Emerging Industry Revolution 4.0 and Its Relationship with the Agriculture Sector in Malaysia

Emerging Industry Revolution 4.0 and Its Relationship with the Agriculture Sector in Malaysia

Published: 2020.11.02
Accepted: 2020.11.02
32
Former Director
Strategic Planning and Innovation Management Centre, Malaysian Agricultural Research and Development Institute (MARDI)
Center for Technology Commercialization and Business, Malaysian Agricultural Research and Development Institute, Malaysia.

ABSTRACT

The Malaysian government plans to transform the agriculture sector to be a dynamic, sustainable and competitive sector. Agriculture has been recognized as one of the National Key Result Areas (NKE) that projected to increase the gross national income to around RM49 billion (US$11.6 billion) in 2020, an increase from RM20 billion (US$4.76 billion) in 2009.  A lot of funds have been allocated, and many initiatives have been introduced as to ensure this sector continues to contribute to the country’s economic development. However, the low productivity of the agriculture sector has been one of the concerns of the government. The productivity was reported to be stagnant in 2017, and increased very marginally in 2018. Further, agriculture only contributed 6.5% of Malaysian Q1 2020 gross domestic product (GDP), far behind the services and the manufacturing sectors. The Malaysian government has launched the Policy of the Industry Revolution (IR4.0) in 2018 as a new strategy to boost productivity growth, with priority initially given to the manufacturing sector, followed by services and other sectors, including agriculture. On part of the agriculture sector, the government has introduced the Agriculture 4.0 as one of the strategies to increase its productivity, efficiency and competitiveness. The focus is on capacity building (skill and trained manpower or labors) and providing infrastructure that could speed up the application of digital technology in Malaysia. Malaysia is optimistic that the agriculture sector will remain important as the source of economic development for the current and future generations.

Keywords: Industry Revolution 4.0, Agriculture Revolution 4.0, Digital technology, smart agriculture

INTRODUCTION

The population of Malaysia is projected to increase to more than 45 million by 2050. The increase in population will also result in the increase in food demand and consumption, hence food insecurity will be one of the major challenges faced by the country.  The agro-food sector will be transformed and modernized into a high-income and sustainable sector. Efforts will be focused on ensuring food security, improving productivity, increasing skills of farmers, enhancing support and delivery services, strengthening the supply chain and ensuring compliance to the international market requirements. The development of this sector will also take into account the impact of climate change, the impact of trade liberalization and the competitiveness of Malaysia’s products in the world markets.

However, the issue of low productivity growth was the concern of the government, as the level of productivity growth was stagnant in 2017. According to the Malaysian Productivity Corporation (MPC) in its 25th Productivity Report 2018, Malaysia’s productivity growth was more or less flat, which only increased by a mere 0.1 percentage points from 3.7% in 2014 to 3.8% in 2017, after having dipped to 3.5% in 2015 and 2016. In response to this issue, the Ministry of Economic Affairs takes an initiative to boost the productivity, especially in the manufacturing and agriculture sector. The former Prime Minister launched the Malaysian Productivity Blueprint on 8th May 2017. It sets a minimum of 3.7% labor productivity growth in Malaysia by 2020, in accordance with the 11th Malaysia Development Plan (2016 – 2020). Another initiative is the introduction of the Industry Revolution (IR) 4.0. The Malaysian government has launched the Policy of the Industry Revolution in 2018.  Malaysia looks towards Industry 4.0 to boost the productivity growth, with priority initially given to the manufacturing sector, with future plans to be extended to other sectors, such as the services and the agriculture sector. 

The introduction of the IR 4.0 in the agriculture sector will speed up the process of transformation and change in Malaysia’s socioeconomic life. However, the readiness of the people that include the farmers, fishermen and breeders is still uncertain. This paper highlights the introduction of IR 4.0 in the agriculture sector in Malaysia, its issues and challenges and the way forward. It is hoped that this initiative will help the government in enhancing the sector and become one of the sources of new wealth for Malaysia.

INDUSTRY REVOLUTION

Industry revolution 4.0

The term ‘Industry 4.0 or IR 4.0’ was initially coined by the German government that emphasized technological change in the manufacturing industry with the aim of sustaining German’s industry competitiveness (Tay et al., 2018). The idea whereby production will become more efficient and less costly, may be achieved by massive exchange of information, integrated control of production or manufacturing and smart computation and performing a task through machines (Qin, Liu &Grosvenor, 2016).  In general, IR 4.0 contains nine pillars that include Big Data, Augmented Reality, Simulation, the Internet of Things (IoT), Cloud Computing, Cyber Security, System Integration, Additive Manufacturing, and Autonomous System. 

IR 4.0 involves the connectivity of the cyber-physical system (CPS) where existing and new production machines are fitted with sensors, which collect lots of relevant data, use QR codes or RFID tags to identify different products. For example, the RFID tag can be used to identify a product faster and more accurate. It enables products to be mass-customized according to customer requirements, enables better product monitoring, product schedule planning and helps business increase its profit margin. On the other hand, Artificial Intelligence (AI) analyzes data from sensors and equipment to identify developing problems to enable predictive maintenance to be performed before a break down, thus reducing downtime and optimizing asset utilization.

Industry revolution 4.0 in Malaysia

Malaysia looks forwards towards IR4.0 to boost its productivity growth. In the beginning, Malaysia focuses on the manufacturing sector, and will be followed by other sectors, including the agriculture sector. This initiative was introduced as a response to the low productivity of all industries that affected the development of economy in Malaysia. The introduction of IR4.0 in Malaysia aims to:

  1. Increase the number of high-skilled workers and tighten up entry of low-skilled workers into the workforce in order to meet the demands of the future economy.
  2. Strengthen the readiness of enterprises to exploit technology and takes the advantages of the digital economy.
  3. Reduce reliance on non-critical subsidies and link financial assistance and regulatory liberalization efforts to productivity outcomes and re-position industry towards an emphasis on higher value-add segments of the value chain.
  4. Address regulatory constraints and develop a robust accountability system to ensure effective implementation of regulatory reviews.
  5. Embed a productivity culture nationwide and drive productivity performance through an effective government mechanism

The Ministry of International Trade and Industry has launched the National Policy on Industry 4.0 on 31st October 2018, with the aim of boosting digital transformation in the Malaysian manufacturing sector and its related services by facilitating companies to embrace the related technologies in a systematic and comprehensive manner. The objectives of the National Policy on Industry Revolution 4.0 are:

  1. To attract stakeholders to Industry 4.0 technologies and processes, and further increase Malaysia’s attractiveness as a preferred manufacturing location
  2. To create a right ecosystem for Industry 4.0 to be adopted and align existing and future development initiatives
  3. To enhance the capabilities of the companies that are involved in the Industry 4.0.

The end goal is for Malaysian manufacturers to be stronger through smart technologies. The government has introduced various initiatives such as readiness assessment, intervention program, high speed broadband connectivity to potential industrial parks. The other initiatives include enhancing competence centers at public higher learning institutions, and reskilling program to address the technology and skill gaps among the industry players, especially the small and medium enterprises.

Industry revolution 4.0 is important for Malaysia, as it will help in increasing the speed of innovation and also help the companies in reacting to the challenges in the current markets domestically and globally. The enabling technologies will bring a new dimension to the industrial environment by changing the traditional manufacturing system to a greater efficiency, integrate and automate the operation system, and connected the system through the Internet.

Performance of agriculture sector

The agriculture sector remains an important contributor to the Malaysian economy. In Malaysia, agriculture sector is classified into two categories, the industrial commodity that includes oil palm, rubber and cocoa. The other category is agro-food sector that includes paddy, fruits, vegetable, livestock and fisheries. This sector has been the backbone of Malaysia’s economy by producing agricultural products for domestic consumption, as an earner of foreign exchange, and contributes to the national Gross Domestic Products (GDP). The agriculture sector contributed 7.3% to the GDP amounted around RM99.5 billion (US$23.7 billion), in 2019. Despite an increase in absolute value, the contribution of the agriculture sector has decreased continuously from 10.1% in 2010 to 8.29% (2015) and 7.54% in 2018.  Oil palm was the major contributor to the GDP of the agriculture sector in 2018 at 37.9%, followed by other agricultural commodities (25.1%), livestock (14.9%), fishing (12.5%), forestry and logging (6.9%) and rubber (2.8%). The gross output of the agriculture sector in 2017 was RM91.2 billion (US$21.71 billion), an increase of 11.1% per year compared to RM73.9 billion (US$17.6 billion) in 2015. Malaysian export for agri-food has expanded to 7.8% a year from 2016 – 2017 which contributed 3.4% to national export valued RM 31.8 billion (US$7.57 billion) compared to 2015 of RM 27.3 billion (US$6.5 billion).

However, the agri-food commodity production has shrunk to around 3.4% to 10,811 metric tons in 2017 compared to 2015. The major decreases in production were in the commodities of paddy, fisheries, fruits and vegetables. The production of paddy has decreased to 2.568 million MT in 2017, from 2.739 million MT (2016). During the same period, the marine fish landing has dropped to 1.465 million MT from 1.583 million MT; a dropped around 0.8%.

The agriculture sector recorded a labor productivity of RM53,943 (US$12,843.6) in 2019 from RM54,041 (US$12,866) in 2017, a decreased around 0.2%. Malaysia aims to achieve the labor productivity around RM68,800 (US$16,380) at the end of 2020. The reduction of productivity was contributed by the variation in weather conditions, which is beyond the control of the farmers. The other factors that contributed to lower productivity were the lack in the application of technologies, government policies, the land quality and the environmental issues such as extreme climate change.

The agriculture sector in Malaysia is also facing great challenges and issues that need special attention by the government. The issue of population growth, for example, will boost the demand for food. Malaysia needs to double its food production in 2050 as compared to 2013 agriculture output. This is a great challenge because the land area for food production is decreasing every year. The competition to use the land with other lucrative industries such as housing and industrial industries will definitely disfavor the agriculture sector. Furthermore, the increase in urbanization will lead to the reduction of arable land for food production.

The extreme climate has changed agricultural activities in Malaysia. Climate change has altered the environment and shifted the production and harvesting seasons. More drought and floods have reduced the yields and affected the quality of the products. Water resources are highly stressed, scarce and affected agricultural activities. Farmlands are becoming increasingly unsuitable for food production. As a result, farmlands become highly degraded and are left abandoned.  A report by the Department of Agriculture shows that 119,273 hectares of agricultural land were left idle in 2018. These issues have reduced the production of agricultural products in Malaysia. Malaysia is currently producing 65-70% of its rice, 70-75% of vegetables and 20-25% of its beef, goat and mutton requirements. Despite many previous government initiatives to bolster meat production, there is a chronic shortage of grazing land. As a result, the production of meat only increased marginally every year.

Among the notable agricultural challenges in Malaysia are:

  1. Crop yields are dependent on unpredictable weather conditions. For example, the        climate change has shifted the fruiting seasons, and affected the production of the          agricultural produce.
  2. Natural calamities such as floods and long drought has led to harvest loss, and thereby adversely affecting the agricultural infrastructure.
  3. Majority of farmers are now aged around 60 years old. They are less educated and refuse to adopt new technologies. At the same time, young people do not want to take over the family farm holding because they wanted to find better opportunities in other sectors.

All the issues need imperative technology-driven solutions. The adoption and adaptation of technology solutions driven by Internet of Things (IoT), Data driven, GPS, cloud computing, robotics, automation, in-field drones are crucial. Technology solutions will increase productivity, yields, profitability, will eliminate or minimize risks, and avoidance of underutilization of resources. For maximum productivity and quality, farmers need to be empowered with technology-driven solutions. For instance, technologies such as IoT sensors, and drones will be implemented in the fields to record environmental conditions. The data will be fed to weather forecasting. Artificial intelligence tools will be used to make agricultural decision-making process efficient and cost-effective. Furthermore, dependence on labor may be reduced. Crop and soil inspections will be conducted by drones and data to be channeled wirelessly in real-time. AI systems will comprehend the next course of action for higher crop yields. Such a technology-based ecosystem, where farmers know which field to irrigate and where crop needs to be planted, would lead to a precision-driven agricultural industry that delivers higher revenue.

The introduction of Agriculture 4.0 in Malaysia

The term Agriculture 4.0 refers to the application of technologies that includes precision farming, the Internet of things (IoT) and the use of big data in the agriculture sector. It is also known as the digital revolution era. The application of technology will drive a greater business efficiency in this sector and will result in higher production. The Agriculture 4.0 will increase crop fields, more efficient farming, decrease demand for farmlands and reduce the migration of workers to the urban areas.

The government of Malaysia has decided to transform the agriculture sector from a traditional approach to a modern, dynamic and systematic methodology by using technology and innovation. Malaysia is ready to push innovation and agricultural technology development to help this sector transform and grow. The government started to invest time and resources into smart farming. Private sectors are invited to invest in smart farming and produce high quality and premium price agricultural produce for local and export markets.

At the same time, the modernization of the agriculture sector must be supported by green technology. The application of technology will help the government in identifying the demand side by the consumers, and the supply side of agricultural products. The application of innovation and technology, such as sensors, devices, machines and information technologies will lead agribusiness to be more profitable. This will encourage more entrepreneurs to participate and invest in the agricultural activities. 

Agriculture 4.0 will manage the supply chain in the production of agricultural produce more efficiently. For example, despite applying agricultural inputs in the entire farmlands, farmers will use water, fertilizers, chemicals/pesticides according to the needs, thus, adapting precision farming.  Malaysian agriculture landscape is ripe for establishing Precision Agriculture (PA) or also known as smart farming. PA is carried out by the optimization of inputs that directly impact crop yields, both in terms of quality and quantity. These inputs are water conditions, types of fertilizers and pesticides and tools and equipment. The agriculture 4.0 also changes the agriculture methods such as crop rotation, hydroponic, aquaponic and fertigation system.

The vision for Agriculture 4.0 is to modernize farms and become smart enterprises. Farmers and agricultural activities are relying on digital and connected technologies that enable farmers to have greater control over their operations. The recent progress in Malaysia’s agricultural agenda is the increasing use of emerging innovative technology, namely the Internet of Things (IoT) and big data, to initiate smart agricultural practices. This measure is aligned with the current global trend of automation technology. Smart agriculture practice could be the springboard to increase the quantity, quality, sustainability and cost effective production. By leveraging the IoT, farmers can remotely manage and control their irrigation equipment, monitor soil moisture, crop growth and the level of livestock feeds without the need of their presence. Smart agriculture is expected to address some issues such as biodiversity degradation and environmental pollution.

However, one of the great challenges in introducing Agriculture 4.0 is lack of reliable internet connectivity in rural areas and not having the right skill sets to deploy technologies. According to a report by the department of Statistics Malaysia, the internet penetration in Malaysia has increased to 90.1% in 2019, from 87.0% in 2018. Around 91% of consumers in Malaysia used smart phones, while 27.5% used feature phone in 2019. The report also revealed that 83.5% of consumers used smart phones for finding information. However, some farmers are old and are unable to interpret the resulting data. On the other hand, young people are reluctant to be involved in agribusiness activities. Despite functioned as data originators; farmers are unable to interpret the data and used it for planning their operation activities. In other words, the data gathered by government agencies are useless and does not benefit the farmers.

Another challenge faced by farmers who want to digitalize their farming operations is the cost of obtaining the technologies. More than 85% of farmers in Malaysia are categorized as small and medium enterprises, with the average land ownership of 2.5 hectares. Farmers do not have capital to buy expensive technologies offered in the markets. For example, farmers cannot afford to buy drones that can speed up the operation activities such as fertilizing and controlling pesticides. In other words, not everyone has the capability or has the access toward digital equipment. Farmers understand the importance of technologies in helping them managing their farmlands, but the higher cost of technologies has hindered them to use it.

At the same time, farmers are not really aware about the impact of and the need for Industry 4.0 technologies. This is because they have inadequate understanding of the cost and benefit of implementing digital technologies. As a result, the implementation of smart agriculture is quite slow and receive less response from farmers, especially the senior generation. On the other hand, young farmers are starting to embark on modern farming such as using drones for fertilizing and managing pests in their farms.

Government initiatives/ agenda

Malaysian government has paid attention to develop the agriculture sector. Government has identified agriculture as a National Key Result Area. Under this initiative, the agriculture sector is targeted to increase the Gross National Income by RM28.9 billion (US$6.88 billion) to reach RM49.1 billion (US$11.69 billion) by 2020.  The agriculture sector is also targeted to create more than 109,000 job opportunities by 2020, primarily in the rural areas (Rozhan, 2015). The National Agro-food Policy (2011-2020) was formulated to further enhance the level of self-sufficiency level (SSL) and to reduce the vast sums spent on importing agro-food. This policy also aimed at addressing food security and safety: guaranteeing the availability, affordability and accessibility of food; ensuring the competitiveness and sustainability of the agro-food industry; and increasing the income levels of agropreneurs.

To achieve a high-income nation, cultivation of innovation, sciences and technology is a must. Innovations contribute to the economic growth as they are leveraging efficiency, productivity, quality, and competitiveness (Bareghen et al., 2009). Under the 10th and 11th Malaysia’s five-year economic development plan, the country leaders had incorporated strategies and programs to increase food production through optimization and sustainable land, development and upgrading agricultural infrastructure, enhance labor/ farmers skills, strengthening agro-food supply chain and increase the quality, safety of food and food security. The National Agro-food Policy also emphasized the use of modern technologies and mechanization to increase productivity, efficiency, yield, and to reduce the dependency of manpower. The government also provides sector-based incentives to encourage the private sector to invest in the agriculture and agro-based industry.

Accordingly, in 2019, the government has launched the Shared Prosperity Vision (SPV) 2030 with the primary aim of providing a decent standard of living to all Malaysians by 2030. Among the agenda is to increase high skilled workers by 35% and to promote value-add industries by adoption of high-end technologies. As for the initiative, the government has introduced 15 key economic growth activities (KEGA) which incorporated Industrial Revolution 4.0, Digital Economy, Advanced & Modern Services and Smart & High Value Agriculture activities among the focus (Prime Minister Office, 2019). Furthermore, during the presentation of the National Budget 2020, the government has announced a huge sum of allocation to support agriculture activities. The government increases the allocation of the Ministry of Agriculture from RM4.4 billion (US$1.05 billion) in 2019 to RM4.9 billion (US$1.167 billion) in 2020. Accordingly, the government also allocated RM43 million (US$10.23 million) special funds to enhance the Agriculture Industry 4.0 which is to develop higher productivity and quality of new crops (Ministry of Finance, 2019).

Malaysia launched its Industry 4.0 blueprint, “Industry 4WRD: National Policy on Industry 4.0” in October 2018 (Ministry of International Trade and Industry (MITI), 2018). Unfortunately, the focus is on the digital transformation of the manufacturing and services sectors. The agriculture sector was merely given a marginal emphasis. Maybe this was due to the consistent contributions of both manufacturing (23%) and services (54.5%) sectors to the national gross domestic products (GDP) (DOS, 2018). Although the contribution was only 8.2% to the 2017 GDP, agriculture sector plays a vital role in leveraging economic enhancement, diminishing poverty, sustainability food safety and security as prescribed in the Sustainable Development Goals (SDGs) (FAO, 2018).

Recently, the government has also introduced the Industry Digitalization Transformation Fund (IDTF) valued about RM3.0 billion (US$0.71 billion) under the Malaysia 2019 budget, in which the focus is to achieve IR 4.0 goals by accelerating industry’s adoption of the related technologies and to propel the nation in becoming a strategic partner for smart manufacturing and related services in the Asian and Pacific region. The policy aims to raise labor productivity growth, increase the contribution of the manufacturing sector in the GDP, enhance innovation capacity and create more-high skilled jobs (Malaysia Development Bank, 2019). The transition of Malaysia’s economy from the agriculture-based during the post-independence, to a greater focus on industrialization has witnessed a rapid growth in the manufacturing sector. While the trend is progressing towards a more diversified service-based economy, the manufacturing sector continues to play an important role in the economic development of the country. The manufacturing sector is now playing a critical role as the main linkage and inter-industry interactions, of which industries use products or services of other industries to develop and produce their own products or provide their own services.

WAY FORWARD

Malaysia is blessed with fertile soil and a conducive environment for agricultural development. Agriculture contributed 6.5% of the Malaysian Q1 2020 GDP, 3rd largest after Services and Manufacturing sectors (DOS, 2020). Agriculture is an important sector as it is a key for diminishing poverty, sustaining food safety and security. The contribution of the agriculture sector to the GDP is still significant and sustainable. Thus, the transformation of this sector is critical and requires strategic long-term plans.

Innovation and technology development programs would be instrumental in assisting farmers and SMEs to increase productivity, drive efficiency and boost growth. The government needs to assess the gaps continuously, and facilitates the preparedness of farmers toward the new challenges that emerged from the Industrial Revolution 4.0. Digitalization of the industry would hold the key for growth and innovation and to create the job for the future. This includes to revise the policy of IR 4.0, and spell out the Agriculture Revolution 4.0 (AR 4.0) clearly. The idea of AR 4.0 is depicted by the emergence of cyber physical system (CPS) on a global scale in agriculture, which eludes conventional farming of individual, small scale activities and low adaption of technologies. AR 4.0 shall integrate smart farming, automation, digitalization, big data for data intelligent, cloud computing and the Internet of Things (IoT) as a smart way in operating agricultural activities. The application of AR 4.0 will increase the efficiency in agricultural activities, increase  productivity, and decrease the wastes both in the agricultural system and the business environment.

CONCLUSION

The agriculture sector in Malaysia is on the threshold of transformation that could enable it to be a critical source of economic benefits, such as agricultural products for local consumption, revenue from export markets, jobs for youths and improving the socioeconomic status of farmers, fisherman and breeders.  Digital technology and big data are two main components that could lead the transformation of the agriculture sector in Malaysia.

The introduction of Agriculture 4.0 is timely in Malaysia and is in line with the global trend in addressing higher demand for food in the current situation and in the future. Malaysia is ready to embark on Agriculture 4.0. Malaysia has prepared itself in terms of creating policies for spearheading the implementation and providing infrastructure for farmers to adopt the technologies. The agenda shall focus on empowering human capital, organize structured technology development programs, heavily promoting the adoption/ adaption of innovation, new/ high end technologies and varieties, which includes assistance in initial investments or dedicated grants scheme.

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