to the degree of the estates, more gross could be earned by the state.

Harmonizing to Papentus ( 2000 ) , the production of smallholders has remained suboptimal due to deficient usage of the proper fertilisers due to miss of cognition or fiscal capital, wrong direction, seting at incorrect spacing and usage of uncertified seeds.Ismail ( 2003 ) revealed that 14 % of the independent smallholders did non use fertiliser.

In his survey, Basiron ( 2007 ) argued that the low national oil output norm can be attributed to exhaustion of categories 1 and 2 dirts which has resulted in extension to category 39marginal ) and 4 ( unsuitable ) dirts. Other grounds are unequal inputs like fertiliser and field care, deficit of skilled labors, low seting rate,

uneffective and unequal estate direction, and instability of extension service. He added that combination of these factors can take to low Fresh Fruit Bunch output and oil extraction rate which constantly means low oil output.

Murad ( 2008 ) reported Ahmad ( 2001 ) to hold said in Malaysia, although smallholders contribution in agricultural sector is important, they constitute the majority of low income groups in the state and suffer the most due to little farm size, monetary value diminution in trade goods, lifting production cost and persistently low productiveness and income.

Chapter THREE

Methodology

3.1 Study Area

This survey will be carried out in two provinces ; Johor and Selangor. These provinces have big figure of oil thenar seting country ; about one hundred and 71 1000 hectares in Johor and 36 hectares in Selangor. Four out of the eight territories in Johor will be selected, viz. , Pontian, Batu Pahat, Kluang and Muar.

3.2 Sampling Method

Purposive trying method will be used to choose farm and respondent. A sum of two 100 questionnaires will be administered. One hundred and 60 respondents will be selected from Johor and Forty from Selangor.

3.3 Data Collection

Both primary and secondary informations will be used for the survey. The primary informations will be obtained from field study which would be carried out and the secondary informations from farm records and other relevant paperss.

3.4 Data Analysis

The Policy Analysis Matrix method will be used to analyse the information. The profitableness, nominal protection cost ( NPC ) , domestic resource cost ( DRC ) and societal benefit cost ( SBC ) which are all indexs will be used to find the comparative advantage of oil thenar fresh fruit clump every bit good as the impact of authorities policy intercession. Other tools that are likely to be used are the steps of cardinal inclination and correlativity analysis.

3.5 Policy Analysis Matrix

The PAM theoretical account developed by Eric A. Monke and Scott R. Peterson ( 1989 ) will be used to mensurate comparative advantage ( societal profitableness ) of an activity every bit good as consequence of authorities intercessions on oil thenar industry.

The PAM methodological analysis will supply information to assist turn to issues of agricultural policy. It will cast visible radiation on whether or non authorities intercession is needed to convey up the production of the independent smallholders to the degree of the private proprietors and the supported smallholders. It will demo whether the smallholders are competitory under the bing engineering and earn net income in existent market monetary values.