The Newsletter 88 Spring 2021

A thorny dispute over land and profits. Durian plantations in Raub, Malaysia

Cassey Lee

Prickly, creamy and pungent, durian (Durio zibethinus) is regarded by many in Southeast Asia to be the king of fruits. In fact, durian’s commercial value has risen in recent years, especially since it became popular in China. In 2019, China imported some US$1.7 billion worth of durians. Although Thailand dominates supply in this market, the Malaysian government aspires to increase the country’s market share to well beyond the current ten per cent. Two factors are likely to increase Malaysia’s durian exports to China in the future. First, Malaysia secured the rights to export frozen whole durians to China in August 2018. Second, there is increasing demand for Malaysia’s premium durian, especially for a variety known as ‘Musang King’.

Though the Covid-19 pandemic has adversely affected the demand for durians in China in 2020, the long-term constraint is likely to come from the supply-side rather than the demand side. Not only is there a long gestation period for durian trees (more than five years), the Musang King variety only thrives in specific geographical areas in Malaysia. One of these areas is the district of Raub, located in the state of Pahang. As the durian industry booms, durian plantation lands in Raub have become the loci of contestations among various parties. This is because many of the one thousand affected farmers have been cultivating durian on land that is state-owned.

The most recent struggle over land for durian cultivation in Raub can be traced back to March 2020, when the Pahang state government’s agency for agriculture development, Perbadanan Kemajuan Pertanian Negeri Pahang (PKPP) signed agreements with a private company, the Royal Pahang Durian Group (RPD), to form joint ventures to develop a durian processing centre and to legalise durian farming on encroached state lands.

On 24 June 2020, the Pahang government awarded a 30+30 year lease and the right to use over 5,357 acres of land in Raub to the joint ventures. A month later, the affected durian farmers in Raub were given the ultimatum of accepting a sub-lease of 10+10 years with the joint venture company or risk being evicted for illegal land occupation. The proposed sub-lease contract requires each farmer to pay a levy of RM6,000 (US$1,473) per acre and to sell their Grade A Musang King to the joint ventures at a fixed price of RM30 (US$7.40) per kg for two years starting from 2021. Not surprisingly, the ultimatum and proposal were met with stiff resistance by the durian farmers who felt that the state had colluded with a private company to unfairly extract their hard-earned profits. The state and the private company have not previously invested any time and resources in the farmers’ ventures and yet, by way of fiat, intend to extract rent from them. The case has since gone to the courts with the farmers seeking a judicial review on two matters – the state government’s order to vacate their lands and its decision to award the lease and the right to use to the joint venture company. A temporary reprieve was obtained by the farmers when the court ordered the state authorities to cease all enforcement and eviction measures against the durian farmers until the judicial review would be decided in December 2020.

At first glance, the case appears straightforward from a legal perspective. The implementation of land registration under British rule had abolished the practice of ‘adverse possession’, which was recognised under customary law. In adverse possession, an occupant of ‘waste land’ [tanah mati] has the right to cultivate the land provided a proportion of the produce is remitted to the rightful owner (the state). Thus, under the current legal system, the affected durian farmers have illegally occupied state-owned lands and have no legal recourse whatsoever. This would put the farmer at a disadvantage when bargaining for a more favourable lease term.

Under the Federal Constitution, land-related matters are dealt with under state jurisdiction. It would perhaps be less controversial if the entire 30+30 year lease is given to PKPP because the land does in fact belong to the state. PKPP can then provide a sub-lease to each durian farmer. Why should another private company (RDP) be a beneficiary of the lease? As a state-owned agency, PKPP should have sufficient resources to develop the industry including financing the proposed durian processing plant. As part of a sub-lease agreement with farmers, the PKPP could also assist them in obtaining the Malaysian Good Agricultural Practices (MyGAP) certification, which is required by China for durian imports. After all, it is the role of the government to assist the private sector to overcome such non-tariff barriers. If the state government does not have the expertise nor the human resources to provide direct technical assistance to farmers on matters relating to MyGAP, it could encourage private provision of such services.

One potential complication is the involvement of the Pahang Royal Family as a shareholder in the private company RPD. The Sultan of Pahang is the de facto head of the state government. Some legal scholars and practitioners have argued that state lands ‘belong’ to the Sultan as a sovereign entity. This is debatable because changes in state land legislations require the approval of the state legislative body, implying that the ‘state’ is in fact distinct from the sovereign entity – just as the Federal legislative body (Parliament) is separate from the executive body and the king. Norms may, however, differ from actual practice as the Sultan commands the utmost respect from state bureaucrats and politicians.

On 23 December 2020, the High Court in Kuantan dismissed the farmers' applications for judicial review on the basis that they are trespassers and hence have no legal standing. This court decision is likely to be construed by the general public to be unfair. Legal constraints aside, it might be worth to consider economic efficiency. What arrangement would allow the durian industry in Raub to flourish whilst ensuring that the state government receives its fair share of revenues (lease payments, quit rents and tax revenues)? To do this, the courts should stay the ‘grabbing hands’ of the state and allow the ‘invisible hand’ of the market to do what it does best in commerce. This would require the court to recognise the right of the farmers to be fairly compensated (for past investments, should they choose to exit farming) or to a fair revenue-sharing contract (should they choose to continue farming). Such a contract should be negotiated without the threat of eviction.

To conclude, the boom in Malaysia’s durian exports has brought about a conflict between major players and institutions in the country – farmers, state and the royalty. A fair solution to this conflict can only be obtained through negotiations without threat of eviction.

Cassey Lee is a Senior Fellow in the Regional Economic Studies Programme at the ISEAS – Yusof Ishak Institute.