Malaysia: Nestlé, Sime Darby lead corporate push into padi

by GRAIN | 1 Feb 2008

Last year we reported on a new hybrid rice initiative in Malaysia being led by RB Biotech-- a joint venture operation involving one of Malaysia's most influential construction tycoons. We then heard from a representative of Bernas, the privatised descendent of Malaysia's National Rice Board and Malaysia's biggest rice miller, who told us that it was now pursuing a joint hybrid rice project with RB Biotech. Bernas is the majority owner of Bernas Marditech Seeds, a seed company spun-off from the Malaysian Agricultural Research and Development Institute (MARDI) which Bernas has utilised to move into upstream activities. Already, the company claims to supply 20% of the national demand for rice seeds, representing a turnover of more than RM 12 million a year.

Moves are also afoot to bring hybrid rice beyond the peninsula, to the Malaysian state of Sarawak. In November 2007, Sarawak's Agricultural Department signed a memorandum of collaboration with a Hunan-based Chinese seed company called Aviva Brothers, for the development of hybrid rice in the state. Few details of the agreement were released and this is the first we've heard of Aviva, although Hunan is a centre of hybrid rice research in China and home to companies like Yuan Longping Hi-tech Agriculture and its newly acquired AVA Seeds.  Sarawak's Deputy Chief Minister Tan Sri Dr George Chan said only that Aviva would supply the investment capital and the technology; Sarawak would provide the seeds. ""We have hundreds of local varieties that can be crossed to become hybrid padi," he said.

Shortly before the Chinese agreement, Sarawak's Agricultural Department wrapped up another deal for its farmers' rice biodiversity with one of the world's largest food companies-- Nestlé. In October 2007, Nestle unveiled its plans for a traditional red rice contract farming project in the Sarawak-west Kalimantan border area that will supply its global production of infant cereals. Initially the joint project with the department of agriculture will contract 112 farmers on around 50 ha. Nestle says it will instruct farmers on "good agricultural practices" and ways to  "modernise traditional rice farming.' Not that farmers in Sarawak need any lessons on farming their traditional varieties.  According to the state's Agriculture Research Centre (ARC) senior research officer, Teo Gien Kheng, local farmers continue to cultivate more than 100 traditional rice verities of hill and wet paddy, accounting for some 85 percent of the state's annual output of rice. Nestle selected four such red rice varieties for its project, held at the ARC genebank (Udang Halus, Udang Besar, Katek Merah and Silah Merah).

The project proponents say that they'll eventually scale the project up to 300 ha, providing significant livelihood opportunities for Sarawak farmers. But government officials are already talking about the need to invest in larger-scale farming, and, besides, Nestlé will only be paying farmers RM1 ($0.31) per kg for the rice, while in local markets traditional rice sells for between RM2.80-RM9.50 ($0.87-2.94) per kg. Plus, Nestle is already making plans to take its red rice production elsewhere, to the "rice bowl" state of Kedah on the peninsula where there is more access to irrigation and mechanisation. Nestlé says it's currently working on the national release of a red rice variety with MARDI and, "once the seeds are released, we will work with Sime Darby Bhd and implement the project in Kedah." Nestle"s plan is to jump into the Northern Corridor Economic Region (NCER) project that the Malaysian government has tasked Sime Darby to oversee.

(Sarawak's Deputy Chief Minister Datuk Patinggi Tan Sri Dr George Chan and executive director of production of Nestle Malaysia Dr Magdi Batato transplanting red rice)

Sime Darby is one of Malaysia's largest corporations. In early 2008 it will merge with a few other major Malaysian plantation companies to become the world's largest  publicly-listed oil palm company. But Sime Darby's interests extend well-beyond oil palm; it's a vertically-integrated agribusiness, involved in everything from cattle farming to fruit drinks. It also owns a 30% stake in Tesco's Malaysia subsidiary, which is fast becoming the biggest food retailer in the country. Last year, the Malaysian government tasked Sime Darby to draw-up the blueprint for the NCER, and the corporation has not surprisingly used the opportunity to convert the region into an oasis for corporate profiteering (see the detailed coverage on the NCER by Malaysian journalist Anil Netto).

Sime Darby's essentially using its control over the NCER process to drive forward and subsidise its own plans to develop fully-integrated chains of food production, based around contract production schemes to supply Tesco. As explained by Charles Santiago, coordinator of the Kuala Lumpur-based Monitoring Globalisation think tank: "What they are really doing (is) using a government-linked company and foreign multinational corporations with expertise in seeds, fertilisers and pesticides, and the entire project is underwritten by the government . . . This is a classic case of government subsidy for private capital."

The lynchpin of Sime Darby's plans is a 16 ha seed centre in the agricultural state of Perlis. It's not clear if the seed centre will be owned outright by Sime Darby or if it will operate as a quasi-public private outfit (much like Sime Darby itself). Sime Darby's reported to have put up $11 million of its own funds, while between $22-$31 million will come from the funds set aside by the government for the NCER. Either way, the R&D for the centre seems to have already been mapped out. Sime Darby says the centre will focus on developing high-yielding varieties for 10 cash crops, including rice, and, in line with this, it's already signed an R&D agreement with the Chinese Academy of Agricultural Sciences (CAAS) for the transfer of germplasm and their know-how with biotechnology. Sarojeni Rengam, executive director of the Pesticide Action Network Asia Pacific, suspects that the centre intends to work with GM seeds. "There is a strong likelihood they might use genetically engineered seeds such as Bt corn or a herbicide tolerant corn - because they are talking about high technology," she told IPS.

According to Sime Darby's CEO, Datuk Ahmad Zubir Murshid: "These people [CAAS] have the mother. It is already patented. They are one of the top five in the world and we will JV [joint venture] with them in Perlis for certain seeds and in other areas, other seeds. They will also help us with our own seeds in palm oil."  (Note: CAAS isn't one of the top five seed companies in the world, but it does have a collaboration with Vilmorin, the world's 4th largest seed company, which recently purchased a 49% stake in the leading Chinese seed company Yuan Longping High-tech Agriculture)

CAAS says it too has reasons for venturing into Malaysia. "We spent a lot of time visiting rice and maize fields in Perlis and other states and we see huge potential...We have seen some very interesting things in Perlis. We are looking for common ground with Sime Darby so that we could begin research for the seed centre," said CAAS deputy director-general Gong Xifeng.

For Sime Darby, this is the beginning of a big future in seeds. "When I talk about agriculture, you have to have the full value chain. First, you have to have the seed in control," says Ahmad Zubir

One of the first orders of business for the new seed centre will be the commercialisation of hybrid rice seed, based on Chinese varieties. Maize is also a priority, specifically "sweet corn". In fact, Sime Darby has already launched what it calls the Amazing Kedah Sweet Corn Supply Chain Project, which involves contract farmers and plantation agriculture on a 320 ha piece of land in Bukit Tangga. Under the NCER, Sime Darby will expand this project to feed its processing factory
which will then distribute fresh, frozen or processed sweet corn through the new Tesco distribution centre in the State of Ipoh and into the Tesco network within Malaysia and abroad. The company, for example, is already targeting Tesco's China operations for exports.

While the project initially intends to contract with small-scale farmers, Sime Darby will scale things up as quickly as possible. "The land is too small to introduce mechanisation. This is where in our NCER, our major proposal is to introduce mini-estate cooperative scale farming." said Ahmad Zubir.

Zubir explains that under the NCER landowners will not be asked to sell their land but instead will be encouraged to appoint a professional company to manage their land in return for a fixed monthly salary and profit-sharing from the produce. "We are looking at the commercial agriculture, that is, getting big companies involved in the downstream and also participating in the upstream, that is, in large scale farming, " said Zubir. Precisely where big corporations like Nestlé come in.
Author: GRAIN
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