Technical Efficiency of Paddy Farming in Peninsular Malaysia: Applications of Data Envelopment Analysis

Abstract

Rice is the staple food for most of the people in the world. Rice also served as a basic food for Malaysian people. More than 300,000 people in Malaysia are paddy farmers and involved in small scale cultivation. Rice production especially in the granary area is expected to increase after the new incentive scheme was introduced by the government as a lot of budget had been spent for this incentive. In addition, the paddy farmers have faced the increase in cost of rice production almost in every year. This study was conducted to measure the technical efficiency of paddy farming in the East Coast and West Coast of Peninsular Malaysia which are MADA, KADA, IADA Penang and IADA KETARA by using Data Envelopment Analysis (DEA). The data were obtained by interviewing the paddy farmers using the well-structured questionnaires. The interviewed farmers were chosen randomly from the whole paddy farmers of each agency. For this function, this study has applied a non-probability sampling method that is a purposive sampling technique. The result showed that the IADA KETARA recorded the highest value which is 0.901 followed by MADA with 0.843, IADA Penang with 0.836 and KADA 0.607. The value of output slacks is zero and only for IADA KETARA.  The KADA area operated with 0.017 as minimum output slacks, IADA-Penang with 0.332 as maximum output slacks and MADA was in the middle of the two with 0.159 output slacks. These showed the average level of shortfall in paddy production in the three granary areas.

Keywords: Rice Production, Technical Efficiency, DEA, Malaysia