PETALING JAYA: Freeing up the market and removing subsidies will be a boon for the poultry sector, according to experts.
It will stop subsidy leakage, encourage innovation and, most importantly, boost investment, they say.
In just a month since the subsidy for chicken was lifted on Nov 1, the government has already saved RM100 million, according to the agriculture and food security ministry. This could be reinvested into the poultry sector.
Price ceilings and subsidies alter the production structure, leading to market distortions, according to CEO of the Center for Market Education, Carmelo Ferlito.
He said subsidies were introduced to reduce the limitations of price ceilings.
“The government has always had the illusion that it can determine what is an ideal price but this has only resulted in failure on every occasion,” he added.
He pointed out that as long as there are no price ceilings, subsidies are not necessary.
Subsidies and price ceilings for essential items have been a constant in the Malaysian economy for some time now.
It has recently been reported that since February 2022, the government has already allocated RM3.8 billion for egg and chicken subsidies.
However, this has led to leakages in the disbursement process. Furthermore, foreigners and those in the high-income group enjoy equal access to these benefits.
These factors have now led to a decision to do away with subsidies for chicken on Nov 1.
Ferlito said Malaysia’s poultry industry is well-equipped to withstand the challenges emanating from the removal of chicken subsidy.
“Before the government introduced the price ceiling, the poultry industry was self-sufficient, able to satisfy local demand with local supply,” he added.
Fuelling local poultry growth
Fatimah Mohamed Arshad, a research fellow at the institute of tropical agriculture and food security at Universiti Putra Malaysia, told FMT Business the removal of price controls for chicken will encourage investment among local suppliers.
“Based on past experiences in the padi and rice sector, it is evident that efforts to control both farm and retail prices have hindered investment in the poultry industry,” she said.
Fatimah said lifting price control would enable producers and traders to get a clear picture of market supply and demand, leading to smart decisions and encouraging the introduction of new ideas.
A free market also encourages innovation, she said.
For instance, she said, low prices would make it necessary to introduce a grading system.
“It will also lead to the introduction of new value propositions and force producers to find ways to reduce costs,” she added.
Reducing reliance on imported meat
Fatimah said eliminating price controls on chicken would also lower dependence on imported meats.
It could even lead to an increase in exports, she added.
On the other hand, she said Malaysia also has to invest in research to find better animal feed such as high-yield corn and improved palm kernel cake to reduce reliance on imports.
“Otherwise, it (Malaysia) may lose its competitive edge due to higher costs of imported feed,” she added.
Inevitably, there will be potential to generate more employment opportunities.
“Thus, supporting startups as well as micro, small, and medium enterprises (MSMEs) is deemed more advantageous than to feed the well-established government-linked corporations (GLCs),” Fatimah said.
Earlier this month, the Malaysia Competition Commission (MyCC) said competition in the chicken market appears to be showing “positive signs” following the recent removal of price controls. - FMT
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