Strengthening Food Security and Manufacturing: Insights from Malaysia's Budget 2026

Key Highlights for Budget 2026 for Food Industry

1. Importance of Food Security: Food security is essential for national stability and public health. It involves ensuring that all individuals have access to sufficient, safe and nutritious food to maintain a healthy life.

2. Role of Food Manufacturing: The food manufacturing sector plays a crucial role in enhancing food security by improving food availability, quality and safety. Innovative practices and technologies in food production can contribute to a more resilient food system.

3. Government Initiatives in Budget 2026: The Malaysian government has introduced various tax incentives in the 2026 Budget to promote investment in food security projects and sustainable food manufacturing practices. This includes a 100% income tax exemption for new food production projects focused on domestic sales.

4. Sustainability Practices: Sustainable practices in food manufacturing, such as reducing waste, utilizing renewable energy and sourcing ingredients locally, are essential for long-term food security. These practices not only benefit the environment but also improve the economic viability of food businesses.

5. Support for Farmers, Fishermen and Agricultural Entrepreneurs: The government has announced significant support for farmers, fishermen and agricultural entrepreneurs in Budget 2026.

6. Food Safety Certification: Obtaining food safety certifications is crucial for manufacturers to ensure compliance with health regulations and build consumer trust. Certifications such as HACCP (Hazard Analysis Critical Control Point) and ISO 22000 are industry certifications that help ensure the safety and quality of food products.

Understanding Food Security and Its Challenges

Food security is defined by the Food and Agriculture Organization (FAO) as a state where all people, at all times, have physical, social and economic access to sufficient, safe and nutritious food to meet their dietary needs for an active and healthy life. Despite its importance, food security faces numerous challenges, particularly evident from 2020 to 2025:

Examples of Crop Damages and Wastages (2019 – 2025)

1.Flooding in Malaysia (2021): Severe flooding in several states, including Selangor and Pahang, caused extensive damage to rice and vegetable crops. Reports indicated that thousands of hectares of farmland were inundated.

2.Pest Infestations (2022): A surge in pest populations, including the fall armyworm, affected corn and vegetable crops in various states. Farmers reported significant crop losses due to these infestations.

3.COVID-19 Pandemic Impact (2020-2022): The pandemic disrupted supply chains, leading to wastage of perishable goods. It was estimated that about 30% of fruits and vegetables were wasted during this period.

Source : https://theedgemalaysia.com/article/cover-story-weathering-perfect-storm-supply-chain-disruptions

4.Support for Farmers, Fishermen and Agricultural Entrepreneurs: The government has announced significant support for farmers, fishermen and agricultural entrepreneurs in Budget 2026.

5.Typhoon Damage in Southeast Asia (2020-2021): Typhoons that struck the Philippines and neighbouring countries had a ripple effect on regional food security, damaging crops such as bananas and coconuts.

6.Climate Change Effects (2020-2025): Ongoing climate change has led to unpredictable weather patterns, affecting planting schedules and crop viability. Climate change is linked to potential production and GDP losses, with one report estimating a 9% loss in production and 8.4% in GDP by 2030. Climate impacts disproportionately affect vulnerable communities, exacerbating existing food insecurity issues in states like Kelantan and Sabah.

7.Post-Harvest Losses: Studies indicate that Malaysia faces post-harvest losses of about 20-30% in certain crops due to inadequate storage facilities and poor handling practices. Malaysia faces a significant food loss and waste issue, discarding an estimated 23,000 tons of food daily, which is 53% of its total food production.

The problem spans the entire food supply chain, from production to consumption, and is exacerbated by consumer behaviour, agricultural practices, and a lack of comprehensive waste management systems. Contributing factors include post-harvest losses in perishable goods, inefficient processing, and a general lack of awareness about the value of food.

The Role of Food Manufacturing in Ensuring Food Security

Food manufacturing is pivotal in addressing these challenges. By optimizing production processes, improving food quality and reducing waste, the food manufacturing sector can significantly contribute to food security. Here are ways in which food manufacturing enhances food security:

Increased Production Efficiency: Advanced technologies such as automation, AI and IoT can streamline production processes, reduce costs and increase output, ensuring a stable food supply.

Quality Control: Implementing rigorous quality control measures ensures that food products are safe and meet health standards, which is essential for consumer trust.

Waste Reduction: Sustainable manufacturing practices that minimize waste can lead to more efficient use of resources and reduce the environmental impact of food production.

Local Sourcing: Supporting local farmers and sourcing ingredients from within the country can strengthen local economies and reduce dependency on imported food.

Government Initiatives and Tax Incentives in Budget 2026

In the 2026 Budget, the Malaysian government introduced various tax incentives to bolster food security projects and encourage sustainable practices in agriculture and food manufacturing. Key initiatives include:

A) Tax Incentives for Food Security Projects:

New food production projects may qualify for a 100% income tax exemption for ten years, specifically for income derived from domestic market sales.

Expansion projects can maintain a 100% tax exemption for five years under the same conditions.

B) Support for Sustainable Practices:

The government is focused on promoting sustainable agricultural practices and modern farming technologies, which align with national food security goals.

C) Research and Development Grants:

Tax deductions for companies investing in research and development can foster innovation in food manufacturing, leading to better productivity and sustainability.

D) Support for Farmers and Fishermen: The government has announced significant support for farmers and fishermen in Budget 2026.

For Farmers: The MADANI government is providing the highest agricultural subsidies in history, amounting to RM2.62 billion for various subsidies and assistance, including paddy price subsidies, fertilizer subsidies and production incentives. Additionally, the incentive rates for plowing and pest control have been increased to RM160 and RM300 per hectare per season, respectively. A new harvesting incentive of RM50 per hectare per season has also been introduced to cover diesel costs for harvesting machinery.

For Fishermen: A living allowance of up to RM300 per month and catch incentives have been allocated with a budget of RM160 million. The government is maintaining subsidized diesel at RM1.65 per liter specifically for fishermen, and RM20 million is set aside to help upgrade fishing vessels to reduce reliance on foreign crews and replace unsustainable fishing nets.

For Local Fruit Producers: RM55 million has been allocated to support local fruit producers, including incentives for pineapple cultivation and farm infrastructure in states like Sarawak, as well as other fruit crops such as soursop, water guava and large citrus.

E) Support for Agricultural Entrepreneurs: The government is also focusing on agricultural entrepreneurs by providing:

Agrobank Financing: RM1.1 billion has been allocated for Agrobank to support entrepreneurs in expanding their businesses and promoting automation and mechanization in agricultural projects.

Agropreneur NextGen Program: This program offers startup grants and project expansion grants totaling RM20 million for agricultural initiatives.

Tax Exemption for Food Production Projects: Companies undertaking new food production projects will receive a 100% income tax exemption on statutory income for a period of 10 years. Existing companies expanding their projects will benefit from a 100% income tax exemption for 5 years. The application period for these tax incentives has been extended until December 31, 2030.

Incentive / Scheme	Benefit or Value	Purpose / Scope
New food-production companies: CIT relief	100% tax exemption (10 yrs)	Encourage new local food factories and R&D
Expanding food companies: CIT relief	100% tax exemption (5 yrs)	Encourage expansion of existing food plants
Automation tax incentives (agriculture)	Extended coverage	Applies to livestock, aquaculture, deep-sea fisheries, etc.
Agrobank modernization loans	RM 1.1 billion	Low-interest financing for farm/process automation
Agropreneur NextGen grants	RM 20 million	Grants for agri start-ups and expansion projects
R&D and innovation incentives	(various programmes)	Tax breaks/deductions for food industry R&D

Table 1 : Budget 2026 Food Manufacturing & Industry Incentives

Programme / Sector	Allocation (RM)	Purpose / Notes
Agriculture Ministry (KPKM) budget	6.87 billion	Total (7% ↑ over 2025) for agro-food modernisation
State-level agri projects (with govts)	300 million	Land-use optimisation in partnership with states
Support for fruit entrepreneurs	55 million	Crop incentives and farm infrastructure (local fruits)
Farmer subsidies (paddy, fertiliser, etc.)	2.62 billion	Inputs support, price aids (largest-ever farm subsidies)
Rice farmer incentive (per hectare)	RM 4,300	Up from RM3,790 (per ha, per season)
Fisheries catch incentives & allowances	160 million	Plus up to RM300/mth allowances
Fishermen diesel subsidy	RM1.65/litre (subsidised)	Continuation of existing fuel subsidy
Fishermen housing (fishing villages)	10 million	Build/renovate ~380 homes
Vessel modernisation (fishing fleets)	20 million	Upgrade vessels to reduce foreign crew reliance
Plantation smallholders support (Felda etc)	~2.4 billion	Protects 720,000 settlers/families (land schemes)

Table 2 : Major Food and Agricultural Allocations in Budget 2026 (Federal)

Sustainable Practices in Food Manufacturing

Food manufacturers can adopt various sustainable practices to enhance food security:

Utilizing Renewable Energy: Incorporating solar panels or wind turbines can significantly reduce energy costs and the carbon footprint of food production facilities.

Implementing Waste Management Systems: Establishing effective waste management practices can minimize food waste and promote recycling within the manufacturing process.

Investing in Technology: Adopting advanced technologies for precision agriculture can optimize resource use, improve crop yields and reduce environmental impact.

Collaborating with Local Farmers: Building partnerships with local farmers can ensure a steady supply of fresh ingredients while supporting local economies.

Food Safety Certification

Food safety certifications are critical for manufacturers to ensure compliance with health regulations and build consumer trust. Some important certifications include:

HACCP (Hazard Analysis Critical Control Point): This certification focuses on identifying and controlling food safety hazards in production processes.

ISO 22000: This international standard outlines the requirements for a food safety management system, ensuring that food is safe at every stage of the supply chain.

FSSC 22000: This certification combines ISO 22000 with additional requirements specific to food safety management, providing assurance to consumers and businesses alike.

Benefits of Food Safety Certification

Consumer Confidence: Certifications enhance consumer trust in food products, leading to increased sales and brand loyalty.

Market Access: Many markets require food safety certifications for products to be sold, making them essential for manufacturers looking to expand.

Risk Mitigation: Implementing food safety protocols reduces the risk of foodborne illnesses, protecting public health and minimizing liability for manufacturers.

Strategic Focus on the Halal Industry

The government is also placing a strong emphasis on the halal industry, recognizing its potential for growth and export opportunities:

Doubled Financing Guarantee (SJPP): The government’s export-financing guarantee for the halal sector has doubled from RM1 billion to RM2 billion. This significant boost aims to enhance the financial support available for halal businesses.

Special Loans for Halal MSMEs (SME Bank): A total of RM100 million has been allocated for special loans designed to support Micro, Small, and Medium Enterprises (MSMEs) within the halal sector, fostering growth and development.

Halal Industrial Park: RM124 million in funding has been designated for the establishment of a new Perak Halal Industrial Park (Manjung), intended to create a central hub for halal food processors, promoting efficiency and collaboration.

Streamlined Certification: The government is committed to expediting JAKIM halal certification processes and enhancing overall halal compliance support, making it easier for businesses to meet the necessary standards.

FAQs

1. What is food security?

Food security refers to the condition where all individuals have access to sufficient, safe and nutritious food to maintain a healthy life.

2. How does food manufacturing impact food security?

https://www.magcolm.my/food-safety-the-importance-of-pest-control-2/Food manufacturing enhances food security by increasing production efficiency, ensuring food safety, reducing waste and supporting local sourcing.

3. What government initiatives support food security in Malaysia's Budget 2026?

The Malaysian government has introduced tax incentives for food security projects and sustainable agricultural practices to encourage investment in the food manufacturing sector.

4. What are the key food safety certifications?

Key food safety certifications include HACCP, ISO 22000 and FSSC 22000, which ensure compliance with health regulations and build consumer trust.

5. How can food manufacturers adopt sustainable practices?

Food manufacturers can adopt sustainable practices by utilizing renewable energy, implementing waste management systems, investing in technology and collaborating with local farmers.

6. Do you think that there will soon be a food price crisis?

While it’s difficult to predict, rising global inflation and supply chain disruptions suggest a potential food price crisis could occur. Malaysia’s Budget 2026 aims to enhance food security through strategic investments. By focusing on local production and sustainable practices, the government hopes to mitigate looming challenges in the food sector.

Conclusion

Strengthening food security through sustainable food manufacturing is vital for ensuring a stable and resilient food system in Malaysia, as emphasized in the Budget 2026. The government’s initiatives, coupled with the adoption of sustainable practices and food safety certifications, can significantly contribute to national food security. By investing in these areas, the food manufacturing sector can play a pivotal role in creating a healthier and more sustainable future for all Malaysians.

For more information on food safety certifications, visit Food Safety Certification.