Third National Agriculture Policy (DPN3)

The overriding objective of the NAP 3 is the maximization of income through the optimal utilization of resources in the sector. This includes maximizing agriculture’s contribution to national Gross Domestic Product (GDP), export earnings as well as maximizing income of farmers, breeders and fishermen. The objectives of NAP 3 are:


  1. to enhance food security
  2. to increase productivity and competitiveness of the sector
  3. to deepen linkages with other sectors
  4. to create new sources of growth for the sector
  5. to conserve and utilize natural resources on a sustainable basis  

Achieving these objectives require new strategic approaches and policy thrust to enhance the economic contribution and growth of the agricultural sector. Towards this end, NAP 3 introduces two new strategic approaches namely the agroforestry approach and product-based approach.   

The Agroforestry approach will address the issue of scarce resources including land, labour and raw material availability. This approach sight agriculture and agroforestry as mutually compatible and complementary and therefore provides a scope for joint development that can bring about mutual benefits. The integrated agroforestry and agriculture development also aim at creating a larger productive base for both sectors. These approaches will bring about benefits as follows:  

  • Creating a larger productive base for agriculture and forestry by allowing a wider range of agroforestry enterprise mix, optimize resources utilization particularly the land resources and enhance the income generating potential of agroforestry investments
  • Enable the production of both agricultural and forestry products on the same land      thereby mitigating the demand pressure for new arable land.
  • Support various symbiotic relationships such as planting of forest species with industrial crops to optimize land utilization and maximize returns.
  • Provide avenues for early and continuous returns from the agriculture component of the mixed enterprise. This will encourage the participation of the private sector in commercial forest plantations, thereby increasing the supply of timber for the wood-based industries.


The second new strategic approach is product based approach. Through this approach, key products and markets are identified based on demand, market potential and consumer preferences. The conventional commodity-based approach, limits the effectiveness to serve markets that are of higher value. The product based approach, will be more specialized to meet the needs of various market. These market demand and preferences are translated into strategies for upstream marketing of the agricultural production to enhance production and marketing of the agricultural and forestry products.  This approach would be able to:- Reinforce and complement the cluster-based agro industrial development as identified in the Second Industrial Master Plan (IMP 2) 1996-2005 through strengthening both inter and intra-sectoral linkages including the development and expansion of intermediate and supporting industries.

Enhance the development of agricultural industries through the transmission of market signals and consumer preferences upstream to the farm. Through this approach, agricultural production will be more specialized to meet the needs of various domestic and global market segments identification of opportunities for market expansion and deepening. The strategy of utilizing market signals transmitted upstream will facilitate agricultural producers in making decisions to produce the necessary raw materials to support agro-based manufacturing and other economic activities. This will broaden the scope of agricultural and forestry development and create business opportunities for a wider range of business ventures through a system of linkages. This includes R&D and technology generation, primary production and processing, manufacturing of intermediate and final products as well as distributing and marketing the final products and services to the consumers.

With these new approaches, agricultural sector is expected to achieve growth rate as of 2.1% per annum. The contribution of agricultural sector to GDP is expected to further decline from 13.5% in 1995 to 7.2% in 2010. This decline is consistent with the overall structural economic changes experienced by most developed economies. Increasing labour shortages and competition for other factors of production are expected to further decrease the contribution of rubber and cocoa to agricultural value added. Contribution to total agricultural value-added from these two sub-sectors are expected to decline from 10.4% and 5.2% in 1995 to 5.3% and 3.0% in 2010, Contribution of saw logs is also expected expected to decline from 13.9% to only 5.4% in 2010, in line with Government’s continuing emphasis on sustainable forest management.

New sources of growth are expected to emerge in agriculture resulting from various initiatives to promote new emerging industry groups such as agroforestry, specialty natural products, bamboo and rattan, biotechnology products, floriculture and aquarium fish. As such, the contribution of the miscellaneous group to agricultural value-added is expected to increase from 1.6% in 1995 to 7.8 percent in 2010. A stronger growth is also expected from the food sub-sector arising from intensified efforts in resolving supply-side constraints and strengthening of economic foundation for this sub-sector. Its contribution to agricultural value0added is expected to increase from about RM4.3 billion in 1995 to about RM7.3 billion in 2010. Strong and increasing international demand for palm oil will continue to enhance the growth of the industry. Its value-added is expected to expand from about RM6.8billion to about RM 10.3 billion for the 1995-2010 period while its contribution to the sector is expected to increase from 42.2% to 46.0% during the same period. The agricultural sector, in particular the industrial crop and forestry sub-sector will continue to play a crucial role as key suppliers of raw materials to the resource-based industries. It is expected that agriculture will contribute substantially to the nation’s economy, as more raw material will be processed into finished products for export. To complement domestic supply and meet increasing demand from downstream industries, strategic sourcing will be undertaken through offshore investment.

Total workforce in agriculture will decline from 1,524,000 workers in 1995 to 980,000 workers in 2010. With the current land and labour shortages and increasing cost of production, it is envisaged that future expansion in hectarage would be limited during the plan period. Therefore, the increase in output will emanate from the increasing productivity. Productivity per worker is expected to increase from RM10,650 to RM22,780 per worker within the same period. This reflects the emphasis given to labour-saving technology, innovations and more efficient farm management practices.  

NAP will continue to pursue agricultural growth through moderate expansion of land and further intensification of land use. There will be substantial reduction in the rubber, paddy, coconut and cocoa areas. Rubber, coconut and cocoa holdings, as well as planted area of paddy are expected to reduce. Most of these areas will be replaced by agroforestry, oil palm, fruits and vegetables cultivation. In Sabah and Sarawak, where there are substantial land areas, new land development will be undertaken. As such, land utilization for agriculture during the plan period is expected to marginally increase by about 0.5% per annum from 5.8 million hectares to 6.2 million hectares.



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