Is Malaysia ready for shortage of supply, cost of rice to soar? – Datin Tan Yee Kew

Govt must ensure adequate supply, stable prices by increasing local production

The Vibes – According to the Food and Agriculture Organisation’s (FAO) All-Rice Index, prices of rice export have been on the rise for the fifth successive month in May as a result of the shortage of petroleum, fertilisers, wheat and feed caused by the Ukraine-Russia war.

As the war prolongs, the prices are expected to increase. Countries that depend on imported rice to supplement their local production are almost certainly to face shortage of supply and price hike.

Are we ready for the shortage of supply and price hike?

The government must take preventive measures now before the nation is hit by the shortage of supply and price hike of rice.

Increase stockpile to 20% of national requirement

The annual requirement for rice for Malaysians is 2.5 million metric tonnes (mt). The country’s rice production is around 70% while the remaining 30% relies on imports to meet the demand. As the war prolongs, we will have to face not just the increase in prices of rice but also the shortage of supply in the market.

According to the agriculture and food industries minister, the stockpile of rice in the country is about 200,000mt. In other words, the stockpile of rice is only enough to meet one month of the national requirement. Compared to Singapore that has a stockpile for three months, Malaysia’s rice stockpile is far too low.

But the building up of the stockpile of rice in Malaysia depends solely on Bernas, which has the monopoly of rice import and controls nearly 50% of all rice produced in the country.

Bernas is a profit oriented public listed company, and it is not in the interest of the company to increase the stockpile as cash will be locked in the stock.

In view of the critical situation, the government must move in to enforce a minimum percentage of stockpile, which should not be less than 20% of the national requirement or 2 months’ supply.

End monopoly of rice import

Another important measure to reduce the pressure of supply and prices of rice is to increase the sources of supply. The government must suspend Bernas’ monopoly in the importation of rice during this critical period if it cannot immediately end the concession given to Bernas.

Rice traders should be allowed to import rice and source their own supply from different countries freely. With competition and more sources of supply, the quantum of increase in prices of imported rice will no longer be decided by Bernas alone and our consumers will be less impacted by the price hike in the world market.

Liberalising rice imports will also help to boost our stockpile.

Singapore’s rice stockpile scheme requires all licensed importers to maintain a quantity equivalent to their two months import in the government warehouse as stockpile. Malaysia can do the same once rice import is liberalised.

Govt must regain ownership of Bernas to boost local production

To ensure adequate supply and stable prices of rice, the long-term strategy lies in increasing local production. We’re losing much of our paddy land to floods as well as to housing and industrial development as growing paddy is not profitable.

When Bernas was corporatised in 1966, the major shareholders were paddy cultivation related government agencies. It aimed to ensure a good balance of imported rice and local produce in order to protect the interest of paddy growers. Its profit was to plough back for the development of paddy cultivation with the ultimate aim to achieve self-sufficiency in rice.

Today, Bernas is a private company. The irony is that Bernas, which makes its huge profit by having a monopoly in rice import, is tasked to help promote local rice production.

The fact is the lower the local rice production, the more Bernas can import and the more it profits. Therefore, we cannot expect Bernas with its present ownership to help promote local rice production.

Today the prices of rice – both import and local – are decided by Bernas. If the government is serious about self-sufficiency in rice and controlling the price hike, it must regain its control on the import of rice, take back from Bernas the management of subsidy to farmers and the procurement of rice from farmers.