AgriTech in Malaysia: Slow but Steadily Growing

Agriculture is a significant industry in Malaysia.

Agriculture is critical to economic growth and prosperity. It is essential to human survival because it provides food. It contributes greatly to business growth in other areas of the economy as a supplier of industrial raw materials. This industry has long been the backbone of the Malaysian economy, producing agricultural products for home consumption and generating foreign money. Agriculture also contributes to the national GDP.

One of the most significant industries in the country, according to the report in 2019, agriculture is the third-highest GDP contributor (7.1 percent, or RM101.5 billion) to the nation, behind just the mining and quarrying industry. Exports climbed by 0.9% from RM114.5 billion in 2018 to RM115.5 billion in 2019. Meanwhile, imports increased from RM93.3 billion in 2018 to RM93.5 billion in 2019 (0.2%increase). This sector's trade balance increased by 4.1%, from RM21.1 billion in 2018 to RM22.0 billion in 2019.

With agriculture being one of our most important economic sectors, it's crucial that ways to improve processes are constantly being developed and implemented. But one major issue still stands in our way.

Smallholder farmers, who account for the vast majority of farmers in the local agricultural industry, are the most in need of dryland agriculture. They are the ones who suffer low production and agricultural yield and a lack of staff on their farms. There are also concerns about the inability to handle natural disasters and waste from poor farming practices. In terms of workforce, employment in the agricultural sector has decreased significantly, from 1,570,300 in 2018 to 1,541,100 in 2019. As a result, the farm output must come into the picture to cushion the drop before it reaches an all-time low for farmers.

AgriTech, such as smart sensors and drones, is not cheap. Drones that give footage of field conditions, for example, can cost roughly $1,000 (approx. RM4,145) apiece, without including the fee of the hired personnel to operate one. It is now an unreasonable price for many smallholder farmers if they are expected to pay it out of their own pockets. The three AgriTech businesses emerged as Bootcamp winners:

• Sayur.Farm

Creating a FitBit-like gadget function as a farming assistant by collecting information using artificial intelligence and data visualization to give yield projections, plant health, recommended medications, data sharing, insights, profit analysis, and yield analysis.

• The Beginning of Life

Developing black soldier fly larvae from organic waste and feeding them to cattle, animals, and pets

• FarmExchange (formerly called Kapitani) 

AgriTech is a restricted marketplace where farmers may acquire direct loans for the equipment they need. Farmers can also receive a credit score, and lenders can get a clear picture of the farmer's needs, anticipated ROI, and timescale.

Markus Chin of Shinnou Farms, a local farmer, told Al Jazeera in 2019.

"We'd want to get our hands on automated technology like a robotic harvester to save labour expenses, or a weather station gadget that can tell us the ideal time for planting, fertilizing, and watering based on past data." But it's simply too pricey anymore," 

The enormity of such a market may appear overwhelming to individual investors, but fear not: chances for individual investors to grab a piece of this delectable pie are growing! Venture capital firms have traditionally been the biggest funders of AgriTech enterprises and startups.

For example, earlier in 2020, Petroliam Nasional Bhd (Petronas) made its first private equity investment in Malaysia by investing in an AgriTech startup - Braintree Technologies Sdn Bhd. The company develops robotic devices and proprietary technology powerful in terms of offering the capability of total solutions and converting unsupervised, non-revenue producing agricultural land into increasing crop farms.

Malaysia's AgriTech situation and potential.

Agriculture is an important sector in Malaysia, accounting for RM101.5 billion, or 7.1% of the national GDP (RM1,516.42 billion), in 2019. In that year, the agriculture industry was Malaysia's third-largest GDP contributor. Malaysia's worldwide agricultural trade totaled RM180.94 billion that year. Exports rose 0.9 percent from RM114.5 billion in 2018 to RM115.5 billion in 2019, while imports rose 0.2% from RM93.3 billion in 2018 to RM93.5 billion in 2019. With Malaysia's GDP predicted to reach US$359 billion by the end of 2021, the agriculture industry can only play a vital part in the country's economy.

Because of the apparent importance of the agricultural industry in Malaysia, several measures have been launched by the government and private sectors to encourage the growth of AgriTech. One such program is sponsoring entrepreneurs that provide farmers with AgriTech solutions to better their livelihoods while enhancing the productivity of their processes. In 2018, the Malaysian Digital Economy Corporation launched a pilot project to boost agricultural output and quality through a public-private partnership with the Pertubuhan Peladang Kawasan Kuala Langat (PPKKL). Farmers were able to implement an Internet of Things (IoT)-enabled fertilization and irrigation system, which allowed them to cut monthly fertilizer consumption by 20%, monthly labor needs by 25%, and total yield quality by up to 90%.

The following year, at the end of the Global AgriTech Summit, the Malaysian Global Innovation & Creativity Centre (MaGIC) organized a boot camp for AgriTech companies to investigate agribusiness potential deeper and discover the newest events in the present agricultural market. Several AgriTech businesses that emerged from the boot camp provided various technology solutions to farming difficulties in Malaysia.

MDEC and CIMB Islamic announced an MoU in April 2021 to expand a comprehensive microfinancing initiative with an initial funding package of RM10 million, with the potential to be increased to RM25 million, to catalyze Digital Agriculture Technology (Digital AgriTech) in Malaysia. Digital AgriTech is a subset of AgriTech that focuses on using digital technology to give the agricultural industry tools and information to make better decisions and increase production.

Meanwhile, MDEC's ongoing eLadang program, which aims to pilot the use of computer media in transforming traditional agriculture into a high-income digitalization profession, benefited 548 participants by December 2019. Seventy-eight farmers use its digital farming technology, resulting in a 20% increase in crop yield, a 30% rise in revenue, and a 30% reduction in operational costs. Three digital labs were also created to teach, certify, and push the usage of digital technologies in agriculture. Since Malaysia's critical position in the agricultural economy, the AgriTech industry has significant growth potential, evidenced by several public and private efforts. So these possibilities will continue to rise in the future years.

Estet Sepakat 

A new player has entered the AgriTech landscape amid this dynamic growth: Estet Sepakat (ES), the only full agriculture Technology-as-a-Service (ATaaS) firm in Malaysia that uses efficient machine technology and data services to increase paddy farmers' revenue. ATaaS firms offer AgriTech services to farmers, industries, government agencies, etc. The yielding mapping and surveillance industry is categorized into yield mapping and monitoring, soil conservation, crop monitoring management, navigational and position, and other applications. Estet Sepakat is Malaysia's sole provider of full-service ATaaS.

Estet Sepakat's mission is to develop a network of internet paddy farmers motivated by data to assist them in generating a stable lengthy income, allowing local farmers to realize the rewards of substantial paddy estates. According to Khazanah Institute data, Malaysian paddy farmers can produce much more minor than Malaysia's average B40 (bottom 40) income level. This gap has been linked to paddy farmers becoming the industry's least minor, most dispersed player. ES seeks to address this marketplace problem by creating a community of farmers investing in ES today to be a part of Malaysia's dynamic and expanding AgriTech ecosystem. Check out the campaign website for more information on hazards, mitigation techniques, and other program elements.

The worldwide ATaaS market is estimated to hit $2,492 million by 2024, at a CAGR of 21.75%. The price of agricultural technologies increases, and ATaaS providers retain more customers due to the recurrent nature of their services. ES is seeking investment opportunities ranging from RM 1,000 to RM6,000,000 in exchange for 9-30 % shares of the company to find its place in this expanding market to achieve its mission.

Given the market potential, ES forecasts an annualized ROI of 24% for an RM6 million investment over five years, based on total revenue of RM146,836,326. ES also intends to purchase investors' shares in five-year tiers and pay 40% of net profits as dividends depending on the type of shares owned by the investors as part of the ROI. Class M1 investors are expected to get 12% of the 40% payout, while regular investors receive 28%. Participate in Estet Sepakat to be a part of Malaysia's vibrant and developing AgriTech ecosystem.

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