Skip to main content

Malaysia’s move to break rice import monopoly could backfire on farmers’ welfare: Analysts

By January 10, 2023November 2nd, 2023No Comments

Malaysia aims to increase local rice production to 75 per cent of the country’s consumption by end-2025

KUALA LUMPUR – Malaysian Prime Minister Anwar Ibrahim’s move to break the rice import monopoly of Padiberas Nasional Berhad (Bernas) could well achieve his objective of ensuring open competition and affordable prices for consumers.

But analysts warn it may also disrupt local padi farmers’ livelihoods, if existing safeguards such as subsidies and minimum price guarantees are not maintained – especially with Malaysia’s aim to increase local rice production to 75 per cent of the country’s consumption by end-2025.

Bernas is a private company controlled by business tycoon Syed Mokhtar Albukhary, who has close ties to ruling party Umno. The company received a 10-year extension until January 2031 on its concession to import rice under the previous government led by Tan Sri Muhyiddin Yassin.

Tan Sri Syed Mokhtar’s company Tradewinds became a major shareholder in Bernas in 2009. Since then, Bernas has obtained two 10-year extensions in 2010 and 2021 for its concessions.

In December, Datuk Seri Anwar said he had reprimanded Mr Syed Mokhtar for monopolising rice imports. “He must know that this import permit is not a concession and not a reward for him, but instead given to Bernas,” said the Prime Minister.

But ending the concession may not be an easy task for Mr Anwar politically, as he has to balance the need to protect farmers’ production and keep prices low for consumers, said agricultural economist Julian Conway McGill from commodities consultancy firm LMC International.

“A full liberalisation of the rice market would result in lower rice prices for consumers, greater imports and lower output among rice farmers who will not be protected from competition,” said Dr McGill.

More imports will push down rice prices in Malaysia, he added. But rice farmers who incur high production costs are likely to stop producing without price protection such as tariffs on imports.

“As a consequence, Malaysia’s rice self-sufficiency ratio will decline. Such an outcome is unlikely to be politically acceptable,” he told The Straits Times.

Malaysia consumes about 2.7 million tonnes of rice a year, of which about 30 per cent is imported by Bernas to make up for the shortfall in local production. The company also buys rice from local farmers and millers to sell.

Besides maintaining adequate rice supplies, Bernas is also tasked with keeping prices fair and stable for farmers and consumers and distributing subsidies to farmers on behalf of the government. It is obligated to buy any excess rice produced by padi farmers at a guaranteed minimum price and is currently required to maintain a rice stockpile of 200,000 tonnes.

But padi farmers have long complained that Bernas ignores farmers’ interests and is more focused on profits.

For the 2020 financial year, the company paid out about RM670 million (S$206 million) in dividends. For 2021, it made a net profit of RM182.3 million on the back of RM4.7 billion in revenue.

In contrast, the monthly household income from both agricultural and non-agricultural activities for padi farmers averaged RM2,526, placing them in the bottom 40 per cent of earners in the country, reported Khazanah Research Institute in April 2019.

Bernas did not respond to ST’s request for comments.

Given Bernas’ key role in the industry, it would be disruptive to dismantle the private company’s rice monopoly without first replacing it with a well-conceived alternative, said Malaysian Institute of Economic Research senior research fellow Shankaran Nambiar.

The exit strategy could include giving import rights to farmers’ associations, as previously suggested by Mr Anwar.

“Giving import rights to farmers’ associations will empower farmers to participate more actively in the padi market. They can also be another channel for the import of padi, which will give them an opportunity to make profits from trade,” Dr Nambiar told ST.

Dr McGill suggested that the government can also assist farmers directly so they can retain their livelihood while allowing more imports. “The Malaysian government could maintain their own stocks, rather than allowing Bernas to do so,” he said.