The viability status and level of compitativeness of tobacco Industry in peninsular Malaysia / Ahmad Fauzi Puasa, Ismariah Ahmad and Ismail Ahmad

The main intention of this paper is to evaluate the viability status and the
competitiveness of the tobacco industry in Peninsular Malaysia. There are two
methods of analysis has been adopted encompasses of i) financial analysis to find
out how feasible tobacco farming activity from different type of farming options and ii)
competitive analysis using break-even point concept to find out the level of
competitiveness. This financial analysis uses current price data to reflect the
performance of the different types of tobacco farming activities. Its role of discipline in
the project analysis is mainly towards diagnosing weakness in the existing system
and to recommending action for further consideration. Financial analysis is based on
the information from the cash flow budget for any project. Using the cash flow data,
the break-even analysis will be computed so that any change in tobacco price will
affect the whole tobacco farming activities budget. The data from Kelantan and
Terengganu has been used for this study. These two states are two major tobacco producing
areas in Peninsular Malaysia, comprising 14,615 ha or 92.7% of the total
area in the Peninsular Malaysia. There are three types of tobacco farming
techniques. Firstly farmers plant only tobacco and sell wet tobacco leaves to curers.
Secondly farmers plant tobacco as well as curing the leaves. Thirdly farmers only
cure the leaves. Each of these tobacco-farming activities has its own entity of
individual operational cash flows for running the business. This study develops
individual cash flow for financial analysis in order to examine viability of the farming
activities. The viability of this financial analysis is based on the net present value and
internal rate of return for each type of the farming activities. The break-even analysis
will be computed in order to know the break-even price for each of the farming group.
The results from this financial analysis will reflect the viability of the tobacco industry
according to the farming activities and the break-even analysis will determine the
level of competitiveness of the tobacco industry in Peninsular Malaysia