Socioeconomic and Business Impact of Urban Agriculture in Malaysia

Socioeconomic and Business Impact of Urban Agriculture in Malaysia

Published: 2022.08.17
Accepted: 2022.08.10
5
Socioeconomic, Market Intelligent and Agribusiness Research Center, MARDI
Former Director
Strategic Planning and Innovation Management Centre, Malaysian Agricultural Research and Development Institute (MARDI)
Malaysian Agricultural Research and Development Institute (MARDI)
Horticulture Research Center, MARDI
Socioeconomic, Market Intelligent and Agribusiness Research Center, MARDI

ABSTRACT

Urban agriculture (UA) is broadly defined as the full range of activities involved in producing food in cities, including small-scale home and large-scale commercial production. Urbanization, limited agricultural land, food demand, and consumer awareness are push factors for urban agriculture. This scenario is among significant challenges for modern agriculture in Malaysia. However, it is still insufficient for the domestic market despite increasing vegetable production. Given the increasing consumption of vegetables among the urban population, the government has established the Urban Agriculture Program to reduce the dependence on vegetables in the market. For that reason, this paper discusses and explores urban agriculture’s implementation in two categories: community urban agriculture and commercial urban agriculture. Therefore, a descriptive and financial analysis study was conducted to assess the impact of urban agriculture strategic planning. Studies found that agriculture in urban areas is a cost-effective method of supplying viable food for communities and plant factories that can generate profits for entrepreneurs.

Keywords: socioeconomic impact, business impact, urban agriculture

INTRODUCTION

The urbanization process has led to the migration of the population to urban areas. It is estimated that more than 4.27 billion or 60% of the world’s population lived in urban areas in 2019. The same scenario occurs in Malaysia, where 78% of Malaysia’s population is concentrated in major cities (World Bank, 2022). The urbanization process has led to an increase in food demand in urban areas. Moreover, consumer awareness of the importance of healthcare has also increased the demand for vegetables and fruits. Relatively, the understanding and knowledge of the urban community on the importance of vegetables and fruits to health is higher. This awareness causes the consumption rate of vegetables and fruits among urban adults to exceed the consumption rate of rural consumers. Agriculture in urban areas is recognized as an efficient and multifunctional approach to providing a source of food supply (Langemeyer et al., 2021). In addition, it is progressively able to provide benefits to the socioeconomics of society and the environment (Jin et al., 2021; Lyu et al., 2022; OECD, 2020; Piso et al., 2019)

Currently, a healthy lifestyle contributes to the consumption of fruits and vegetables among the urban population. Consumption of fruits and vegetables increased through better access to these commodities. Studies show that logistics, geography, and market access are among the factors contributing to the increased consumption of a commodity, including vegetables. The more accessible consumers obtain the products they need, the more often such items are traded. Vegetable resources in urban areas usually come from agricultural locations in rural or suburban areas. Vegetable production in urban areas is minimal due to limited agricultural areas. At the same time, vegetable production in Malaysia cannot meet the needs of consumers in the country. According to Crop Statistic (2021), although vegetable production has increased from 1.00 million tons in 2017 to over 1.11 million tons in 2021 (Department of Agriculture, 2021), it is still insufficient for the domestic market. The increase in population and the increase in per capita consumption of vegetables from 80.83 kg per person to 85.33 kg per person in the same period resulted in insufficient supply (DOA, 2020). A report by the Malaysian Adults Nutrition Survey revealed that the consumption of vegetables among adults in the urban areas is higher than that of the community in the rural areas. The same report stated that man consumes more than woman. A man consumes 1.61 servings of vegetables daily compared to a woman (1.59 servings) (Ministry Of Health, 2014).

Given the increasing consumption of vegetables among the urban population, the government has established the Urban Agriculture Program to reduce the dependence on vegetables in the market. City dwellers are advised to plant and develop community farms that can produce vegetables for their use or sell to the local community. The use of technology and innovation supports the development of urban community farms. It aims to increase the productivity and quality of vegetables produced. Apart from that, the development of urban farms aims to use community areas optimally and encourage residents to grow their vegetables for family use.

Although agricultural activities are common, the implementation in urban areas, especially in residential areas such as condominiums and apartments, is a new activity for urban residents. At the same time, the implementation of commercial production of vegetables by plant factories is also new in Malaysia. Therefore, an impact study of urban agriculture implementation was conducted to assess the acceptance of the urban population of government initiatives. This paper discusses implementing some initiatives under the vegetable sub-sector, especially on producing vegetables in the urban areas and its impacts on the socioeconomic and business community.

URBAN AGRICULTURE

Urban agriculture is a dynamic system that includes ground-level farming, rooftop farming, hydroponics, vertical farming, areal farming, and aquaculture farming. People used different approaches in different locations and communities. This activity can be carried out as a primary or part-time income source. In addition, it can play a significant role as a food source and generates income for urban dwellers (Anwesha et al., 2019). In some countries, there is an increasing trend in which urban agriculture is integrated with the landscape to beautify the surrounding areas (Ohmer et al., 2009). Urban agriculture is also associated with applying science and technology, indicating a high level of smart agriculture (Aciksoz et al., 2021).

Among the challenges urban communities face is the lack of land and financial capital to engage in agriculture (Puppim de Oliveira & Ahmed, 2021; Siegner et al., 2018). Currently, many condominium houses and apartments are built, and there is no space for agricultural activities. Therefore, the government should generate user-friendly technologies as one of the solutions.

The implementation of urban agriculture

The implementation of urban agriculture is relatively new in Malaysia. In general, there are two approaches to urban agriculture in Malaysia: (1)  Community Urban Agriculture, which is on a voluntary basis; and (2) Commercial Urban Agriculture, which focuses on commercial large-scale production by plant factories.

Community urban agriculture

The Department of Agriculture has implemented the urban agriculture program since 2014, and until recently, a total of 124,988 people in 5,065 locations have benefited. The urban agriculture program aims to reduce the cost of living in the urban and sub-urban areas by encouraging the communities to grow food crops for personal use, and the surplus is sold as a source of income. The Department of Agriculture encourages the urban community to grow food crops for use around their respective homes and participate in the Community Urban Agriculture Project (KEBUNITI), which is explicitly established for residents in the urban and suburban areas. The KEBUNITI aims to help the B40 income group reduce their monthly food expenditure (Ministry of Finance, 2021). Malaysians are categorized into three different income groups: Top 20% (T20), Middle 40% (M40), and Bottom 40% (B40). B40, M40, and T20 represent the country’s population percentages of Bottom 40%, Middle 40%, and Top 20%, respectively. The B40 income group refers to people who receive an income of between RM1,900.00 (US$452.00) and RM4,849.00 (US$1,154.00) a month (Department of Statistics Malaysia, 2020).

 Community urban  agriculture, also known as urban farming program, is a program that helps households reduce the cost of living through their production of foodstuffs under the guidance of the Department of Agriculture. The program involves residents, schools, institutions, and urban agricultural entrepreneurs with the cooperation and involvement of various relevant agencies at the State and Federal levels. The  Community Urban Agriculture Development Program is one of the strategies to encourage social interaction among the locals. In addition, community farming helps increase the self-motivation of the participants with the ability to form their communities and work in teams to produce food products for their use or sale. The objectives of this program are: (1) to help reduce the cost of living; (2) to create community agricultural activities to ensure adequate quality and safe food production; and (3) to create social interaction and encourage communication among the community (Department of Agriculture, 2022).

The program is implemented individually or by urban agricultural entrepreneurs, whether in residential areas or vacant lands belonging to the government, to generate income through the production and sale of agricultural produce. The program is conducted individually in groups (minimum of 10 people) for individual categories. Participants must carry out sales/marketing activities for the entrepreneur category. The program involves identified planting areas around apartments/residences that residents jointly implement as community farming. Farming activities can generate community income through the production and sale of produce. The activity can also foster cooperation and harmony between the neighborhoods and beautify the landscape around the area. For the community category, the project is implemented around the area in groups with a minimum of ten participants. 

The program is also implemented as agricultural activities in schools for teaching and learning and to expose students, teachers, and parents to the importance of farming activities for food production. In addition, students can carry out physical activities through agricultural activities. These activities can also generate income while beautifying the landscape in the school environment. For the school category, the project is implemented in groups with a minimum of 10 participants.

In the institution category, agricultural activities are carried out using various appropriate methods in the institutional areas, government offices, and private offices. The program aims to produce a supply of quality food that are safe to eat and beautify the area’s landscape. Not only that, this activity can also strengthen good relations among employees. For the institutional category, the project is implemented in groups with a minimum of 10 participants.

The program provides theoretical and practical guidance to participants on simple gardening techniques with modern farming methods such as hydroponic and fertigation systems. The government also provides participants free gardening equipment such as pots, shovels, and hydroponic system equipment.

The majority participants in the community urban agriculture were male (56.3%), and the rest were female (43.9%). The majority of active participation was led by senior citizens aged between 51 and 69 years (51%), followed by adults aged 41-50 (23%) and youth aged 31-40 (15%). The program lacks involvement from youths under 30 years old. A deep interest in agriculture drove their participation in urban agricultural activities. Over 55.0% of community participants chose fertigation farming, followed by hydroponic (47.9%), basic technology (23.3%), vertical farming (12.3%), aquaponics (4.9%), nutripot and green kit (8.4%), and aeroponics (1.9%) (survey, 2020). The technology applied in the community urban agriculture is presented in Figure 1.

Commercial urban agriculture

The other urban agriculture approach is the large-scale production (commercial) of vegetables by plant factories. Commercial urban agriculture is defined by economic principles and is controlled by expert groups that practice agriculture on different urban farm scales for profit (Hedin, 2015). Furthermore, Asia’s indoor farming and plant factory sector is forecasted to grow due to the threat to food security (Huang, 2019). A plant factory is a closed system production infrastructure or house that creates an indoor microclimate that allows the cultivation of various plants, regardless of soil conditions and other climatic factors. In these plant factories, high-value vegetables are grown with the help of a customized light-emitting diode (LED) lighting system that replaces sunlight and a precise supply of carbon dioxide (CO2). The ambient temperature and humidity are also controlled accordingly using air-conditioning systems. The vegetables were grown in a hydroponic system where the supply of water and fertilizer was automated. The production of vegetables in a closed system will produce high-quality vegetables with higher yields without being affected by outdoor conditions (Duda et al., 2016; Orsini et al., 2020). An entrepreneur converts an empty warehouse or shop lot into a plant factory to start a commercial plant factory. The final approach is using shipping container (contena) as a small plant factory.

A warehouse plant factory is a closed system that enables entrepreneurs to cultivate high-value vegetables such as lettuce (butterhead, arugula herbs, and baby spinach) and spices (sweet basil, thyme, rosemary) and garnish category (microgreen and edible flowers). The minimum building size for a warehouse is 2,400 square feet. This warehouse-type plant factory can plant a maximum of 22,000 seedlings. This building requires 2-3 medium and high-skilled operators. The estimated initial cost to develop this warehouse plant factory is RM700,000.00 (US$166,666.70). These costs include building the infrastructure, purchasing mechanical and electrical equipment, installing tiered plant systems, lighting systems, operational control and monitoring systems, and operating equipment.

The second approach to develop commercial urban agriculture is by converting empty shop lot into a medium-sized plant factory. The minimum size of shop lot is 1,400 square feet. The entrepreneur can rent a shop lot to reduce the initial cost. This shop-lot plant factory requires only two medium and high-skilled operators. The estimated initial cost to develop a shop-lot plant factory is RM210,000.00 (US$50,000.00). These costs include purchasing mechanical and electrical equipment, installing tiered plant systems, lighting systems, operational control and monitoring systems, and operating equipment.

The third approach in developing commercial urban agriculture is by converting the shipping containers (contena) into a small plant factory or AgroCube. The minimum floor area of a mobile or container plant factory is 400 square feet and is estimated to hold a maximum of 3,000 lettuce seedlings. These seedlings can produce around 326 kg of vegetables per month. The estimated initial cost involved is at least RM 135,000.00 (US$32,142.80). These costs include the purchase of used shipping contena,  mechanical and electrical equipment (RM55,000.00) (US$11,904.80), installation of a multi-story plant system, lighting system (RM60,000.00) (US$14,285.70), control system, and operational monitoring (RM20,000.00) (US$4,761.90) not involving the cost of operating equipment.

IMPACT OF URBAN AGRICULTURE

The government has so far allocated a total of RM63.30 (US$15.07) million to the Ministry of Agriculture and Food Industry (MAFI) for the success of urban community farming throughout the country. A total of RM28.82 (US$6.86) million was allocated for the program from 2014 to 2020. The allocation covers RM10.00 (US$2.38) million under the National Economic Recovery Plan (PENJANA) 2020, which has benefited 165,207 people nationwide. The encouraging response from the community has prompted the government to provide an additional RM30.00 (US$7.14) million in 2021 in addition to the annual allocation of RM4.50 (US$1.07) million, which has benefited 39,608 people in 25,775 locations throughout Malaysia. The urban community agriculture program benefits the local socioeconomic, social and environmental aspects, generating employment opportunities and supporting the food needs of urban and rural residents (Ministry of Finance, 2020).

For the implementation of the Second Phase, which is from 2022 to 2025, an allocation of RM21.18 (US$5.04) million will benefit 27,524 individuals and 1,046 communities nationwide. The government provides each individual and community with agricultural input such as seeds, fertilizers, and equipment. The participant received agricultural inputs valued at RM500.00 (US$119.00), while each urban community received RM50,000.00 (US$11,904.00) (Ministry of Finance, 2020). Through such a program, participants do not have to buy vegetables in the market, and indirectly it will reduce the cost of spending by almost RM 80.50 (US$19.20) per month for vegetables and RM 28.90 per month for fruits, equivalent to RM 966.00 (US$230.00) and RM346.80 (US$82.57) (for each vegetable and fruit) per year on average. This program positively impacts people's household expenses, particularly for the urban poor, who are the target users in the current COVID-19 pandemic (Rasmuna, 2021).

The government expects the program to generate 8,800 tons of agricultural products by 2025. At the same time, the government also targets to reduce the cost of living by RM1,296.00 (US$308.60) in 2021 to RM1,680.00 (US$400.00) in 2025 (DOA, 2022)

For commercial urban agricultural activities, the plant factory provides new business opportunities to entrepreneurs. This commercial urban agriculture also creates business opportunities along the supply chain of vegetables from farms to consumers. New businesses are created from this activity, such as the development of plant factory infrastructure and the logistic and marketing of agricultural produce to consumers. A financial analysis of vegetable production using a large-scale warehouse, shop lot, and contena factory was conducted. Surveys at the three premises showed that the warehouse plant factory produced about 2,500kg of salad, shop-lot (1,640 kg), and contena plant factory (471 kg) per cycle.

The income statements from three premises show that the commercial production of vegetables using a plant factory is viable and can generate profits for entrepreneurs. The Net Present Value (NPV) and internal rate of return (IRR) for all three premises are positive. The payback period for the three premises is between two and four years only. The initial cost of developing warehouse, shop lot, and contena plant factories is RM700,000.00 (US$166,667.60), RM210,000.00 (US$50,000.00), and RM135,00.00(US$32,142.80), respectively. The development cost for this commercial urban agriculture is presented in Table 1.

The commercial-scale warehouse plant factory is targeted at large companies, cooperatives, and entrepreneurs with significant financial capital. This plant factory is suitable for high-value crops such as premium variety salads, curly kailan, and culinary herbs such as basil, oregano and sage. The revenue from crop production is projected to generate an income of RM16,950.00 (US$4,035.70) per month, with a net present value (NPV) of RM 891,341.00 (US$212,224.00)  and an internal rate of return (IRR) of 37.4%, and a break-even period in the third year.

The medium-scale or shop-lot plant factory is targeted for small and medium enterprises or individual farmers. The crop production is estimated to generate an income of RM7,122.00 (US$1,695.70) per month, with a net present value (NPV) of RM403,929 (US$96,173.60), an internal rate of return (IRR) of 49.8%, and a break-even period in the second year.

The small contena plant factory or AgroCube targets young entrepreneurs interested in smart agriculture but have limited financial capital. Crops suitable for the AgroCube package are high-value crops such as premium variety salad, butterhead, arugula, microgreen, curly kailan, young vegetables (baby vegetable), strawberries, and culinary herbs such as rosemary, parsley, thyme, and oregano. The revenue from venturing into the contena plant factory is estimated to generate an income of RM3,074.00  (US$731.90) per month, with a net present value (NPV) of RM87,039.00 (US$20,723.00), an internal rate of return (IRR) of 24.8%, and a break-even period in the fourth year. The financial analysis of these three plant factories is presented in Table 2.

WAY FORWARD

The direction of the development of the agro-food sector should prioritize elements of meeting the dietary needs of the country’s population and, at the same time, emphasize a sustainable environment. The Malaysian government launched a new national agriculture policy in December 2021. The National Agro-Food Policy 2021-2030 (DAN 2.0) is holistically formulated to continue the first National Agro-Food Policy (DAN) by focusing on the modernization and development of the agri-food sector to improve the country’s food security. At the same time, DAN 2.0 also focuses on four sub-sectors, including paddy and rice, fruits and vegetables, livestock, fisheries, and aquaculture, through the implementation of 18 strategies and 58 action plans. The strategy will focus on high-value activities along the food value chain that can generate higher income for the target group and improve the socioeconomic status of farmers, ranchers, fishers, and agric-entrepreneurs (Ministry of Agriculture and Food Industries, 2021).

In 2021-2030, the vegetable industry is projected to reach a self-sufficiency level of 79% through increase in productivity and production. The government aims to increase vegetable production to 2.04 million tons by 2030 as a result of an increase in productivity to 20.6 tonnes per hectare, compared to 12.5 tonnes per hectare in 2020. The increase in vegetable production enables Malaysia to export more vegetables and contributes to the country’s economic income. The government aims to export vegetables worth more than RM2.78 (US$0.66) billion by 2030. The increase in vegetable production will also enable entrepreneurs or farmers to earn more than RM6,000.00 (US$1,428.00) a month.

The government has prepared four strategies, and 12 action plans to realize this aspiration. The four strategies to empower the vegetable industry are as follows:

1. Intensify R&D on genetic engineering;

2. Efficient long-term land management involving all industry drivers across the value chain;

3. Promote sustainable agricultural practices and vegetable production; and

4. Boost the growth of high-value vegetable crops.

In the third strategy, the government has set an action plan by accelerating the development of controlled environment agriculture, such as producing vegetables by plant factories to support urban agriculture and cultivate high-value crop-based products. The government also supports programs and provides initiatives to empower community agriculture.

The Agriculture and Food Industry Ministry (MAFI) targets over 3,000 farmers throughout the country to receive assistance from the Urban Community Agriculture Program (UCF) and the Organic Farming Programme under the 12th Malaysia Development Plan. The government allocates RM50.00 (US$11.90) million to help the urban population reduce their kitchen expenditure and generate additional income. UCF aims to produce crops for self-sustenance, and the surplus in production can be turned into economic opportunities. The organic program seeks to develop the agricultural industry through an eco-friendly method and produce better crops in bio-security.

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