KUALA LUMPUR:  Malaysia should prioritise investments in agricultural technology (agritech) in Budget 2025 to attract diverse investors, particularly family offices, said an economist.

UOB Kay Hian Wealth Advisors head of investment research, Mohd Sedek Jantan said as the global population faces escalating climate change, rising food prices, and increasing demand for sustainable food sources, agritech presents a crucial opportunity.

"Implementing tax breaks for agricultural research and development, along with subsidies for innovative farming technologies, would further incentivise these investments.

"This strategic focus not only addresses pressing challenges but also positions Malaysia as a leader in sustainable agriculture," he told Bernama when asked about his expectations for Budget 2025 which will be tabled on Oct 18, 2024.

Mohd Sedek also said that Malaysia should develop closed-ended and infrastructure funds which support agritech projects.

"This could bolster the country's position as a premier family office hub, more so with Malaysia alone having some 754 ultra-high-net-worth individuals with a total net worth of US$30 million (US$1-RM4.2155)," he said.

The numbers are expected to grow to 1,015 individuals by 2028, according to data by global real estate consultancy, Knight Frank.

Similarly, according to Altrata's World Ultra Wealth Report 2024, there are 426,330 individuals worth US$30 million or more, known as ultra-high-net-worth individuals globally, with their total wealth surging by seven per cent to US$49 trillion in 2023, thanks largely to rallying stocks.

"This initiative is not merely a passing investment trend (but) represents a crucial shift for the future of agriculture in response to climate change," said the economist.

High-net-worth individuals and family offices are increasingly joining the agritech movement, particularly those interested in sustainability and long-term wealth preservation, with more regions such as Southeast Asia increasing allocating funds to agritech ventures.

Agritech is the application of new technologies or applications to raise productivity, profitability and sustainability as traditional farming is finding it difficult to meet food demand due to adverse weather conditions.

Investment is becoming more critical than ever, gaining traction globally, from venture capital (VC), private equity (PE), government and sovereign wealth funds, institutional investors, agribusinesses, and social funds due to attractive returns.

Mohd Seek said traditional farming methods are no longer sufficient to meet the demands of a growing population in the face of rising temperatures, erratic weather patterns and depleting natural resources.

Agritech – through innovations like precision farming, sustainable crop management, and advanced irrigation technologies – offers the only viable path to ensure the agricultural sector remains resilient, he noted.

Promoting VC and PE funds focused on this sector can also drive significant progress, Mohd Seek said, adding that by creating a favourable environment through tax incentives, streamlined regulations, and world-class infrastructure, Malaysia can attract high-net-worth individuals and their capital.

He highlighted that with the realisation of the Johor-Singapore Special Economic Zone (JS-SEZ), the government should capitalise on the spillover effects so that more global asset managers establish family offices in Johor.

"Operational costs are more competitive compared with Singapore, catering to the needs of high-net-worth individuals in both countries," said Mohd Sedek.

Will the continuous strengthening of the ringgit against the US dollar also woo family offices?

"A stronger ringgit provides a window of opportunity to solidify Malaysia's position as a prime investment destination for family offices.

"However, this currency strength could be short-lived, and without decisive policy moves, Malaysia will fail to convert this into long-term capital inflows," he stressed.

Mohd Sedek also said public-private partnerships, effective marketing and knowledge sharing will be crucial in positioning Malaysia as a leading destination for this lucrative market segment.

By fostering a robust family office ecosystem, Malaysia stands to attract substantial foreign investment, create high-value jobs, and reinforce its status as a regional financial centre.