I. STATE OF THE ENVIRONMENT IN MALAYSIA
The agricultural sector in Malaysia continues to play a major role in contributing towards national development. In addition to contributing to GDP, employment and export earnings, the sector provides raw materials to domestic agro-based industries as well as food for the population. At the same time, the sector is continuing its move towards conserving the ecology and environment as well as ensuring sustainable development. With rapid economic transformation towards industrialization, the sector's share of GDP declined from 29 per cent in 1970 to 22.9 per cent in 1980 and then 18.7 and 13.6 per cent in 1990 and 1995, respectively (table 2). Nevertheless, in absolute terms, the total value added of the sector continued to increase significantly from M$ 14,827 million in 1990 to M$ 16,406 million in 1995. At the same time, the sector's contribution to total export earnings and employment declined from 22.2 and 26 per cent in 1990 to 13.1 and 18 per cent in 1995, respectively. During the 1990-1995 Sixth Malaysia Plan period, the agriculture sector grew at 2.0 per cent per annum as a result of constraints such as labour shortage, the depletion of agricultural resources, a lack of suitable land and low prices of certain commodities, particularly cocoa and pepper.
Agriculture has always been closely associated with the environment. Better integration of agricultural and environmental policies would provide mutual benefits and enable trade-offs to be made between competing objectives. The need for policy integration has been reinforced by several developments including:
(M$ million in 1978 prices)
Source:Seventh Malaysia Plan, 1996-2000.
Note: * figures in parentheses are percentage shares of gross domestic product.
Sustainable development is a common objective, both of environmental and agricultural policies. The goal is to move rapidly toward "environmentally friendlier" sustainable agricultural practices. At the farm level, the analysis includes issues of the environmental benefits of sustainable and lower input agriculture, the adoption of environmentally friendly technologies and practices, and the role of education and farm advisory services. At the policy level, the analysis includes issues concerning the design and implementation of agricultural and environmental policies with the least economic distortions. That implies that policies are more market-oriented and that prices reflect the social value of resources used. The possible use of economic instruments, such as taxes, user charges, pollution charges and tradable permits can provide strong incentives for influencing the behaviour of individual farmers and the sector, and offer good prospects for achieving environmental objectives in a cost-efficient manner. Trade instruments are increasingly being used to achieve environmental objectives at the national and international levels. The most common trade instrument is the imposition of complementary restrictions on imports and exports as counterparts to regulatory controls on domestic production and consumption. Proposals to use trade measures for promoting external environmental objectives, such as sustainable resource use in other countries, are increasing. Trade measures may have a role to play in influencing the price of imports in order to more accurately reflect their resource or environmental costs. Malaysia does not view those proposals negatively as trade barriers since they pose new challenges to shifting national environmental policies from a "regulation-driven" to "incentive-driven" basis.
In recent years, there has been growing recognition that pollution damage costs should be internalized. Getting the price right is probably the most important factor in effectively pursuing sustainable development. Unless prices for raw materials and products properly reflect social costs, and if prices can be assigned to air, water and land resources that currently serve as free inputs and cost-free receptacles for the waste products of society, resources will be used inefficiently and environmental pollution will likely increase. Unfortunately, the prices of many natural resources has historically been set too low to reflect their full cost. Furthermore, the social costs associated with consuming and possibly exhausting the resource are usually ignored in setting prices. The concept of full-cost pricing should prevail for all types of use, with the price set to at least cover the supporting costs of the services, including capital investment, operation and maintenance, and environmental costs.