Malaysia’s looming food crisis

 

From Murray Hunter

The shortage of McDonald’s french fries earlier this month in Malaysia is symbolic of a much bigger national problem. Many food items are in short supply and subject to rapidly rising prices.

Some analysts claim that rising prices and shortages are the result of supply chain glitches, natural disasters, and labour shortages. However, the food crisis cannot be considered just a cyclic issue as there are deep structural issues involved.

Malaysia imports nearly 60% of its food needs. Consequently, food security is a major issue. In 2019, Malaysia produced only 46% of its vegetables, 70% of its rice, 61% of its fruits, 25% of its beef, 11% of its mutton, and 5% of its dairy requirements.

The food import bill in 2020 was RM 55.5 billion. Five million hectares of land is cultivated with palm oil, and 1 million hectares with rubber, while only 1 million hectares are utilised for food production, mostly in the hands of smallholders.

In the 1980s then-prime minister Dr Mahathir Mohamed was warned of the dangers of a narrowly-diversified agricultural sector. Mahathir set his sights on developing a high-tech economy with his pet projects to the detriment of developing agriculture. Thus, agriculture was neglected during the 1990s, until Mahathir’s first retirement in 2003.

The mentality within the corridors of power in Putrajaya has been that the value of commodity exports far exceeds the nation’s food import bill, thus alleviating any need to bump up local food production.

Under Abdullah Ahmad Badawi, who came to office as prime minister in 2003, much more effort was put into revitalising the agricultural sector. He launched the biotechnology initiative and economic development corridors across the country, which made a major focus on agriculture.

These programmes were continued under Najib Razak.

However, Putrajaya developed the solution that agriculture development would be led by government agencies and GLCs which would be benevolent to local communities. This resulted in a great wastage of money and resources, and in corruption among bureaucrats, with government-linked companies using the opportunity for land grabs.

Bureaucrats and consultants came up with culturally untenable ideas such as creating padi estates, which would lease smallholder land to make economically viable land holdings, and hiring landowners as labourers. The latest idea is smart farming, with high intensity investments in technology benefitting consultants and nobody else.

Monopolies and regulation

With Umno back in power, industry sources told the writer that a play is being made for undisclosed interests to take over the broiler industry in the country.

The industry has been hit with rising feed prices, substantially adding to production costs. Late last year the government set a maximum price of RM9.10 per kg retail, well below the current poultry (chicken) monthly price of US$2.89 (RM12.40) per kg on the Mundi Index.

The government’s maximum price has caused companies producing chicken for the wholesale and retail markets to cease production. Other producers have switched to producing value-added chicken-based products not subject to price controls, or selling chicken through the black market.

The government has allowed some 35 companies to import chicken on a temporary basis to alleviate chronic shortages in the market.

These highly sought-after import permits or APs were, according to industry sources, not given out fairly. There are wide spread claims by players within the industry that a cartel of companies is preparing to enter the market as producers, once existing producers have closed down.

The APs carry unrealistic terms and conditions according to industry sources. The import permits have taken months to obtain from the Department of Veterinary Services and according to a company CEO who wished to remain anonymous, involved requests for unspecified payments to obtain the required signatures for approval.

Currently the whole chicken supply chain in Malaysia is in turmoil. The chicken industry was previously one of the best managed and self-sufficient farming sub-sectors in the Malaysian economy. Now it is almost destroyed due to the government manipulating prices.

Those companies using the APs are converting the chicken into finished consumer products that are beyond government price controls, or end up being sold on the black market. It appears regulation of the food industry has led to massive corruption and diversion of strategic food industries to cronies.

Restrictive market regulation is only presenting politicians and bureaucrats with opportunities for self-benefit, and for cronies, the opportunities to create monopolies.

The issues of food security and corruption within the regulated food chain fall under the responsibility of the agriculture and food industries minister, Ronald Kiandee. The minister will have a lot of questions to answer over the coming months. - FMT

Murray Hunter is an independent researcher and former professor with the Prince of Songkhla University and Universiti Malaysia Perlis.

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.