Gov't must act on high food prices

The prices of food items in the market place are exorbitant. Food is certainly the most important expenditure of households. Malaysians in the B40 group spent a total of 48 percent of their household expenditure on food. Certainly the poor will be more affected by high food prices as a greater percentage of their income is spent on basic food items.

Why is food so expensive in Malaysia? Firstly, food production in Malaysia is low. Out of the eight million hectares of agricultural land, six million hectares are planted with palm oil and one million with rubber. Less than one million hectares or just 12 percent of agricultural land is for food production.

This has resulted in Malaysian consumers depending on imported food. Malaysia imported RM51.3 billion in 2017 of agricultural and food products for local consumption, an increase from RM 38.9 billion in 2013; and an increase of 32 percent in four years. 

For example, Malaysia is only 22 percent self-sufficient for beef and 39 percent self-sufficient for ikan kembong. When food is imported, prices would strongly be influenced by global factors, including monopolistic practises as well as climate change effects in food-producing countries. This could easily affect the price of food in Malaysia.

Next, Fomca has long advocated for a market review of the local food supply chain. We have always suggested that one of the key factors of the high price of food was monopolistic practices along the various parts of the food supply chain. The recent report on the market review of key food items by the Malaysia Competition Commission confirms that one of the key reasons for high food prices is distortions and manipulations in the food supply chain.

For example, the price of ikan kembong has increased by six times between the price received by the fisherman and the price paid by the consumer. Another example of a substantial price increase is the price of cabbage; the price at the farm is RM 1.60 while consumers pay a retail price of RM 3.90, an increase of 143 percent.

The Malaysia Competition Commission (MyCC) in their report has identified multiple causes for the exorbitant food prices in the market. The reasons include market manipulations by middlemen, multiple intermediaries and manipulation of approved permits causing unreasonable increases in food prices. 

For example in the fish supply chain, middlemen are known to hoard fish when prices are low, thus restricting supply and forcing the prices of fish to increase. There is also opaqueness in price determinations along the supply chain. MyCC has also suggested the establishment of new wholesale markets to promote competition through greater transparency and market competition through the removal of market inefficiencies.

These market distortions need to be addressed. The government has two powerful legislations to act against price manipulators and they are the Price Control and Anti-Profiteering Act 2011 and the Competition Act 2010. These legislations are powerful instruments to detect price manipulation practices and profiteering as well as, more importantly, for strong action to be taken against the manipulators and profiteers. Through the market study, these offenders have been identified.

The other issue than from the study is what next? If the monopolistic practices and market manipulations continue with no further action, then the MyCC report becomes just an academic exercise with no impact on consumers. Thus Fomca urges the authorities to act decisively to liberalise the market along the food supply chain through the effective enforcement of current laws to eliminate profiteering and market manipulation. 

The role of MyCC and the Ministry of Domestic Trade and Consumer Affairs should not be just to identify the problems; more importantly, they must use the provisions in the acts to eliminate the illegal and unethical practises that are having such a devastatingly negative effect on all Malaysian consumers, especially the poor.

In a bigger picture to reduce food prices, the government needs to give greater priority to food production to increase food security so that we can decrease our food imports and be more self-sufficient in essential agricultural products.

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The writer, Paul Selva Raj is CEO, Fomca. - Mkini