Title: Some organizational aspects of agricultural and non-agricultural growth linkages in the development of the Muda region
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Title: Some organizational aspects of agricultural and non-agricultural growth linkages in the development of the Muda region
Physical Description: Book
Creator: Afifuddin Haji Omar.
Publisher: Muda Agricultural Development Authority,
Publication Date: 1976
Copyright Date: 1976
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Volume ID: VID00001
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Resource Identifier: oclc - 190938094

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0.- ,0o1

Some Organizational Aspects of Agricultural and
Non-Agricultural Growth Linkages
in the Development of the Iuda Region*


Afifuddin Bin Haji Omar**


The provision of irrigation infrastructures to enable double-

cropping of rice, coupled with agricultural technological advancement

facilitated through institutional innovations and restructuring, have

resulted in encouraging increases in agricultural productivity within

the Muda Region. Double-cropping increased total production of rice

over the traditional single-cropping in the Region by around

600% by 1974. From 1970 (the first phase implementation of double-

cropping), up to the present, an average annual increase of I.,>

in price production has contributed to considerable increases

in marketable surpluses which further generate the overall economic growth

of the Region. The organization for production, credit, and marketing

Paper read at the Conference on "Developing Economies in. Agrarian
Regions: A Search for Methodology.." Rockefeller Foundation. Bellagio,
Italy, August 4-6, 1976.

Head of the Division of Agriculture, Muda Agricultural Development
Authority, Malaysia.

The Muda Region is a predominantly rice area. Other agricultural produce
such as coconuts, mangoes, livestock, and fresh water fish have so far
been only of secondary importance. However, over the last couple of years,
through the initiatives of the Muda Agricultural Development Authority,
efforts towards developing income-increasing and employment-creating
activities around these have shown encouraging results.


through relevant government statutory bodies has enabled a reasonably

efficient and well-balanced flow of physical input and output. This is

reinforced by the increasing mileage of rural road networks effectively

linked to the urban centers. The economy generated by this sudden spurt

of agricultural growth is, however, more dramatically reflected in the

growth of urban and township areas within the Region, than that experi-

enced by the peasant society itself.

The increase in income at farm level has not been evenly distributed
across the already unequal pattern of distribution, and has there-
fore seemed to worsen that distribution. . [Moreover] the
increased expenditure of farm families, mainly because of their
improved mobility (more and better roads, and increased use of
private and public transport) has enhanced the welfare of the
urban based distributive structure at the expense of the strictly
rural shopkeeper.

It is clear therefore that it is not only the majority of the rural

farm sector which suffers a relatively lower increase in income but also

the rural non-farm sector vis-a-vis the urban sector. It is shown'by the

FAO/World Bank study that among the rice peasants the "net annual farm

income per unit area has increased by between 23 and 123/ [and this

of course] has important implications for the distribution of income."3

Since 71V of the rice peasants farm land below 6 acres, which is considered

the minimum economic size unit, it can be inferred that the majority

within the peasant society are within the lower end of the range in net

increases. This is confirmed by the fact that 8LS (the first two quartiles)

2FAO/World Bank Cooperative Programme, "The Muda Study -- A First Report,"
Vol. 1 -- Text. Rome. September 1975. p. 2.

Ibid., p. 36.

Khairi Haji Mohammad, "The Economic Size Unit of Padi Production in the
Muda Project." PP(RPM)E/4 (1) MADA. June 1969. The Gini ratio for
the distribution of farm size is 0.36. FAO/World Bank Study, op. cit.


of the peasant households are getting only 5LO of the gross annual income

while o of the households are getting 29% of the income. The Gini ratio

is 0.41.

Although growth in the urban and township areas is relatively

higher than that in the rural areas, most of it, however, is confined

within the commercial and service sectors. The employment absorption

capacity of this non-farm economic growth is apparently very low. This

is reflected in the decreasing contribution of off-farm income to total

net annual income of the peasant families as shown in Table 1. Although

there are fluctuations in the percentages shown in Table 1, especially

among households within the acid soil areas,5 the overall trend after

double-cropping started in 1970, shows a general decrease in non-farm


Hence, it is apparent that the absorptive capacity of double-cropping

rice outweighs that of commercial and service sectors in the urban and

township areas. Income generated through rice farming is more than that

generated through non-farm employment.

The introduction of double-cropping has substantially increased
the total farm labor input per unit area. This increase in
labor input has been met by a transfer of family labor previously
occupied off-farm to on-farm employment and an expansion in the
use-of hired labor. The significant opportunity cost of their
transfer of employment is reflected in the sharp decline in income
earned off-farm.

This has been partly due to the fact that padi cultivation is responsive

to increased labor intensity, especially in weeding, pest control, and

5About 50,000 acres or 2Q' of the Muda rice land are acidic. They only
support marginal production. However, ameliorative efforts through liming
and leaching, have resulted in an increase of 45,; in productivity which
eventually would bring the whole acid areas into economic production.

6FAO/,orld Bank Report, on. cit., p. 34.

. 4 -

water control. Although at present the Region's average yield per hectare

of about 4 tons is the highest in the country, this however represents

only 4/5 of the present potential of the Region.

However, the above involutionary trend toward farming, which may again

be caused by the low non-farm "pull," apart from contradicting the general

national development goal towards industrialization, is also defeating

to the overall agricultural growth and development of the Region. The

high demand for land does not only reduce the operational size through

fragmentation but also creates a high degree of tenancy and increases

the number of displaced tenants who would form a large class of rural

proletarians. This is further worsened by the need for mechanization in

the highly organized agriculture, both for operational and economic

reasons. The annual population increase of 3.1% will intensify strains

of the Region's rural economy further.

II. Growth Strategies For the Muda Region

The Muda Region, although characterized by its inherently low

industrial potential, should never be regarded solely from the perspective

of agricultural growth for its own sake. As an economic region, not only must

the channels of supply of agricultural output to other regions and demand

for non-agricultural and some agricultural input from the other regions

be developed, but also this input-output flow structure between the rural

and urban sectors within the region has to be developed at least as much

as the former. In other words, market integration has to begin within the

For further discussion of the effects of agricultural mechanization in
the Muda Region, see Afifuddin Haji Omar, "Social Implications of Farm
Mechanization in the Muda Scheme," in H. Southworth and M. Barnett (eds.),
Experience in Farm Mechanization in Southeast Asia, (New Yorki A/D/C, 1974),
pp. 39-55.

5. -

Region and this would work outwards to other regions and economic sectors.

This stress is made in the light of an integrated growth strategy that

depends upon increasing agricultural productivity to trigger off employment-

generated farm and non-farm enterprises.

Accelerated growth of agriculture may be an important condition
for a high-employment policy, but a high employment policy is an
important condition for continued rapid growth rates in the
agricultural sector.

The employment structure may be considered at two major sectoral


Firstly, employment could be provided in the rural areas through
non-rice growing activities which would create additional
sources of rural-farm income. This scheme would include agricul-
tural diversification and rural labor intensive industries. Apart
from increasing rural employment and income, the above steps would
arrest premature rural-urban migration, thus giving ample time
for the urban areas to ready themselves for further large scale
industrial development. Secondly, through the establishment of
big scale labor-intensive industries (both manufacturing and
service industries) in selected urban areas in the Muda Region,
the population pressure on scarce agricultural land could be
relieved. 9

Looking at the above implications of agricultural growth to the

potential unfolding of new employment structures in another way, the

first effect generated is the output-effect which takes the form of the

growth in agro-based industries in both the rural and urban sectors.

This can further be reinforced by agricultural diversification within

the Region. Such possible industries are mushroom canning, rice-noodle

and rice bran-oil manufacturing, chicken processing, and strawboard

manufacturing. These industries would be labor-intensive.

J. W. Mellor, The New Economic Growth -- A Stratery for India and the
Developing World, (Ithacal Cornell University Press, 1976), p. 14.

9See Afifuddin Haji Omar, "Regional Approach to Development -- The M. A. D. A.
Case," Paper-presented to the Southeast Asian Development Advisory Group
(SEADAG of Asia Society) Seminar on Regional and Urban Planning. Manila.
August 1975.

It follows from here that the demand for consumer goods would

increase with increases in employment and income. This income-effect

on employment absorption would take the form of the growth of industries

which serve household demands. They can either be small rural-based or.

big urban-based industries. The small rural-based industries would be

in the form of furniture manufacturing, bicycle assembling, wooden farm

implement manufacturing, dress-making, farm machine servicing, and trans-

portation. The big urban-based industries would be textile and footwear

manufacturing, rubber products industries, farm implement fabricating

industries, and transport services.

In the output-effect industries the level of agricultural output

would determine the labor absorption capacity, while in the income-effect

industries this would be determined by the income elasticity of demand

for the consumer goods produced. These relationships are based on the

assumption that there would be low capital-labor input ratios in all the

industries, well-balanced income distribution, and reasonable prices of

agricultural products prevailing.,

The working capital required for the above undertakings can come

from three potential sources, namely, the public sector (the government),

the private sector (mostly in the urban areas), and the peasantry. However,

throughout the developmental history of the Region the rate of private

sector investment within it (as expected by the capitalistic model of

development) has never been substantial enough to effect a regional

economic growth. Instead, much of the surplus obtained through monopsonic

rice marketing was and is still appropriated to other developed regions

more highly developed than the Nuda Region, especially to'the industrial-

port region of Penang where the rates of return to investment are


.considerably higher than those in the agricultural Muda Region. As a

result there has been a net outflow of economic surplus from the Muda

Region thus draining the already poor region bone-dry.

This capitalistic form of growth and development which in actuality

led to the underdevelopment of the peasant majority is

the necessary product of the internal contradiction of capitalism
itself. These contradictions are the expropriation of the
economic surplus from the many and its appropriation by the few,
the polarization of the capitalist system into metropolitan center
and peripheral satellites, and the continuity of the fundamental
structure of the capitalistic system throughout the history of its
expansion and transformation due to the persistence or recreation
of these contradictions.10

Within this perspective, the Muda Region's rural peasantry is the

periphery, the Region's town and urban centers the satellites, and the

Penang commercial-industrial center the metropolis.

The peasantry, as expected, did not even have enough capital to

increase their farm productivity or for that matter did not have the

motivation to acquire more capital because of the capitalistic-monopolistic

exploitation of the credit-marketing syndicates operated by the private

sector. Before government intervention through the establishment of

socio-economic institutions such as the Farmers' Association (F.A.), the

Agricultural Bank and the Padi and Rice Marketing Board, many.were in

A1. G. Frank, Capitalism and Underdevelopment in Latin America -- Historical
Studies of Chile and Brazil (New York and Londonl Monthly Review Press,
1967), p. 4. The "dual-economy" concept used by many to describe the
Malaysian economy in which the rural smallholdings are categorized as
subsistence economy while the urban-town economy is categorized as commercial-
industrial .economy with little or no linkages between the two, blurs the
fact that the. capitalistic structures have penetrated even the most isolated
villages since colonial times, in one form or another, even though colonial
sanctions limited their extensive development; cash crops, monetary economy,
and the collection of taxes in cash form are some examples. It is therefore
misleading to regard the Ialaysian peasantry as purely traditionalistic,
subsistence, and feudalistic oriented.

perpetual debt to these syndicates, whose interest rates ran as high as

300 per annum, while the padi prices paid to the peasants were very low.

Such exploitative capitalistic structures existed far back in colonial

history that "the Kedah State Government in 1912 approved the construction

of a government rice mill because of its concern with the low prices paid

to padi producers as a result of combination of millers." This, however,

'was implemented only in 1921, and even that could not break the stranglehold

of the monopoly which is backed by about 35 big rice mills and scores of

medium and small-sized mills.

However, since the implementation of the development projects in the

'Muda Region under the jurisdiction of the Muda Agricultural Development

Authority, capital injections by the government through infrastructures,

service cost supports, and input subsidies, have greatly set the motion

for increased income and surpluses. Beyond these, no direct grants for

working capital to the peasantry are provided by the government.

The above situations do not enable adequate accumulation of capital

for any substantial undertaking by the peasantry (since as it stands they

are the only source of capital formation) unless an immense cooperative

effort in the mobilization of capital among them is successfully launched.

Thus the roles of the wide scope F. A. in the Muda Region become critical.

The F. A. roles are not only critical in capital mobilization but

also it is as critical in determining the distribution of the increased

income to those low-income peasants. In Muda Region's F. A.'s, the fact

10. C. Docring, III, "Malaysian Rice Policy and the Muda River Irrigation
Project," (Ph.D. dissertation, Cornell University, 1973), p. 13.

that 8C0 of the members are operating land below 4 acres assures the

actualization of this goal if enough capital is mustered for the undertakings

of.employment generated projects, apart from other institutional changes

like land reform, etc. The increase in income of these poor peasant

categories would generate increasing consumption of certain food products.

The pattern of expenditure on food items . appears to be
changing. The general tendency is for expenditure on cereals
and related products to decline while expenditure on vegetables,
fish and milk and milk-related products increases.12

However, the overall expenditure on food declines in proportion to the

total annual expenditure. Although the increasing expenditure on certain

food items would arrest the movement towards capital transfer to non-farm

sector to a certain degree, it is more desirable than to risk further

worsening of income distribution.

An investment strategy which stresses the importance of the production

of high capital-labor ratio commodities or enterprises which give high

rates of return, at the expense of the primary material satisfaction of

the historically deprived peasants, in a region like Muda is certainly

a perpetuation of the expropriation/appropriation exploitative structure

of the traditional monopolistic capitalism, even though assurance is

given that the deprivation is only temporary. The order .of the day is

to allocate more resources within a completely integrated market to the

low income peasants even at the cost of a slow transformation towards a

national industrial society. The increase in the amount of wealth has

to be shared by the lower strata not totally in the form of government

12FAO/World Bank Report, op. cit., p. 36.

- 10 -

"welfare" hand-outs mainly derived from taxations of the rich but rather

through simultaneous development of the peasantry based upon the current

national economic development process. The peasantry should never be

made out as the "beneficiary" of the national growth. In other words,

this self-generating growth and development of the peasantry should be

integral elements of the whole growth and development of the nation. The

capitalistic theory of development cannot entirely be depended upon to

spread the growth effects not so much because of the inability of the

administration to implement a progressive taxation policy, but mainly

due to two reasons. Firstly, the time-lag between the growth in the

high capital-intensive non-farm capitalistic strata and the distribution

of the acquired income to the lower strata may be too long and this would

threaten the political order and may result in the retardation of growth

itself. Secondly, the increasing consumption of expensive luxury items

by the upper strata may be emulated by the lower strata, thus resulting

in an overall low level of savings and investment.

Given the fact that the F. A. is to be the major institution for

capital mobilization among the peasants, the capital accumulated would

first have to be channelled to agricultural diversification projects

which would not only be labor intensive, but which also would correspond

to the demand structures. It is observed that fish and fish products,

cereal and cereal products, sugar and other sweeteners, vegetable oils,

vegetables, fruits and meats, are consecutively consumed in declining

order of percentages of cash expenditure, as shown in Table II. Hence,

the non-rice agricultural activities into which capital would have to be

injected would thus as far as possible follow the above order of importance.

- 11 -

The above development in diversified food production would go a long

way to establish a more balanced and symetrical rural-urban dependency

in which the urban areas of the Region would no longer have to import most

of the food items, other than rice from other agricultural regions. In

the past such drain in urban food expenditure helped to cause under-

development of the rural areas apart from the monopolistic stranglehold

of the rice market.

However, the capital mobilized from the peasantry should not be

channelled solely within the agricultural diversification projects. In

terms of monetary returns to investment, these projects may rank low,

but in terms of providing employment and extra income to peasant families,

they are highly favorable. The peasantry should never be condemned to

those economic activities pertaining only to agriculture. The $250 million

marketable surplus of rice per annum produced by the Iuda Region provides

too large a cake to too few urban entrepreneurs and private syndicates.

(See Table III for production figures.) The peasants through the 27 F. A.'s

could be organized to undertake a portion of this marketing business

volume. Thus the growth linkages between the peasantry and the outside

world' would directly extend beyond the Muda Region's boundaries.

As the overall expenditure in food items decreases, the overall

expenditure in non-food items increases. An earlier study in the Muda

Region indicates that there is a high tendency for peasants to .either

renovate their houses or when they can afford it, even build new ones

with increased income.13 The FAO/World Bank Report indicates an increasing

13H. M. Khairi and Y. Nohd. Tamin, "Socioeconomic Survey of the Kubang
Sepat Pilot Project," RPH (Mimeo). Alor Setor. 1968.

- 12 -

rate in expenditure on housing renovation as shown in Table IV. Whereas

expenditures on clothing and footwear, furniture and household equipment,

and tobacco which form the important consumer commodities, seem to be

remaining more or less constant. Hence, looking at the above trend,

non-farm activities to be organized as employment-generating enterprises

should give priority to woodwork in which housebuilding, repairing, and

furniture manufacturing would constitute the major activities. Taking

into account the fact that carpentering has traditionally been the major
non-farm activity of Muda peasants, the problem of basic skills is


It is interesting to note that the scope for dress-making, especially

mass production of school uniforms, army uniforms and those of government

employees, is very wide. Moreover, expenditure in clothing would pick up

as more peasants send their children to school and the overall demand

for quality dress increases. Dress cutting and sewing are two activities

which are indeed labor intensive.

Looking beyond the Muda.Region's boundaries, linkages between the

Region and other regions can be established through the network of

townships and urban centers of the former. The increasing income of the

Muda urban sector would create more demand for consumer goods with high

capital-labor ratio, while most of the demand for food and food products

are satisfied by the developing rural hinterland of the Region. This

would initially generate growth linkages with the other regions, especially

the industrial regions, in terms of increased importation of high capital-

labor ratio goods. However, for the overall growth of the Muda Region


S13 -

this tendency should not be allowed to create a high net-outflow of

investments as has been traditionally occurring. i'oreover, the concen-

tration of all types of industries in the Penang industrial complexes

to the south of the Region has deleterious effects on the economy of the

latter, and generates social problems to the former. The industries

attract a large number of unskilled labor from the IMuda Region causing,

in effect, a transfer of poverty from one region to another.15

Some selected manufacturing industries should be allocated to the

Kuda Region. These industries should be those f. labor intensive types

and depend upon resources available locally. Strawboard, strawpaper,

noodle, bran-oil, poultry processing, and agricultural product canning

industries fall within the above category. This decentralization of

selected industries would generate a more balanced growth and development

between regions.

To realize the strategies set up above requires an ambitious

mobilization of capital from the peasantry, given the fact that both the

private sector and the government have their own priorities and limitations

to pump in more capital. The former may not have enough motivation apart

from the multi-million dollar agricultural input-output market, while

the latter may have to think about allocating resources to other poor

regions which have not been endowed with extensive growth-generating

infrastructures as those found in the Muda Region.

The remainder of this paper will describe the organizational efforts

in the last five years in the mobilization of peasant capital for the

primary purpose of peasant economic development within the framework of

15Afifuddin Haji Omar, "Regional Approach to Development -- The MI. A. D. A.

active participation of the peasantry at all stages of planning and

implementation. The underlying philosophy of this framework is income

increase and employment creation for the poor majority of the peasantry

and to integrate them fully into the national social structure.

III. Organizational Framework for Mobilization of Peasants and Rural
Resources for Develom-ent

(a) Organizational Strategy

From Table III it is observed that increases in volume of production

and their corresponding dollar values over single cropping are large

enough to provide the first impact for economic growth. However, these

increases in no way contribute to the development of the Region if no

structural changes occur in the economic, political, and social subsystems.

In talking about structural change, then we are talking about
changes in the pattern of resource possession and use by persons ..
More productive patterns of resource possession and use can be
established through "evolutionary" or "revolutionary" means.
Differential incremental changes will, over tge change a
pattern and can lead to greater productivity.

Before governmental intervention in setting up production, credit, and

marketing organizations to compete with and to supplement the services

traditionally provided by the private sector (middlemen, and landlords)

there was a high concentration of resource possession in the hands of the

latter. The above intervention has to a certain degree dislodged this

monopoly, but sustained effort from the peasantry has to be generated in

order to prevent a reversion to the exploitative and monopolistic

structure once government intervention is relaxed or even lifted.

1N. T. Uphoff and W. F. Ilchman, The Political Econony of Develonment;
Theoretical and Empirical Considerations," (Berkeleyl University of
California Press, 1972), p. 91.

i) -

Hot only changes in the pattern of resource possession are

needed but changes in occupational patterns and the patterns of

social and political relationships17 within the peasantry and between it

and the national society are also essential in generating a meaningful

development. These changes should provide for a redistributory system

which would correct the previous imbalances. In short,

development is more than capital, investment, and markets. It
is a complicated process of institutional changes, redistribution
of political power, human development, and concerted, deliberate
public policy efforts for redstributing the gains and losses
inherent in economic growth.

Thus, mere diffusion of innovations through agricultural and business

extension efforts targeting on traditionally organized peasant groups

or even individuals, which have so far formed the mainstay of development

strategies in Malaysia, can serve only to endow those with economic,

political, and social power with more resource base than the majority

of the peasantry.19 In no way do they free the peasantry from many of

the traditional institutions which favor the better endowed minority.

See G. Hunter, modernizing Peasant Societiesi A Comnarative Study in
Asia and Africa (iNew Yorki Oxford University Press, 1969), p. 43.

18P. Dorner, neededd Redirections in Economic Analysis for Agricultural
Development Policy," Land Tenure Center Reprint No. 67. University of
Wisconsin, Iadison, Wisconsin.

9For a critique on the diffusion and cultural contact theories, see N. Rolings,
"Innovation and Equity in Rural Development." Paper read for the meeting of
the ISA Research Committee on Innovative Processes in Social Change at
the VIIIth World Congress of Sociology. Toronto. August 1974; and,
J. Migdal, Peasants, Politics, and Revolution (Princetont Princeton
University Press, 1976.), pp. 10-14. Strategies to create individual
penny capitalists from among the peasantry through elaborate credit
systems for small business, and diffusion of business skills may not
contribute to the above structural changes. They may in fact create
further bases for inequality. These strategies only highlight the
economic factors without considering the political and social intervening
variables which together with the economic variables facilitate the
culture of poverty of the peasantry.

lb -

The elements facilitating diffusion'of innovations such as roads, guaranteed

padi prices, etc., become effective and functional only at a point where

the changes in the totality of the social structure of the peasantry have

taken place. Hence, culture contact serves only as a supplementary force

.to change at a particular point in time. This historicity of developmental

change is summed up by Migdal as.followsi

Adoption of new technology and procedures from the outside
by peasants then, depends on a dynamic historical process.
Aspirations and resources for increased outside participation
may have long existed, but the restrictions from within
thwarted potential innovators and resulted in the use of rather
fixed level of technology. With the dynamic forces creating
numerous economic crises, and with any changes in the security of
outside participation, the innovators got their chance to
establish new ties.20

The rural cooperative movement, started in the 1920's and intensified

after the Second World War, has failed and the F. A. movement, started

in 1967, initially has to struggle against the monopolies of the

existing institutions.

The mobilization and organization of peasants in the Muda Region

within the 27 F.A.'s are underscored by the above considerations of

structural changes. The establishment of peasant work groups to under-

take planning and implementation of economic projects at local subvillage

levels, with technical and organizational supervision by the F. A. manage-

ment staff, sets the stage for full involvement and participation of the

peasants in the developmental processes. This work group concept which

was implemented late in 1973, was a result of the recognition of the Muda

Agricultural Development Authority (,MADA) of the ineffectiveness of the

20 al o c p. 151.
Migdal, on. cit., p. 151.

S17 -

traditional F. A. structure which uses a village or a group of villages

in the planning and implementation of economic projects.21

The main reason for the success of work groups in project planning

and implementation is that they cater for comprehensive and common needs

of small numbers of peasants. The basis of common economic and social

interests of the work group draws together peasants of similar socioeconomic

levels. Work groups, each comprising of 7-10 members, set the stage for

group consciousness which would strengthen the political capacity of

small peasants. Except in irrigation work groups in which the irrigation

boundaries transcend all strata, the other work groups would form the

first building block of a peasant political community based upon economic

needs. The thickening of socioeconomic threads within the peasantry in

this wayprovides an optimum medium for full participation in development


The initial successes of these work groups in poultry keeping,

carpentry, copra production, school uniform production, vegetable growing,

fresh water fish culture, and a few others are due to full participation

by the peasants. These, they see, are their own projects, financed by

their own capital, and market stability is assured by the F. A. Hence,

the F. A.',s begin to command more confidence and gain credibility from

the peasantry after initial skeptical and cynical responses in which

they were regarded as one of the numerous government imposed organizations

2For a description of the organizational linkages in this set-up see
Afifuddin Haji Omar, "Implementation of Rural Development: Institution
Building in the Muda Region." Paper read at theConference of Southeast
Asian Social Scientist Association, in Kuala Lumpur and Penang, Malaysia.
January 1-8, 1975.

iL -

which were bound to fail as demonstrated by the rural cooperative movement.

This confidence is reflected in the increasing number of shares bought

by individual peasants as shown in Table V. From 1973 onwards there is

a sharp increase in the number of shares bought.

The above initially positive response to the Muda F. A. movement is

actually the .peasants' response to the material trade-offs which they

obtain by becoming members. Such trade-offs are the lower interest rates

charged by the Agricultural Bank through the F. A., and lower input

prices. These initially provide alternatives to the monopoly of middlemen.

However, as the F. A. movement goes beyond the mere provision of economic

institutions to include greater interaction with the outside world, not

through existing power structures, but instead through F. A.'s individualized

demands and sustained efforts to provide a more secure and stable structure

in their relations with.the wider economic network, the membership quality

begins to improve. It is this quality of membership that is critical in

the sustained development functions of the F. A.'s. The above increase

in share capital per peasant member may be used as a partial indicator

of the membership quality. Table V shows the trend of share capital increase.

The formal characteristics of the F. A. organization alone,(with a

constitution passed by the Parliament) does not- in any way insure a

permanency of interests among peasants in their struggle for social and

economic justice because it is a known fact that peasant movements have

been historically transitory in nature. The movements reach their zeniths

when there are immediate issues which directly affect the peasants. Once

the problems are solved most of the zeal and dedication wither away. This

is due to the lack of long term social change strategy and the failure of

19 -

the peasantry to be conscious of the close interrelations of their economic,

political, social, and cultural life. Hence, they become easily manipulated

by exogenous forces and ideologies. These are indeed the bases of the

politics of dependency which is characteristic of most peasant movements.22

In this type of activity most of the leadership comes from the urban-based

elites, either absentee landlords or urban bourgeoisie who identify

themselves with peasant interests for one reason or another.

The above situations have significant implications in the strategy

of growth and development of the peasantry. The failure of the rural

cooperatives in the Muda Region has been partially due to this phenomenon

of lukewarm interests after certain immediate issues have been resolved.

For instance, nearly all the sundry shops set up by the cooperatives have

gone bankrupt and production credit activities cease to function once

middlemen undercut prices and temporarily lower interest rates. Scores

of other failures can be cited. The F. A. movement in trying to foster

growth and development has to reckon with this lack of consciousness and

plans to create income and employment generating projects have to be

preceded by the establishment of high quality membership simultaneously

with a strong and efficient organizational set-up embracing the economic,

political, social, and cultural aspects.

22Lipset describes these relationships very well in his study on Saskatchewan
farmers. See S. M. Lipset, Agrarian Socialism -- The Cooperative Common-
wealth Federation in Saskatchewan; A Study in Political Sociolory (Berkeleyi
University of California Press, 1950), pp. 55-94. Huntington's treatment
of the green uprising also implies the transitory and urban-based leadership
and ideology in the politics of dependency which is characterized by (a) the
dependency on non-agrarian leaders, (b) accepting without question other
populist movements as alliances. See S. P. Huntingto~ Political Order in
Changing Societies (New Haveni Yale University Press, 1968), pp. 1-78.

- 20 -

About half of the present membership of the F. A. are tenants,

l.'5% farm laborers, and the rest are owner-operators. Within this last

group, 81% operate land below 4 acres, 12 between 4-6 acres, and the

rest above six acres. This pattern of membership clearly indicates that

much of the capital formation within the F. A.'s are those which are

mobilized from the lower categories of the peasantry. It should be noted

that none of the 18,539 F. A. members own or operate land above 20 acres.

The shares are not the only source of working capital. A commission

of 1.25% of the amount loaned to the members, obtained through the

administration of Agricultural Bank's credit scheme contributed about

$116,512 in 1975. These commissions are obtained in the form of service

charges by the F. A.'s for transport, storage, and distribution in which

processes peasant participation has been found to be very high. For

instance, in the distribution of urea and lime, storage at strategic

points has to be maintained. Many peasant houses and homesteads are used

for this purpose. Peasant leaders participate actively in determining

proper and efficient distribution processes and this contributes to the

smooth flow of the inputs which amount to no less than 500,000 bags per


(b) Organizational Set-Up of F. A.

The workability of the small work groups firmly lays the foundation

for the operation of the economic projects of the F. A. The SAUs (small

agricultural units) are organized according to spatial (village) dimensions,

whereas the work groups are organized according to common interests and

needs. Although their boundaries sometimes do not coincide, it does not

hinder the F. A. functions, since the SAU's are only used for purely

- 21 -

administrative purposes like collecting fees, selling shares, and election

of representatives to the representative council and board of directors.

The organizational set-up is shown in Figure I.

Figure I. The Organizational Structure of MADA Farmers' Association

Board of Directors ---- managementt

Representative Council

Small Agricultural Units

Work Groups Based on Interests and Demands

The members of the representative council elect 7-11 among themselves

to form the board of directors to supervise the execution of work by a

management group, and to set up policies regarding the local functions

of the F. A.

The work group as an action unit carries out its activities within

the jurisdiction of the SAU to which most of its members belong. For

instance, if a work group plans to undertake poultry farming, it has to

table it,s plan and budget before the.meeting of the respective represen-

tative council which would either accept or reject the plan based on

merits and priorities. If it is accepted the management will allocate

the required capital from the common pool of working capital which the

group has to repay at an agreed interest rate to the F. A.

The differentiation of the SAU into work groups is a development

in response to the widening of the base of economic operations of the

- 22 -

F. A. and the changing demand structures which render the SAU to be too

cumbersome for efficiently organized group actions. Moreover, the

absence of corporate village characteristics in Muda due to the linearity

and relative recency of many settlements the village is no longer a

viable economic unit. The prevalence of rice monocropping further adds

to the individual household orientation within the village.

The above organizational structure pertains only to that of a

development locality under a particular F. A. Peasant mobilization

within this structure stops at the locality boundaries. And most of the

mobilization activities are economic and social in nature, and due to

the constraints of scale, a single F. A. can only undertake limited

sized economic undertakings. For large scale investments and integration

to the national economy, the 27 F. A.'s therefore have to be organized

within a structure which not only incorporates the pooling of economic

resources, and the expanding of the medium of social interaction, but

also which binds together and articulates the interests of peasants in

at least matters regarding those economic policies which .directly affect
them. Hence, in considering plans to increase peasant income it is

naive and simplistic thinking to consider only the economic elements

without involving them in the political and social processes which inter-

act to determine the whole developmental change. Moreover, a developmental

23It is not an exaggeration to say that many of the policies regarding
prices for agricultural inputs and products are made by economists.who
seldom set their feet in the rural areas. Questionnaire survey reports
form their major, if not only, sources of information. These are defended
and buttressed by statistical justifications in the form of "coefficients
of reliability," "degrees of fit," "standard errors," and so forth. What
is neglected is the qualitative dimension of the economic reality which
can only be appreciated, not through sitting in air-conditioned rooms,
but through direct interaction with the peasants. Certainly developing
countries cannot afford arm-chair economists.

- 23 -

strategy which manipulates economic changes among peasants through provision

of infrastructures and imposed economic organizations while political

involvement and leadership activities are minimized, is more likely to

generate conflicts between the peasants and the government agencies, and

to foster a feeling of low confidence towards the government. What is

needed is an integrated developmental structure which is based upon

economic growth and increased political consciousness and social parti-

cipation among the peasantry. Hence, a structure for political involvement24

has to be added to the economic infrastructures. The former is made to

be a function of the latter.

This political participation structure is to form the basis of an

independent and permanent organization the primary purpose of which is

to articulate interests for the peasants at the state and the national

levels in a sustained manner. This structure should generate leadership

from among the peasantry in order to forge a larger political community

which is compatible with, and complementary to the new economic reality.

The phrase, "political involvement" tends to frighten many bureaucrats
and politicians in many developing countries. This is very much a result
of the belief that peasants are ignorant of the legal system and hence
may exceed the legal limits once they become empowered. But little do
they realize that it is much to the benefit of the whole society to mobilize
peasants into politics within the existing political system rather than
leaving them on the margins because the latter would certainly produce
instability no matter how much the government provides hand-outs to
placate them. A politically organized peasant, society within a regional
framework would weaken all the traditional local ties resulting in the
transfer of identity and feeling of security to the regional community
from the local or village community. These changes would supplement the
economic changes inasmuch as they may result from economic changes.
Hence, political development is indeed an integral part of directed
economic development. See S. P. Huntington, on. cit., pp. 1-78, and
C. E. Black, The Dynamics of Modernization: A Study in Comparative History
(New Yorki Harper Torch Books, 1966), pp. 9-94.

24 -

In the Muda Region this structure takes the form of a consultative

assembly comprising of all the 27 chairmen of the boards of directors

of the F. A.'s, who in turn elect an executive committee of 9 members

from among themselves to execute all political and economic decisions

pertaining to all matters affecting the peasant society in the Region.

This structure is shown in Figure II.

Figure II. The Political Structure of Muda F. A.'s.

MADA and Other Executive Committee
Government Agencies

Consultative Assembly
(27 B.O.D. Chairmen)

27 Muda F. A.'s

The committee articulates the interests of the peasants to the political

system either directly or through I4ADA and other appropriate government


In the initial stages economic issues dominated the deliberation

of both the council and the committee. The first significant effort

made by the assembly was the mobilization of working capital amounting

to $1270,000 within a period of 2 weeks in order to set up a trading

company with MADA. This was followed by a successful demand to the Padi

and Rice Marketing Board to modify the paddy price structures for 1975/76

seasons and to include peasant representatives in the price committee at

the national level. These initial successes have gone a long way to

build up the confidence of the peasantry towards the F. A.

- 25 -

Capital mobilization is, therefore, seen here as being made an

integral part of the political mobilization of the peasantry, although

under undirected developmental change this is not necessarily so. Capital

mobilization starts with grassroot work groups and widens to embrace the

entire Regional peasant community through the political structure in the

forms of consultative assembly and the executive committee. This

structure formalizes and fosters the identification of the peasantry as

a society in itself as well as for itself -- which enables the peasantry

to act effectively as a social force and to generate its own energies

for development rather than to become passive recipients of handouts

from a "benevolent" government. The peasantry should not be reduced to

a mere social infrastructure.

The Muda F. A. movement provides a complete structural framework

for an extensive peasant participation in the wider socioeconomic and

sociopolitical networks. This prevents the recurrence of previous

experiences of peasants who ventured beyond subsistence boundaries only

to find themselves exploited by the outsiders. Migdal states

Peasants who have greatly expanded the scope of their economic
activity have found inadequacies in the components of the
infrastructure within which they must act. The strength of
political organizers lies in their connections with the govern-
ment or some other supplier of resources to fill the gaps, to
make those components more equitable to particular peasants.
These organizers respond to the peasants' attempts to penetrate
the market fully, to gain added value through expanded outside
relations. Such organizers can offer jobs or elements to make
cash cropping more profitable. The process is self reinforcing.
Once the peasants are organized (which remains a rare phenomenon)
the [government] has a greater lever for extracting more
resources to use as inducements to peasant political participation.25

25. igal., p. 217
J* Migdal, oe. cit., p. 217.

- 26 -

IV. Employment and Income Generatinf Projects within the Participatory

(a) A-ricultural Diversification

One of the first agricultural diversification projects undertaken

is poultry keeping, both for meat and eggs. The employment generated.

by this project is at the rate of 1 worker for 1,000 birds and the

average wage received per employee is about M$80/= per month. This

could go further as market demands for eggs and chicken meat increase.

This has a high potential due to the fact that the traditional supply of

eggs for the towns in the Region has been the chicken farms of Province

Wellesley, 45 miles down south. With a small feedmill and some acquired

technical know-how, the newly formed trading company of the F. A.'s could

act as the distributor of feeds as well as the products of the chicken

farms, maintaining both the input and output prices at reasonable levels

according to the elasticity of demand. Sophisticated marketing processes

in the forms of egg-grading and chicken processing could be undertaken

once the local or Regional demand is satisfied, for the purpose of

export market where competition is more stiff. These activities indeed

create more employment. The movement towards these is taking place at


Another form of diversification is the intensification of fruit

production, namely mango and coconut. In the late 1960's the Department

of Agriculture started a fruit rehabilitation scheme throughout the nation.

Mango and coconut thrive well under the water logged conditions of the

Muda Region. This scheme stops at the supply of planting materials and

the peasants were left to decide whether to exploit these into a semi-

commercial undertaking or subsistence diversification. In 1974, the

- 27 -

first fruits of the new mango and coconut trees began to appear in

quite abundant amounts. The surpluses have to find their way into

the market. One F. A. in the southern part of the Region started a

copra processing work group which produces copra to supplement the

supplies of a coconut oil factory 40 miles to the south of the Region.

This F. A. owns a truck which was primarily used in the marketing of

padi and rice. This truck is now used to transport copra and rice to

the south and on its way back it brings coconut oil and fertilizer for

distribution'in the Region. This type of integrated activity pertaining

to agricultural product processing and marketing will be expanded to

include mango and vegetables. The ownership of a 5-ton truck by the

trading company and 12 l-l---ton trucks by the individual F. A.'s

reinforce the above marketing activities. The role of the company as

the coordinator and regulator of these commercial activities is highly

significant in sustaining, improving, and expanding them to the benefit

of the peasants.

The fleet of trucks accumulated by the F. A.'s and the trading

company is a significant advancement in building a commercial network

based upon peasant capital. The annual -H$30 million urea business can

be shared by the peasants. At this time most of this "cake" is under

the monopoly of a couple of multinationals, one private company, and one

government corporation. The sharing of this "cake" by the trading company

creates increased employment and income among the peasantries. So far

encouraging records have been shown. The company has registered about

30" rate of profit over a six-month period of business life.

- 28 -

Due to the fact that the Region cannot support a wide range of

agricultural diversification, the potential for satisfying most of the

increased demands for food and food products is limited. But certainly

the exploitation of the existing potentials serves to provide employment and

added income, and creates an internal dynamics for further economic growth

of the Region. Since investment from the private sector cannot be wholly

relied.upon, it is more than justifiable for the peasantry to demand

certain franchise from the government in the lucrative fertilizer business,

not to deprive any quarter in the economic community of the country, but

to share the fruits of economic growth generated among the peasants themselves.

Such a move by the peasants through the political structure should not

"frighten" the government because, given the incentives and the correct

perception of their roles in relation to others within a national economic

framework, even peasants can "learn" to invest.

(b) Small Scale Manufacturing Industries and Non-Agricultural Commercial

The income-effect of agricultural growth in the M!uda Region creates

demand for household consumer goods such as furniture, utensils, draperies,

bicycles, motorized vehicles, clothes and footwear.

One of the first projects undertaken by the F. A. is furniture

manufacturing. One F. A.-in the northern half of the Region started this

venture in early 1974 with $13,000/= worth of capital goods and employing

six youths which later increased to twelve. The demand for the manufactured

furniture increased sharply that additions to the labor force over the

existing permanent labor are being made in the form of casual labor.. The

capital for this venture comes entirely from the farmer members of the

- 29 -

F. A. The venture shows a steady rise in net profit which stands at the

present rate of 38 p. a. The potential for future expansion is very

promising, since the products have now penetrated the urban market

and their quality is at least equal if not better than those produced

by urban workshops.

Another F. A. in the south manufactures wooden threshing tubs

which peasants use during harvests. These tubs were usually purchased

from town-based carpenter shops. The workers and capital for this

undertaking also came from the peasantry.

The operation of the compulsory elementary education law for

children of school-going age has increased the number of elementary

schools and the number of schoolchildren especially in the rural areas.

Consequently, the number of secondary schools also increased from fifteen

in 1969, to thirty-two in 1974. Under the IMalaysian system, all school-

children must wear uniforms during school hours. The above F. A. started

a work group comprising of 12 single farm girls to provide custom service

in making the uniforms. Within six months, 1000 school uniforms were

produced even though there was stiff competition from urban tailors. The

potential for expansion in this business is also encouraging.

The increase in mileage of rural roads and small farm roads in

the iuda Region facilitates increased mobility. The purchase of bicycles

by peasants increased sharply. Those who can afford purchase small

Japanese-made motorcycles which became so popular among the peasants.

However, the F. A.'s with the limited capital at present only concentrate

on bicycle-assembling and sale. Two F. A.'s in the south purchase bicycle

parts from a factory in a state of peninsular Malaysia, and train rural

- 30 -

youths in assembling them. These youths are employed on piece-work

basis, and the bicycles are sold to the peasants on installment basis,

usually with prices lower than they can get in the urban shops.

Numerous commercial activities are carried out. by all the 27 F. A.'s
ranging from the sale of shoes from the PERIlADA shoe factory, to the

sale of pedestrian power tillers. These commercial ventures do not

provide much employment to the peasantry but they do help in capital

formation of the F. A.'s.

V. Conclusion

The growth and development strategies being experimented with in the

Muda Region have so far shown encouraging initial results, especially in

absolute economic changes. However, the distribution of these economic

gains is far from the objectives of development which stress the re-

structuring of society, upon which sustained future growth and developmental

goals are expected to be based.

The production of surplus alone does not in itself ensure capital

formation within the Region, and extensive market integration both within

the Region as well as between the Region and the outside world is necessary.

Without facilitating changes in economic, political, and social infrastructures

within the Region, which would enable a breakaway from traditional insti-

tutional constraints, most of the surplus would benefit the existing

power structures more than the peasantry. Unless these are considered as

The shoe factory is an equity joint venture between MADA, the Kedah State
Development Corporation, and a private firm, established in 1974. It employs
at present about 700 youths, mostly from the rural areas of Muda Region, and
the rest from the low income groups in the urban areas. Under full production
it will employ about 1,000 youths. At present 80Q; of the finished shoes
are exported and 290 distributed within the country.

- 31 -

the frameworks of growth and developmental changes, development projects

will only serve to alienate the peasantry further into the margins of

the national society, as political objects rather than political subjects.

Therefore, in the planning and implementation of development projects

in which the peasantry forms the primary target,not only the micro-economic

variables such as yields, household incomes, cost of production, and other

agro-economic parameters, but the totality of the social structural

changes, which can integrate peasants meaningfully into the national

socioeconomic and sociopolitical communities, should be considered.

Despite the fact that many past government initiated organizational

experiences have created much skepticism among peasants on whatever new

cooperative organization in the last couple of years peasant responses

to mobilization efforts have been very encouraging. Although these responses

are mainly attributed.to the material trade-offs perceived by peasants

upon becoming F. A. members, the effects of the parallel political parti-

cipation structures have shown initial signs that political involvement

and economic changes are going to vary together. Such a trend would

ensure the actualization of permanency in the peasant movement.

The intermittent nature of most peasant movements or organizations

has beenl-ainly due to the lack of long range goals which embrace changes

in the totality of the social structure. Once immediate economic problems

are solved the political zeal starts to fade, until another immediate

problem surfaces again. However, with an explicit long range goal in

restructuring society, and through constant mobilization towards this

goal, a state of organizational permanency could be achieved.

One aspect of peasant mobilization is capital accumulation from among

peasants themselves. The capital obtained would be invested in organizations

-32 -

which provide employment and extra income together with stability in

the peasantry's external economic relationships.

The above mobilization of capital from the peasantry could not be

achieved without firstly the increase in agricultural productivity and

secondly the motivation and the peasants' confidence in the F. A. The

increase in productivity is used to set off the train of other changes

which include deliberate efforts to bring peasants into the center of

political decision making. This mobilization of peasants and. their

resources is,made within a growth and development model which treats

the peasantry not merely just an insignificant cog, but rather as a

significant integral component of the national development machine.

- 33 -

Table I. Percent Household Income Derived from
Off-Farm Sources

Years .of Double-Cropping Experience
Soil Type
0 1 2 3 4

Acid S.oils 46 28 14 21 31

Non-Acid Soils 57 17 34 24 17

Source FAOM/orld Bank, "The Iuda Studyl
Text. Rome. September 1975. p. 36.

A First Report."

Table II. Percent Average Househo2d Expenditure on Food
by Type of Soil Area and Cropping

Types Acid Soil Areas Non-Acid Soil Areas
of Single 2 Years 4 Years Single 2 Years 4 Years
Food Crop Dbl Crop Dbl Crop Crop Dbl Crop Dbl Crop

Total Annual Cash
Expenditure on Food
(Malaysian Ringgit) 595(53%) 651(49) 552(40C) 549(50c) 672(40/) 589(40~)
a. Cereal and Cereal
Products 14 10 11 12 11 10
b. Fish & Fish
Products 23 27 27 24 25 26
c. Sugar & Syrup 16 15 16 15 13 14
d., Vegetables 6 7 8 7 8 8
e. Fruits 7. 8 6 7 8 7
f. Meat 3 3 .3 6 6 6
g. Milk& Milk
Products 4 2 3 2 2 3
h.. Vegetable Oils 7 9 8 7 6 7

Sources FAO/World Bank, "The Huda Study:
Tables. Rome. September 1975.

A First Report."

Vol. 1.

Vol. II.

I r k

--- ------
-~------- `~~~
--~~----~~-- --

- 34 -

Table III. Total Annual Values of Rice Produced in the
Muda Region Since Double-Cropping

Year Amount (tons) Value ($)









(Beginning Double-cropping)








Source Rumusan Perangkaan (Statistical Digest),
MADA. February 1976.







Bahagian Pertanian

Table IV. Percent Average Household Expenditure on Important Consumer Commodities
and Services and Savings by Type of Soil Area and Cropping

Expenditure Acid Soil Areas Non-Acid Soil Areas
2 Years 4 Years 2 Years 4 Years
Items Single Crop Double Crop Double Crop Single Crop Double Crop Double Crop

Total Annual Net Cash Expenditure
(Malaysian Ringgit) 1124 1339 1371 1093 1688 1488

a. Clothing and Footwear 8 6 5 7 7 7

b. Tobacco 7 7' 5 5 5 5

c. Furniture & Household
Equipment 3 4 3 6 4 4

d. Housing Renovation 2 4 13 4 3 6

e. Transport 4 2 2 3 3 2

f. Personal Services (Hairdressing
& Laundry) 1 0.2 0.4 0.2 0.3 0.3

g. Savings 0.1 0.6 2 1.3 4 4

Total % 25.1 23.8 30.4 26.5 26.3 28.3

- 36 -

Table V. Farmers' Association Membership and Share Capital

Year Membership Total Share Capital Number of
(Ringgit) Shares Per Peasant*

1969 490 11,375 4.6
1970 5,318 48,255 1.8
1971 7,231 61,820 1.7
1972 8,195 83,560 2.1
1973 11,308 166,345 2.9
1974 11,693 241,245 4.1
1975 18,539 785,900 8.2

Source Rumusan Perangkaan (Statistical Digest); Eahagian Pertanian MADA.
February 1976.

One share is valued at $5.00

Table VI. Major Sources of Working Capital for
Farmers Association in 1975 Other than Shares

Sources Amount ($)

1. Agricultural Bank Commission 116,512
2. Urea Subsidy Commission* 170,806
3. Lime Subsidy Commission 20,000
4. Other Commissions 15,000

Urea subsidy is withdrawn in 1976, as the world urea price drops to

37 -


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H. Barnett. iew Yorki A/D/C, 1974.

2. "Regional Approach to Development -- The
M. A. D. A. Case." Paper presented at the Southeast Asian
Development Advisory Group (SEADAG of Asia Society). Seminar
on Regional and Urban Planning. Manila. August 1975.

3. "Implementation of Rural Development: Institution
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Rome. 1975.

8. Hunter, G. Modernizing Peasant Societiess A Comparative Study in
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9. Huntington, S. P. Political Order in Changing Societies. New Haven:
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10. Khairi H. Mohammad and Iohd. Tamin Y. "Socioeconomic Survey of the
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11. Lipset, S. M. Agrarian Socialism -- The Cooperative Commonwealth
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12. Mellor, J. W. The New Economics of Growth -- A StrateFv for India
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Princeton University Press, 1974.

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Development -- Theoretical and Empirical Contributiors.
Berkeleyt University of California Press, 1972.

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