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Can Banana be a Success Story for Malaysia?

Article · July 2022

DOI: 10.56527/jabm.9.1.2

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JOURNAL OF AGRIBUSINESS MARKETING
e-ISSN: 2289-5671
Volume 9, Issue 1, July 2022
DOI: 10.56527/jabm.9.1.2

Open Access

Can Banana be a Success Story for Malaysia?

Boon Chin Tana*

a
Centre for Research in Biotechnology for Agriculture, Universiti Malaya, Malaysia
*Correspondence: [email protected]

ABSTRACT: MANUSCRIPT TYPE:

Bananas are an important commercial fruit and a major export Research Notes
commodity in the tropics. The growing global demand for bananas PUBLICATION DETAILS:
has caused its harvested area to expand. However, the production Received: 8 June 2022
of bananas in Malaysia has decreased, probably due to adverse Revised: 1 July 2022
environmental conditions and pests and diseases. Nevertheless, the Accepted: 4 July 2022
Malaysian government recognised the importance and potential of
fruit crops, including bananas, and has developed national agrofood
policies and strategies to support and accelerate food production
growth. This study aimed to understand the current scenario of
banana production in Malaysia and determine if local bananas have
a comparative advantage over their rivals. Based on the Revealed
Comparative Advantage (RCA) analysis, Malaysia has a
competitive edge in bananas over regional countries, although some
challenges remain to overcome. Hence, to sustain its competitive
position in the banana market, an intensive effort and
interdisciplinary collaboration between policymakers, industrial
players, growers, and scientists is desirable to address those issues
and challenges described in this study.
KEYWORDS: Agriculture, Agrofood, Banana, Fruits, Market

INTRODUCTION

Banana (Musaceae family) is an important fruit crop as its nutritional status is higher than other
common tropical fruits (Chin et al., 2014; Khalid & Tan, 2016). Banana fruits, either ripen or
unripened, are eatable. Other plant parts, including leaves, stems, and flowers, have been
reported to have medicinal value. Besides, the banana wastes from fruits or plants (e.g., peels)
could be produced into value-added by-products (e.g., fibre-rich powder and animal feed), thus
contributing to small-medium enterprise businesses.

Banana is ranked fourth after rice, wheat, and maize as the most important food crop in
developing countries (Zhang et al., 2022; FAO, 2022). The world production of bananas has
exceeded 100 million tonnes since 2009, with a total production of about 119.8 million tonnes
recorded in 2020 (FAOSTAT, 2022). However, these data may not precisely represent the
global banana production as local smallholder farmers conduct most banana cultivations, and
such data might be challenging to obtain. Currently, India is the largest banana producing
country, contributing nearly 26% of total global production, followed by China, Indonesia, and
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Tan, 2022 Journal of Agribusiness Marketing, 9(1), 13-22

Brazil (Figure 1). The United States of America, China, and the Russian Federation are the
major importer of bananas (Figure 2).

35.0
Millions

30.0

25.0
Tonnes

20.0

15.0

10.0

5.0

0.0
India China Indonesia Brazil Ecuador Philippines Guatemala Angola United Costa Rica
Republic of
Country Tanzania

Figure 1: The Top 10 Banana Producing Countries in 2020. Source: FAOSTAT 2022

5.0
Millions

4.5
4.0
3.5
Tonnes

3.0
2.5
2.0
1.5
1.0
0.5
0.0
United China Russian Germany Netherlands Belgium Japan United Italy France
States of Federation Kingdom of
America Great
Britain and
Country Northern
Ireland

Figure 2: The Top 10 Banana Importing Countries in 2020. Source: FAOSTAT 2022

The harvested area of banana crops has recently expanded to satisfy the growing global import
demand (Figure 3). For instance, the total harvested area in India has increased from 776,000
hectares in 2012 to 878,000 hectares in 2020 (FAOSTAT, 2022). In Indonesia, the total
harvested area has increased from 103,158 hectares in 2012 to 158,147 hectares in 2020
(FAOSTAT, 2022).

At present, more than 1,000 varieties of bananas are being produced and consumed globally
(Vaca et al., 2020). The Cavendish banana is the most popular commercial banana cultivar,
accounting for about 47% of total production (Vaca et al., 2020). Cavendish banana fruits have
a clean yellow peel, soft flesh-sweet taste, and are rich in nutrients. A hundred grams of banana
Cavendish contains about 18.7 mg vitamin C, 3-12.4 mg (retinol activity equivalent) vitamin
A, and 450–467 mg potassium (Wall, 2006; Pareek, 2016). In addition, they have also been
reported to be more resilient to the effects of transportation.

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Millions
6.0

5.0
Hectare (ha)

4.0

3.0

2.0

1.0

0.0

Year

Figure 3: The World Harvested Area from 1990 to 2020. Source: FAOSTAT 2022

Global Banana Trade

The prices of bananas in international markets remain fairly stable since banana production is
not seasonal. However, occasional disruptions in supply might happen due to various factors.
These include the supply and demand of bananas, climate change, diseases, the continuing
COVID-19 pandemic, and war or violent conflicts. Consequently, the global export quantities
in 2020 decreased by 305,867 tonnes from about 24 million tonnes in 2019. This figure is
estimated to fall by 1.5 million tonnes in 2021, probably the most significant annual drop in
global banana shipments (FAO, 2022). In addition, with the ongoing pandemic, several sanitary
measures protecting workers from the COVID-19 virus will be necessary, continued causing
additional costs to growers and those involved in the supply chain. Other concerns include the
climate-related production challenges, such as severe floods, drought, and extreme
temperatures, and the recent introduction of new maximum residue levels on pesticides used
in the fresh banana industry in importing markets. If the products do not meet these new
requirements, they cannot be imported. However, on the other hand, if the maximum residue
levels for the commonly used pesticides are reduced before alternatives can be developed, the
banana industry will be affected.

Malaysian Agriculture

Before looking at how the Malaysian banana industry performed, it would be useful to
understand the current agricultural scenario in Malaysia. Malaysia’s economic development
was heavily dependent on the agricultural sector since the 1950s, but since then, its role has
declined, as reflected by the exports of the agricultural industry. The exports of agricultural
products in 2018 decreased by 9.5% compared to RM126,492 million in 2017 (Department of
Statistics Malaysia, 2019). Although the total agricultural exports showed an increase in 2019
(RM115.5 billion) and 2020 (RM118.6 billion), total imports of the agricultural sector also
increased (Department of Statistics Malaysia, 2020).

Agriculture is an important sector of the Malaysian economy, contributing to an overall Gross

Domestic Product (GDP) of 7.4% in 2020 (Department of Statistics, Malaysia, 2021a).
However, despite its importance, the percentage of growth for the agricultural sector has
declined by 2% compared to the previous year. The decline was mainly due to the negative
growth in the oil palm and other subsectors. In addition, several factors affect the agricultural
sector and food production systems, such as climate change, land degradation, water

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Tan, 2022 Journal of Agribusiness Marketing, 9(1), 13-22

availability, the COVID-19 pandemic and, more recently, war or violent conflicts. These
factors could significantly threaten Malaysia’s agricultural sectors, directly or indirectly
impacting Malaysia’s plantations and associated communities by decreasing productivity, crop
damage, and yield losses. This ultimately results in seasonal unemployment and loss of income
by smallholders and plantation companies. Hence, given the significant impacts of these factors
on agrofood production and prices, it is imperative to revisit the challenges and potential of
this sector.

Malaysia’s Agrofood and Policy Landscape

As the world economy becomes more dynamic and competitive while experiencing the impacts
of the COVID-19 pandemic and war or violent conflicts, ensuring food and nutrition security
has become vital for the nation’s long-term development. Recognising the importance and
potential of the agrofood sector in achieving the goal of food security, the Malaysian
government has developed national agrofood policies, aiming to enhance the national food
security level from a multifaceted point of view: economic contribution, social wellbeing, and
environment. The focus of each policy has evolved from its first inception in 1948 (Table 1).

Table 1: The National Agrofood Policies

Policy Focus
Pre-independence Policy The pre-independence policy focused on the primary commodity,
(1948-1957) and The such as rubber and spices, and incorporated into national plans,
Malaya / Malaysia such as the First Malaya Plan (1956-1960), the Second Malaya
Economic Plan Plan (1961-1965), and the First Malaysia Plan (1966-1970).
(1957-1983)
First National Agricultural This is a long-term policy focused on rural poverty, aiming to
Policy close the income gap between commercial and traditional farmers.
(1984-1991)
Second National Continuing from the previous policy, this edition emphasised
Agricultural Policy increasing the contribution of the agricultural sector to the national
(1992-1997) economic growth. The focus areas include productivity,
competitiveness, research and development, human capital
development, and private sector participation.
Third National This edition was a revised version of the Second National
Agricultural Policy Agricultural Policy following the events of the 1997-1998 Asian
(1998-2010) Financial Crises. This revised policy aimed to address the newly
realised importance of agriculture as a food provider to the nation.
The focus areas include enhancing food supply, productivity,
intersectoral linkages, and sustainable development.
National Agrofood Policy The National Agrofood Policy was developed to provide attention
(2011-2020) to the development of food commodities that contributes strongly
toward food security. Other focuses include improving value-
adding processes and higher value of agricultural export earnings.
Source: National Agrofood Policy 2021-2030 (NAP 2.0)

The recently launched National Agrofood Policy 2021-2030 has identified four critical
subsectors for food security, hoping to support agrofood sector development for the next ten
years. One of the key subsectors is fruits and vegetables, which is vital to Malaysia’s economy.
However, between 2010 and 2019, the self-sufficiency level (SSL) of fruits and vegetables was
only 76.3-81.9% and 44.6-58.4%, respectively, mainly hindered by high production costs,
limited technology adoption, decreased arable land, and adverse effects of environmental
conditions. Banana growers also face similar challenges. Hence, in line with the government
initiatives to increase the SSL for fruits and vegetables for domestic and export markets, an
analysis of the current performance of the banana sector is indispensable.

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In this context, this study aimed to better understand the current scenario of Malaysia’s banana,
with two specific objectives: (1) to examine the current banana production and (2) to determine
the comparative advantage or disadvantage of Malaysia’s bananas to its rivals. In addition,
several potential internal (strengths and weaknesses) and external factors (opportunities and
threats) of the banana industry in Malaysia have also been discussed.

Banana Production in Malaysia

Banana has been identified as one of the important fruits for export markets together with
papaya, starfruit, and mango under the previous National Agrofood Policy (2011-2020). In fact,
Malaysia exported USD10.3 million in bananas, making it the 53rd largest global exporter of
bananas (Observatory of Economic Complexity, 2020; Simoes & Hidalgo, 2011). Most of the
locally produced bananas are exported to Singapore (USD8.68 million), Brunei (USD1.48
million), United Arab Emirates (USD165,000), and Nigeria (USD1,600) in 2020 (Observatory
of Economic Complexity, 2020). The increase in bananas exports was mainly due to the
increase in exports to Brunei.

In Malaysia, banana production peaked in 2017 at 350,493 tonnes (Table 2). Nevertheless, its
production decreased from 331,255 tonnes in 2018 to 325,447 in 2019. According to
FAOSTAT (2022), the production of bananas was 312,968 tonnes in 2020. About 32% of the
nation’s banana production is from Johor (Table 3).

Table 2: The Planted Area and Production of Banana from 2014 to 2019

2014 2015 2016 2017 2018 2019

Planted Area (Hectare) 28,911 30,711 28,036 34,894 30,486 26,079
Production Area (Hectare) 24,873 24,858 22,294 27,565 24,231 21,542
Average yield (Tonnes/hectare) 12.2 12.7 13.9 12.7 13.7 15.1
Production (Tonnes) 303,107 315,500 309,508 350,493 331,255 325,447
Production Value (RM ’000)* 471,330.85 513,563.24 541,638.38 606,352.18 553,195.25 579,295.49
* Based on ex-farm price. Source: Ministry of Agriculture and Food Industries, Malaysia (2019)

Table 3: The Planted Area and Production of Banana in the Different States of Malaysia in 2018

State Planted Area Production

(Hectare) (metric tonnes)
Johor 8,304 116,966
Pahang 4,975 62,421
Sabah 3,602 43,825
Source: Ministry of Agriculture and Food Industries, Malaysia (2019)

The average yield of bananas in Malaysia was estimated at 144,692 tonnes per ha in 2020,
decreasing by 2.2% compared to 2019. The decrease in banana production might be due to
adverse environmental conditions and reduced agricultural lands. For example, in 2016, a
temperature change of 1.7 was recorded throughout the meteorological year (FAOSTAT,
2022), causing a decrease in planted area for bananas from 34,894 hectares in 2017 to 26,079
hectares in 2019 (Table 2).

The self-sufficiency ratio for bananas is 100.1% (between 2016 and 2020), indicating that
domestic banana production is sufficient to meet domestic needs (Department of Statistics,
Malaysia (2021b). However, between 2010 and 2020, the producer price of bananas increased
by about 23% (Figure 4). The increased prices might be due to declining banana supply because
of diseases or increased production costs, such as fertilisers.

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700 Vietnam

600 Malaysia
Thailand
500
USD/tonnes
400

300

200

100

Year

Figure 4: The Producer Price of Bananas for the Selected Countries. Source: FAOSTAT 2022

The main threat to banana production is Fusarium wilt, caused by the fungal pathogen
Fusarium oxysporum f. sp. cubense (Foc) Tropical Race 4 (TR4). The Fusarium fungus is
challenging to control because of its long survival potential in the soil. In the 1990s, the spread
of Fusarium disease reported in the main growing regions disrupted the banana production and
risked the livelihood of growers (Mostert et al., 2017). Furthermore, more than 50% of bananas
(cultivars Berangan and Cavendish) planted in Malaysia are highly susceptible to Fusarium
diseases (Wong et al., 2019). Since this disease could potentially eliminate all banana farms,
searching for viable disease treatment is imperative.

METHODS

Several methods could be used to examine the trade prospects and indicate a country’s
specialisation of specific commodities. This paper adopted the most commonly used method,
i.e., Balassa’s (1965) index of Revealed Comparative Advantage (RCA), to identify the
comparative advantage or disadvantage of Malaysia’s fruits with its rivals between 2017 and
2021. The RCA index is defined as follows:

RCA = ln (XiB / XB) / (XiA / XA)

where,
XiB: Malaysia’s exports of produce i to the world
XB: Malaysia’s total fruit exports to the world
XiA: Rival country’s exports of produce i to the world
XA: Rival’s country total fruit exports to the world

The trade data (2017-2021) used for calculation were obtained from the United Nations
Commodity Trade Statistics Database (UN COMTRADE) following the Harmonized Code
System (HS) classification, i.e., 0801-0814 have been used for fruits and banana was 0803. A
positive RCA value represents Malaysia’s comparative advantage in exporting bananas against
its rival countries, whereas a negative value may be interpreted otherwise. A higher positive
value indicates that Malaysia has a higher competitiveness level, whereas a higher negative
value indicates otherwise.

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Results

Over the past five years, Malaysia has shown a comparative advantage over Indonesia and
Thailand (Table 4). On the other hand, the Philippines demonstrated a greater comparative
advantage over Malaysia in the global banana trade. These findings indicated that Malaysia
started to gain momentum in exporting bananas compared to the previous study conducted by
Nik Rozana et al. (2017). Nik Rozana et al. (2017) reported that Malaysia lost its comparative
advantage to the Philippines and Thailand and only showed a slight increase over Indonesia
between 2009 and 2014. Similarly, Suntharalingam et al. (2011) also reported that Malaysia
was at a disadvantage in exporting bananas to the world compared to Thailand between 2000
and 2008.

Table 4: Revealed Comparative Advantage (RCA) Index of Malaysia and its rivals on banana (2017-2021)

Banana 2017 2018 2019 2020 2021

Malaysia vs Indonesia 2.2 1.4 1.7 2.7 n.a.
Malaysia vs Thailand 2.1 1.7 1.8 2.9 n.a.
Malaysia vs Philippines -1.8 -2.0 -0.07 -1.8 -2.6
n.a.: not available.

As a tropical country, Malaysia is known for its fruit crops banana, watermelon, papaya,
pineapple, starfruit, and mango. This study shows Malaysia’s comparative advantage over
Indonesia and Thailand in the banana market since 2017. Nevertheless, the Philippines remains
the top export of bananas among its ASEAN neighbours. About 31% of its banana production
(5.9 million metric tons) was exported to other countries in 2020 (FAOSTAT, 2022). In
contrast, although Indonesia produced more bananas than the Philippines in 2020 (about 8.1
million metric tons), it only exported about 17 thousand tonnes of bananas. Singapore remains
the top importer of bananas (most of this is Cavendish variety) in the ASEAN region, although
Thailand has been increasing its import of bananas since 2018 (FAOSTAT, 2022). Although
Malaysia only exported about 9% of its bananas in 2020, the bananas produced by Malaysia
have advantages over other countries in terms of different varieties and tastes. Hence, Malaysia
should continue improving productivity by increasing yields in limited lands, developing post-
harvest technologies, and venturing into downstream processing of bananas into high-value
products to sustain its competitive position in the banana market.

Strengths, Weaknesses, Opportunities, and Threats of the Banana Sector in Malaysia

The banana industry is an important source of income for local growers and continuously plays
a crucial role in economic and social impact in Malaysia. Several strengths and opportunities
could make Malaysia a world banana exporter. Nevertheless, a few weaknesses and threats
should be addressed. These elements could be grouped into strengths, weaknesses,
opportunities, and threats (SWOT) to help policymakers, industrial players, and researchers
identify and prioritise their goals and strategies for achieving them (Figure 5).

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Figure 5: SWOT Analysis of the Malaysian Banana Industry (created using TemplateLab)

CONCLUSION

Bananas are certainly among the most popular fruits for growers and consumers in Malaysia.
The RCA analysis showed that Malaysia has a competitive edge in bananas over regional
countries. To sustain its competitive position in the banana market, Malaysia should address
the issues and challenges and overcome the weaknesses, including

• growing good and economically viable bananas,

• developing disease- or climate-resistant cultivars,
• adopting technology and sustainable approaches for banana production,
• ensuring affordable tissue culture planting materials,
• exploring and developing banana downstream products or industries, and
• monitoring the problem of pricing and marketing.

Achieving these goals requires an intensive effort and interdisciplinary collaboration between
policymakers, industry, growers, and scientists. In addition, continued investments and government
supports are also crucial drivers in this realm. In summary, it is time for Malaysia to adopt effective and
sustainable strategic approaches to remain relevant and competitive in the global fruit exports. Perhaps,
bananas could be the one?

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