KUALA LUMPUR: Malaysia should invest more in the downstream sector of its agriculture industry to cushion the impact of volatile commodity prices, says Rabobank Southeast Asia.
Its director of food and agribusiness research and advisory, Pawan Kumar, said the downstream business tends to benefit more from the downtrend in commodity prices with its ample supplies and fixed retail prices.
"It is a matter of focus. Whenever Malaysian companies decide to go deep into something, they have traditionally done very well, be it upstream or downstream.
"However, if they just stay idle and continue with their export and import activities, they will get in trouble with all these currency wars and commodity prices slump," he told reporters after Rabobank's half-day Exclusive Business Forum in Kuala Lumpur on Tuesday.
He said the Asean Economic Community (AEC) would create a huge opportunity for regional companies given the larger consumer base, increased flow of investment and multiplier effect from infrastructure developments.
"Multinational companies (MNCs) are also eyeing this opportunity and according to studies, MNCs are better prepared to take advantage of the integrated community compared with regional players as they are already 'comfortable' with growth in their home market.
"This is why regional companies must make sure they are not too late in planning their strategy to take advantage of the AEC and capture market share in the region," he said.
On the Trans-Pacific Partnership Agreement (TPPA), Pawan said commodities such as palm oil and rubber would get support from the agreement, if it is signed, given the broader market access.
Palm oil's rival soybean oil has been eating market share in the Asian market for the last few years, part of a broader trend due to cheaper soybean oil, he said.
"If palm oil is to get more market share, its price should be discounted more. This is more of a strategy question and not related to the TPPA.
"However, South-East Asia is still very much a palm oil consuming region and a lot of people have tried soybean oil and products, but this trend has not taken off in the region," Pavan added. - Bernama
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