FAQ

The demand for domestic tobacco and the economic value of tobacco in Malaysia have allowed tobacco farmers to benefit from a lucrative crop. Additionally, replacing imports will save foreign exchange. Tobacco farmers are rational producers and will grow tobacco that can guarantee good returns on their labor and investment. Tobacco farmers can earn returns of up to RM10,000 per hectare, and those who preserve their own production can earn up to RM25,000 per hectare. 20,000 farming families that grow tobacco will switch to other crops if there are viable alternatives that are comparable in terms of market, price, income, stability, and crop yield.

Currently, 70% of tobacco in Malaysia is grown on Bris land along the East Coast of Peninsular Malaysia, where opportunities to grow other viable crops are limited. Tobacco is a short-term crop, and many tobacco farmers also grow other crops after the tobacco season, using the farm equipment they can afford from the proceeds of growing tobacco. Crop diversity, crop rotation, optimal cropping systems, and maximizing income from agriculture are key aspects of agricultural development, especially for smallholders.

Malaysia has listed tobacco as a sensitive item under the CEPT AFTA scheme. This means that tobacco will be subject to a reduced import duty rate (0-5%) in the year 2010. The tobacco industry in Malaysia currently operates on a less efficient two-tier preservation system. Like other agricultural commodities, tobacco is unable to compete with low-cost-producing countries that pay low wages for the same commodity production. The government's commitment to AFTA requires the tobacco industry to be restructured towards efficiency and competitiveness.

The Restructuring of the Tobacco Industry involves structural changes from the current less efficient two-tier preservation system to a more efficient and integrated cultivation preservation system. The restructuring includes building family-based individual cultivators and large cultivators, research and development, technology transfer, drainage and irrigation, mechanization, and improving soil fertility.

In general, tobacco is relatively small-scale grown except in some countries where there are large suitable areas and low labor costs. For Malaysia, the proven option is a family-based and efficient crop cultivation under the concept of Individual Cultivators of Preservation (PPI), where costs can be reduced, especially when based on family labor, and expected income based on returns to labor comparable to other alternative farming or non-farming income sources. Most of the 1,900 cultivators developed to date can produce at a cost of around RM8.00/kg., which is considered competitive and will be more competitive after the capital outlay and loans are repaid.

Many tobacco cultivators cultivate for their preservation under the concept of Large Preservation Farmers (PBB) with production costs of around RM10/kg. The average farm size is about 3-5 hectares, taking into account land suitability limits, experience, basic facilities, and ensuring good supervision and management. Larger farms up to 50 hectares have been tried but have not yet shown success due to problems related to land suitability, inadequate farm operations synchronized with weather affecting mechanization operations, and disease after several years of continuous cultivation.

LKTN does not encourage smoking or engage in programs to increase demand for tobacco. The demand for cigarettes is affected by many factors that are not related to the existence of domestic tobacco or the domestic tobacco industry. This can be seen from many developed countries with a thriving cigarette industry even though they do not grow tobacco directly.

Taking into account the impact of various programs to discourage smoking, any demand for tobacco is best obtained from local producers, rather than importing and losing foreign exchange, while also benefiting from foreign producers in the process. Domestic demand for 15 million kilograms of tobacco currently has a market potential of RM200 million per year, creating significant socio-economic implications in terms of employment, multiplier effects, and income injected into the rural economy in the major tobacco-producing states of Kelantan, Terengganu, Kedah, and Perlis.

LKTN provides advisory services from the process of planting until the sale of dried leaves to cigarette manufacturers. In addition, LKTN provides input credits such as fertilizer, pesticides, plastic, ropes and others. The advisory services include crop schedules, planting methods, fertilization, preservation, and grading of leaves. LKTN's services are packaged to ensure that the output can be marketed at a reasonable price. All leaves produced are guaranteed marketable as long as they meet the grade criteria and do not exceed the set quota.