Socio-economic background of herbal industry in peninsular Malaysia

To date, available information on the herbal industry in Malaysia is less streamlined and coordinated. There is a need for a database containing comprehensive information on the herbal industry in Malaysia. To meet this aspiration, studies on herbal industry value chain is important. This book is written based on a study conducted from 2014 to 2016 with four main objectives: (1) To develop a database on the herbal chain players, (2) To identify the demand and supply of raw materials and products of herbal products, (3) To identify the gaps in the landscape of the herbal industry, and (4) To identify the issues and challenges in the herbal industry. This study used two approaches, namely qualitative and quantitative, involving primary and secondary data collection. Secondary data on the list of registered herbal chain players was obtained from Department of Agriculture (DOA), Malaysia External Trade Development Corporation (MATRADE), Ministry of Science, Technology and Innovation Malaysia (MOSTI), SME Corp Malaysia, Federal Agricultural Marketing Authority (FAMA), National Pharmaceutical Regulatory Agency (NPRA), Farmers' Organization Authority (Lembaga Pertubuhan Peladang, LPP), Federal Land Development Authority (FELDA), Halal Industry Development Corporation (HDC) and FRIM. Based on the baseline information, an extensive survey using questionnaire was conducted from 2 September 2014 to 15 January 2015 to gather information on the distribution and status of the chain players in the herbal industry in Peninsular Malaysia. This extensive survey identified, and marked using GPS, a total of 6545 herbal industry players ranging 6200 to 6900 at 95% confidence. It includes five categories of player, namely planting material supplier (PMS), cultivator, producer, wholesaler and retailer in Peninsular Malaysia. A detailed survey was subsequently conducted from 10 March till 31 July, 2015 using stratified sampling method to obtain detailed information from herbal chain players. Based on Michael Porter's value chain model (1985), three sets of questionnaire were used during the survey. In this detailed survey, a total of 679 players (10% sampling rate and stratified sampling) were interviewed. The detailed survey showed the following important findings and implications. (a) Even though the herbal industry has been developed for long time, it is still in infancy. This study showed that 83% of the herbal chain players operated after the new millennium. About 69% of the chain players had only 1–3 herbal staff while another 22% had 4–6 herbal staff. Besides, 95% of PMS and 71% of cultivators operated less than 1 ha. Most of the players were still using manual system/equipment indicating the need to enhance technological adoption to bring the industry to a higher level. Furthermore, 60% of chain players did not have proper storage. As high as 91% of product buyers were locals. There is lack of proper marketing strategies. The industry is highly dependent on marketing through existing network relationship. This limits the products to reach a wider range of customers. (b) The number of herbal industry established increased by 219% during the Ninth Malaysia Plan (2006–2010) and Tenth Malaysia Plan (2011–2015) compared to the previous same period. It is parallel to the focus given by the government to increase the value added products of the herbal industry through the generation of new economic resources under the National Key Economic Areas (NKEA) which was introduced in 2010. This shows that the government plays the most important role in developing the industry. (c) Sustainability of the raw materials for the industry is an issue needs to be properly handled by the policy makers. Tongkat ali and kacip fatimah were two key species in Malaysian herbal industry whose supply was still heavily dependent on the natural forest where the resources are depleting. Domestication of these species is important. (d) Authentication of raw materials is crucial for future development as majority of planting material suppliers and cultivators did not know the origin of their planting materials and did not verify the species. Authentication and verification are basic requirements in producing high quality raw materials and products. (e) Most of the chain players were Malays accounted for 88% of all players. The herbal industry needs to be further developed as this could help to narrow the economic gap between the Malays and non–Malays in the country. (f) Of the total 672 chain players, 54% attained diploma or degree. The potential to further develop the industry will be facilitated as players were generally educated. (g) Majority (93%) of workers in the herbal industry were locals, indicating that Malaysian workers are willing to get involved in the herbal industry and there is less need to depend on foreign workers.