Agricultural incentives in Malaysia: Trends, patterns and policy implications

Malaysia is notable among developing countries for its long-standing commitment to maintaining a relatively open trade policy regime. However, there are still some anomalies in the incentive structure that encourage channelling of resources into unproductive activities. This paper aims to (i) provide an analytical narrative of the nature and evolution of trade and the related accompanying policies impacting on domestic agriculture, with a focus on the underlying political economy, and (ii) examine the degree and changing patterns of incentives to domestic agriculture encompassing both direct (sector specific) incentives and indirect incentives emanating from economy-wide policies. The study covers the period from 1960 to 2004 with an emphasis on four major agricultural products: natural rubber, palm oil, cocoa, and paddy/rice.