McDonald’s had a French fries shortage in February. This was perhaps symbolic of a much bigger 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 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.
Source:
https://www.thesundaily.my
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 by smallholders.
The mentality 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. However, Putrajaya’s solution was for agriculture development to be led by government agencies and GLCs. This has resulted in wastage of money and resources.
Bureaucrats and consultants have untenable ideas like creating padi estates. The latest idea is smart farming, with high intensity investments in technology benefitting consultants.
There are interested parties now for the broiler industry. It has been hit with rising feed prices, substantially adding to production costs. The maximum price of RM9.10 per kg retail (in 2021), 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. A cartel of companies is now preparing to enter the market as producers, once existing producers have closed down. A local newspaper report also revealed that cartels dominated the daily market with 1.5 million chickens, which was 70% of the total 2.2 million sold nationwide every day.
The APs carry unrealistic terms and conditions. The import permits have taken months to obtain from the Department of Veterinary Services. Then with more permits there is always the hint of corruption.
The chicken supply chain in Malaysia is in somewhat of a turmoil. It was previously one of the best managed and self-sufficient farming sub-sectors in the Malaysian economy. But this is now almost destroyed due to the government’s price manipulation.
Companies using the APs are converting the chicken into finished consumer products that are beyond government price controls, or are sold on the black market. Regulation of the food industry has led to unwanted corruption and diversion to crony capitalism.
Restrictive market regulation is only presenting further opportunities for one’s own self-benefit. The Malaysia Competition Commission (MyCC) is now probing allegations that there was political interference in the issue of cartel operations in the poultry industry. But this is not the only case. There is allegedly the so-called extortion cartel at a highland resort.
A farmer is protected from prosecution for engaging illegals as workers. Monthly contribution mentioned is RM300-RM600 per worker. If a farmer defaults on payment, the entire crop is destroyed by the “recipients” of the donation. According to some, the “sheriff” of the Highlands lives in a “castle” on a hilltop! How wonderful, our local “sheriff” and Robin Hood episodes for a mini-series!
References:
Malaysia’s looming food crisis, Murray Hunter, FreeMalaysiaToday, 28 February 2022
MyCC probing allegations of cartels in poultry industry, Bernama/FreeMalaysiaToday,
26 April 2022
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