Perennial crop allocation in Malaysia : A macro model simulation and optimal control approach

Abstract

This paper analyses the effects of adopting various crop allocation policies for rubber and oil palm in the performance of the Malaysian economy. Rubber and oil palm are the two major perennial crops which dominate the Malaysian plantation industry and planting strategies adopted will affect not only the profitability of individual firms or investors involved in planting the crops but also the various sectors of the economy both directly and indirectly. In the past, planting policies have been influenced mainly by the relative profitability of cultivating oil palm vis-a-vis rubber despite the existence of a general government policy to encourage crop diversification. Investment trend determined solely by profitability has certain weaknesses. It often fails to consider national interests as investors are concerned with their own planting policy. The indirect effects of investment decisions on other sectors of the economy could not be evaluated in the usual crop allocation appraisal such as those by Lim and Chai (1978 ) and Arrifin and Chan ( 1978).