4/6/09 SUSTAINING THE RURAL INCOME GROWTH.....

Worldwide, rural economic transformation has always being strongly associated with the Economic of Agriculture Production. Agriculture production in fact would trigger the construction of related infrastructures, utilities, and followed by the manufacturing, transportation, and many others services developments. Thus if one could look at the total picture of the agriculture development, then one would easily understand the overall impact of the sector to the whole State economy.

Unfortunately since before independent, and not until late 1990s, Sarawak agriculture development had been over dependent on subsidy and traditional smallholders development. As such, despite hundreds of millions of Ringgit had been pumped annually into the sector, the impact is considered insignificant. Surely some would argue over the proof of drastic rural poverty reduction since the 1970s.


(2) In fact clear poverty reduction only happened in the mid 1980s, when more rural areas are being opened up with roads. Roads, had not only enable for agro-products marketability, but more significant in reducing the cost of transportation of many other services and goods. This had bring great impact to reducing rural cost of living. Opening of Plantations had also contributed signifiacantly on rural road developments.

(3) Today poverty issue is not only about eleviating the poor. If such view prevail, then we would never be able to eradicate poverty. We must bear in mind the element of inflation which caused the uprising prices of goods and services over time. Accordingly, the population growth and rural population demographic changes would also play a significant roles. Subsequently, the nature of our natives custom and tradition on land matters, had put some constraints over the availability of their agriculture land respources. Then, if price fluctuation factors of the agriculture commodities are taken in, thus the Rural-agro-production based Economic Development Model need greater scrutiny.

(4) In short I would say, Rural Socio-economic Transformation won't work through traditional smallholder-based and merely focusing on production. Under current cicumstances, rural income growth must be sustained. The development must not only able to generate income, but the income must also be growing accordingly with the rest of the State economies. Such notion is critical in order to narrow the Rural-Urban income gap.

(5) I would suggest, and I called, the i-RED model should be explored. i-stand for intergrated, while RED stand for Rural Economic Development. The term Intergrated here is meant to pursue for greater Values Chain whereby the landowners are not only involved in the raw materials production, but must make or benefit equitable gains from the processing, trading, and other related services. In the past, Integrated mean, good coordination of development of the infrastructures and the crop production.

(6) The past Development Concept, I would rather term as Equation of Production, while i-RED is an equation of Income Growth.

(a) Equation of Production (P) = f(Infrastructures(I) + Crops Development (C))
(b) Equation of Income Growth (Ig)= Equation of Production + Xi, where Xi represent all other Value Chain enterprises such as Processing, Trading, Services, and relatedsupporting activities.

(7) In the broader scale i-RED could also means the making of the Commercial and Industrial Rural Communities, which signifies, anything that we want to do, in the rural areas, it must have a strong industrial and commercial linkages.

(7) Based on the Formula Ig = F (P + Xi), where i= 1, n, thus the more X being generated, the better would the income and prices fluctuation could be handled. The risk of Income slow down could be cushioned through diversifying of enterprises that the rural population be involved.

(8) Thus, diversifying rural economies toward the greater Values Chain would be the best Model that we need to adopt over the next decades. This is justifiable where basic infrastructures and utilities are already wide spread in the rural areas. We need to go beyond basic.

Kuala Lumpur 6 June, 2009