The Government has conducted a study to change the approach in land use in the country's plantation sector, said Prime Minister Tun Dr Mahathir Mohamed.
According to him, Malaysia was introduced to oil palm plantations during the era of British rule which brought lucrative returns for the colonial master.
"But we were not aware they set up mega estates of more than 10,000 hectares and therefore were able to reap huge profits.
“On the other hand, local residents who imitated the old British method failed because our estates were more like small industries which are sometimes only two to three acres,” he said when speaking at the Johor government and Federal government Leadership Retreat here today.
He said small industries would not be able to give high profits and may not even give sufficient returns as they are small estates.
As such Dr Mahathir said oil palm smallholders should change their approach to earn better revenue.
“If we have large plantations, a portion should be used for cash crops and should not only rely on oil palm which need a long time to start generating revenue,” he said.
The Prime Minister said the local people did not copy the method of oil palm plantation by the British comprehensively.
"We are aware oil palm gives us income but we were not aware that for oil palm plantation to provide good returns, we need large plantations.
“As such, when the price of palm oil falls, we suffer and ask for subsidy from the Government.
“This we have to correct, that is our small farms must be consolidated into a large plantation managed by professionals,” he said.