B - Cost of Living B10. Food Production

B10-04: The monopoly granted by UMNO and Barisan Nasional to BERNAS will be removed

May 10, 2018
Jun 2018

Can The Prices Of Rice Be Reduced?

Malaysian Digest June 18, 2018

The government is urged not to provide excuses in reducing and controlling the prices of rice in its decision to end the monopoly of PadiBeras Nasional Berhad (Bernas), which has been the guardian of paddy and rice industry in the country. The excuses used by the government showed as if the government did not understand the actual function and responsibility of Bernas. Bernas took over the roles of National Paddy and Rice Board (LPN) on 1 January 1996 during the administration of Tun Dr Mahathir Mohamad when the government implemented the privatisation policy. If price is the determining factor for the decision to end Bernas’s monopoly, this may not be a good news to the industry and the people of Malaysia. Moreover, the decision was made three weeks ago after the new Pakatan Harapan government took over the leadership of the country from Barisan Nasional without running any feasibility studies prior to making the move. According to a source from the industry, the government’s decision in opening the rice market may give worse implications to the industry and consumers. He also questioned the possibilities of further reducing the price of rice as the current price in Malaysia is relatively cheap – the cheapest in ASEAN. Quoting the words of the Chief Executive Officer of Bernas, Ismail Mohamed Yusof, the price for a bowl of rice in Malaysia is 26 sen. According to the source, the Minister of Agriculture and Agro-Based Industry should provide clearer details on the terminology of ‘cheap’ as consumers have the rights to know what type of rice could be sold cheaper than the current rate. The matter also raised questions as the market rate of rice was never determined by Bernas. On the contrary, they were determined by the government through the ministry. The price of rice fixed by the ministry was not done in a hasty manner but only after taking into considerations of many factors. These include, the sufficiency of local supplies, population versus consumptions, fluctuations of currency – when there is insufficiency in local supplies, the government needs to import rice and several other factors which involve supplies and demands. All these have not include the corporate social responsibilities of Bernas towards the local farmers and producers. According to the source, although Bernas is a private entity, the role of Bernas had not changed as it also acted like a government agency. “Bernas is still responsible to purchase all local paddy – regardless of its quality,” said the industry player. Bernas also allocates between RM700 and RM800 million annually for rice subsidies before the company claims it from the government. Thus, Bernas is still awaiting back dated debts from the government. Besides, Bernas also assist in creating job opportunities through rice processing factories to the local entrepreneurs worth RM80 million annually. Wholesalers too, enjoy the credit benefit from Bernas. Bernas also never fail to ensure that the country has a three-months stocks ahead amounting to 250,000 tonnes. With the end of Bernas monopoly, what would the future provide for the farmers who had been protected by the government all these while? “Which company would buy the inferior quality paddy which could be due to natural factors and who would be held responsible for the huge amount of rice imports from foreign countries? “What would happen to the 2,000 employees of the company nationwide? “How about the guarantee in food safety? “With the monopoly, the government can gain better control to the main food source of Malaysians. “If the government is truly serious in ending the rice monopoly, why don’t they recommence LPN so that the rice industry is in the safe hands of the government?” the source said although he remained sceptical on the financial capability of the government in taking over Bernas. Rice is unlike other food such as fish or vegetables where you can choose. If consumers did not like snappers, they can always choose mackerels instead. The consumers only have two choices in rice – super local white rice which are sold between RM1.60 to RM1.80 per kilogramme or imported rice which are sold in accordance to the currency exchange rate. With the ever challenging economy and inconsistency of local currencies, global rice market demand, natural disasters and competitions in the market – can the government really control the price of rice? The prices of goods remain high even without the Goods and Service Tax (GST). We only hope that the manufacturers would not make the reintroduction of the Sales and Service Tax (SST) later as a reason not to reduce the prices of rice. -MalaysiaGazette

Jun 2018

[OPINION] Bernas CEO defends entity’s role

The Edge Markets June 13, 2018

Padiberas Nasional Bhd (Bernas) has said its role as the gatekeeper for the import of rice is still relevant, despite the government’s previous announcement that Bernas’ monopoly to import rice would be terminated. “What will the local paddy farmers sell if other [players] import a lot of rice? That’s the role of a single gatekeeper, you don’t want to look at paddy farmers who cannot sell their paddy,” Bernas chief executive officer (CEO) Ismail Mohamed Yusoff told reporters after a meeting with the Council of Eminent Persons yesterday, adding that Bernas has been supporting some 150,000 paddy farmers in the country. On its website, Bernas said its roles include maintenance of the nation’s rice stockpile, acting as the buyer of last resort for paddy farmers, managing the Bumiputera Rice Millers Scheme and the distribution of paddy price subsidies to farmers on behalf of the government. Being the buyer of last resort means Bernas would buy even when farmers produce diseased paddy, Ismail said. “That is the social obligation [we have that] the government needs to take into account. Now, everyone is talking about wanting the right to import but no one [is] talking about wanting to buy diseased paddy, to take care [of] the stockpile, the subsidy, and helping millers look for their funding. But we are doing all of those things for them. “We are a cross-subsidy entity; we take the profit from the sale of [imported rice] and we subsidise local rice. We only have 28 mills compared with 180 mills in Malaysia, so that’s not a monopoly. We are talking about the sole import of rice to subsidise the social obligations that we have,” he said. Ismail also noted that the country has never faced any rice shortage. “So, I feel that the current system works and it should be maintained. If the government wants to break up the monopoly, we will work with them and see what’s best for the nation and the rakyat. That is more critical,” he added. Currently, Bernas imports about 600,000 tonnes to 650,000 tonnes of white rice per year; the stockpile stands at 150,000 tonnes per year. Bernas, the country’s sole rice importer, was listed on the local bourse before it was taken private by businessman Tan Sri Syed Mokhtar Al-Bukhary in April 2014. During that time, the privatisation was met with strong criticism amid concerns that Syed Mokhtar, who already owned many strategic assets like ports and power plants, would monopolise the import of rice. Bernas posted a pre-tax profit of RM133.39 million for the financial year ended Dec 31, 2016 (FY16), up 2.6% from RM130.05 million in FY15, while revenue rose 2.8% to RM4.34 billion from RM4.23 billion. Bernas is involved in the procurement and processing of paddy, and the importation, warehousing, distribution and marketing of rice in Malaysia. It is also in seed and farming activities, international rice joint ventures, and other rice complementary businesses.

Jun 2018

[Opinion] Breaking up rice monopoly could result in cartels, cautions Padi Rescue

The Edge Markets June 12, 2018

Fraught with problems from the planting stage to the marketing level, the rice industry needs to be managed by a board, not a group of companies that could lead to the set up of cartels. Industry coalition Padi Rescue coordinator Norfitri Amir Muhammad said trust and transparency could be reinstated with the revival of the National Rice and Paddy Board (LPN) that can establish a fund from the profit earned from rice imports to help farmers. “As it stands, our study shows that monopoly holder Padiberas Nasional Bhd (Bernas) earns a profit margin of RM700 per tonne from the imported rice. Imagine what their profit must be like? “If the LPN is revived with the participation of farmers, it will be an independent body made up by people who know the sector. Profit from imports [of rice] could go into the fund to help the sector in emergencies like disease-ridden plants and floods,” he told a media conference yesterday. Norfitri said the problem cannot be solved with just the appointment of a group of companies handling the imports because it does not resolve the low demand for local rice. “Farmers don’t have the bargaining power to ask for good prices. This sector is not one that should be seen as a profit-making sector. The subsidy for padi is about RM2.2 billion but who benefits? “The contract holders for fertilisers or insecticides mark up the prices. The government must review these contracts because it [can] save money here. So we should not be looking at Bernas only but at every level, hence the need for the LPN (which was first set up in the 1970s),” he added. Last week, Agriculture and Agro-based Industry Minister Salahuddin Ayub announced the termination of tycoon Tan Sri Syed Mokhtar Al-Bukhari’s Bernas’ rice import monopoly. Bernas took over from the LPN in 1996 and was listed a year later on Bursa Malaysia before it was taken private. In 2011, its concession to import rice was extended for another 10 years until 2021. However, as part of the Pakatan Harapan government’s manifesto to break Bernas’ monopoly, a working paper with ministry feedback and other stakeholders is being drafted to be submitted to the government for further action. According to a study by the Malay Economic Action Council (MTEM), an umbrella body representing 47 Malay non-governmental organisations, local rice farmers milled 1.82 billion tonnes of rice last year, and up to 900,000 tonnes of rice were imported by Bernas, mostly from Vietnam, to meet the shortfall of 2.75 billion tonnes for consumption in Malaysia. Malaysia imports 30% of rice. Norfitri said Malaysian farmers are able to make up to 100% of local demand but due to bad management of the industry, including weak seeds because of a lack of research and development, and high costs of fertilisers and insecticides. Padi Rescue is an organisation of farmers under the MTEM. Local farmer Azhar Hashim, 50, said a government subsidy of RM2,000 per hectare is high, but farmers still experience losses because of alleged discrepancies in the sector like the sale of insecticides at RM90 a bottle compared with RM40 in countries like Thailand.

Promise achieved; Opinion by industry players

Jun 2018

[POLICY] New framework needed for paddy, rice industry

The Edge Markets June 11, 2018

Experts say the Malaysian government will need to carefully analyse and introduce a new framework for the paddy and rice industry following the dismantling of Padiberas Nasional Bhd’s (Bernas) monopoly in the sector. Last Thursday, the government announced that Bernas’ monopoly to import rice has been terminated. A working paper on the breakup will be drafted with feedback from the agriculture and agro-based industry ministry and other stakeholders to be submitted to the government for further action. “To protect the interests of local paddy farmers, we have identified the modules used in other countries [on importing the staple], among them Indonesia, which has been successful in its approach in opening up the monopoly on rice,” minister Salahuddin Ayub told reporters. The president of the local unit of the UNI Malaysia Labour Centre (UNI MLC) Datuk Mohamed Shafie BP Mammal lauded the government’s move to break the monopoly but said it is necessary to formulate a well-thought-out and comprehensive plan to ensure there is fair trade and healthy competition among the players . “Breaking the monopoly is a healthy move as it will encourage healthy competition. Then when there is no more monopoly, there must be a new framework. The government or minister needs to introduce a new framework which everybody understands and will benefit the rakyat, while the competition shouldn’t be pinching [customers] from one another ,” he told The Edge Financial Daily via telephone. “Now they (the government) want to introduce a new system so I think they must have a concrete and positive reason why they want to break the monopoly. Is it because the government thinks they cannot control Bernas or is Bernas weak?” said Mohamed Shafie, who is also a trade union leader involved in food and agro businesses. “I’m not defending Bernas, but this is not something where you come today and you make a new decision for another five years. Bernas will be affected [by the government’s decision] and they might need to retrench workers,” he explained. With the breaking up of the rice monopoly, independent economist Dr Chung Tin Fah said the government can save on subsidies while opening up opportunities for other players and prices can be lowered as well . “Monopoly is bad in [the way] that it will limit consumer choice and the monopolist set prices to earn higher than a justifiable return,” he said. Mohamed Shafie said Bernas’ monopoly over the country’s rice supply has become a hot-button issue about unfair trade practices, but the company still face certain limitations. “Maybe now the government realises that there is something wrong with the import of rice and therefore they want to break the monopoly and give it (the same licence) to several other companies. Meanwhile, Socio-Economic Research Centre Sdn Bhd (SERC) executive director Lee Heng Guie said the scrapping of the rice importation monopoly would mean the liberalisation process has been set in place, allowing other players to supply in the rice market . “Pending the detailed structure and mechanism, the proposed policy should not only result in more sharing of profits among all rice dealers but also make rice affordable to the masses as consumers have more varieties to choose from . “The liberalisation of rice importation would enhance food security rather than diminish it ,” he said in an email reply. Currently, 70% of rice demand comes from domestic producers while the balance 30% is imported from various sources , he noted. Lee believes that the rice monopoly or giving out import permits to favoured importers had not only resulted in “rent-seeking” practices, but had also often led to high prices of rice for consumers, smuggling and arbitrage of price differentials between domestic and foreign rice. “Rice is central to food security. It is a strategic commodity as the overall economic growth and per capita consumption depend on an adequate, affordable and stable supply of this staple crop ,” he added. Veteran economist and former civil servant Tan Sri Ramon Navaratnam said he hopes that this is the precedent for other monopolies to be broken down. “This should not be the first and only monopoly to be broken down,” he quipped. Bernas, the country’s sole rice importer was listed on the local bourse before it was taken private by businessman Tan Sri Syed Mokhtar Al-Bukhary in April 2014. During that time, the privatisation was met with strong criticism amid concerns that Syed Mokhtar, who already owned many strategic assets, for instance, ports and power plants, would monopolise the import of rice. Bernas posted a pre-tax profit of RM133.39 million for the financial year ended Dec 31, 2016 (FY16), on a revenue of RM4.34 billion. Compared with FY15, Bernas’ pre-tax profit in FY16 grew 2.6% from RM130.05 million, while revenue rose 2.8% from RM4.23 billion. Bernas is involved in the procurement and processing of paddy, importation, warehousing, distribution and marketing of rice in Malaysia, seed and farming activities, international rice joint ventures, as well as rice complementary businesses. According to its website, Bernas continued to fulfil its obligations under a privatisation agreement signed with the government in 1996. “These obligations include maintenance of the nation’s rice stockpile, acting as the buyer of last resort for paddy farmers, managing the Bumiputera Rice Millers Scheme and the distribution of paddy price subsidies to farmers on behalf of the government,” it said. On March 30, 2017 The Edge Financial Daily reported that Bernas was eyeing a relisting in 2020, a year before the expiry of its rice import concession in 2021.

Promise Achieved; Policy Moving Forward

Jun 2018

First four members of National Agriculture Advisory Council named

The Star June 06, 2018

The first four members of the National Agriculture Advisory Council, who will help the Government raise the level of national food security and agricultural exports, were named Tuesday (June 5). They are Dagang NeXchange Bhd chairman Tan Sri Abdul Rahman Mamat, Leong Hup International Sdn Bhd executive director Tan Sri Francis Lau Tuang Nguang, Universiti Putra Malaysia Institute of Agriculture and Food Policy Studies director Datin Paduka Dr Fatimah Mohd Arshad and entrepreneur Mohd Najib Asaddok. Agriculture and Agro-based Industry Minister Salahuddin Ayub, who announced the names during a press conference at his Ministry here Tuesday, said their involvement was expected to contribute substantially to the ministry and to achieve the objectives set out. "The selection of these figures is appropriate in making recommendations to the Ministry as the country still has a national food safety level that is dependent on imports and on boosting agricultural exports," he said. Salahuddin said the council in the early stages would meet every two weeks chaired by Abdul Rahman and they were given the freedom to give insights into the future of the country's agriculture. He said one of his ministry's deputy secretary-general will sit on the council to serve as a facilitator, especially on matters pertaining to bureaucracy and administration.

On the Hari Raya celebration, Salahuddin said his Ministry would continue to play a role in ensuring all agricultural supplies were sufficient for the celebration. "As there is no Ministry of Domestic Trade, Cooperatives and Consumerism (KPDNKK) yet, Prime Minister Tun Dr Mahathir Mohamad has assigned both the KPDNKK's secretary general and my ministry's secretary-general to carry out the duties of enforcing price controls," he said. On the proposal to revoke Padi Beras Nasional Bhd's (BERNAS) concession as the sole importer of rice, Salahuddin said he had instructed the ministry's secretary-general to make a proposal on it. "We will also ask an advisory body consisting of authoritative figures to make a proposal to do away with this monopoly and then it will be combined with the ministry's proposal paper for the preparation of the Cabinet papers to be brought to the Cabinet meeting for approval," he said. – Bernama

Jun 2018

Bernas' monopoly ends

NST June 06, 2018

Agriculture and Agro-based Industry Minister Salahuddin Ayub announced that the monopoly to import rice by Padiberas Nasional Bhd (Bernas) has been terminated as per the Cabinet decision today. Pursuant to this, he said a working paper on breaking up the monopoly with feedback from the ministry and other stakeholders would be drafted before being submitted to the government for further action. "In the effort to protect the interests of local padi farmers, we have identified the modules used by other countries (on importing the staple), among them Indonesia which has been successful in its approach in opening up monopoly on rice,” he told a press conference here today. Meanwhile, Salahuddin said the management of the National Farmers’ Organisation of Malaysia have been temporarily suspended effective June 1 (2018). He said the suspension order under Section 20 (1) Act 109 was issued by the Registrar of Farmers Organisations following an audit on the management of Nafas that was submitted to the ministry on March 26.

Based on the report, Nafas was found to be having serious management problems especially in the aspects of competency, responsibility and transparency involving the leadership and management. “The suspension was done to enable an investigation to be carried out pertaining to management, abuse of power and leakages involving its board of directors and management. “This is to ensure that matters that can cause losses to the entity and the people can be overcome and good corporate governance can be brought back,” he said. Salahuddin said the suspension, likely to last three months, would not impact the 770-odd staff, just that the powers of the board in making management and financial decisions had been curtailed. During the suspension period, powers to run Nafas’ affairs will be vested in the Director-General of the Farmers Organisations Authority as provided for under Section 23 of Act 109, he said. He added that for now, the ministry was looking into the management aspects and that if needed, the police and the Malaysian Anti-Corruption Commission would be roped in

Jun 2018

Bernas’ rice-import monopoly to end soon

Malaysian Insight June 06, 2018

THE monopoly of the Syed Mokhtar al-Bukhary-owned Bernas to import rice will end soon, as the reform mood sweeps through the Pakatan Harapan government. The cabinet has agreed to terminate Syarikat Padi Beras Nasional’s three to four-decade stranglehold on rice imports, Agriculture and Agro-Based Industry Minister Salahuddin Ayub was quoted as saying by Astro Awani. “Cabinet has agreed to end Bernas’ monopoly after hearing the arguments in support of it,” the minister was quoted as saying. All other forms of monopolies will also be reviewed to see if they should be retained or broken up, he said. Prime Minister Dr Mahathir Mohamad also directed Salahuddin to prepare a memorandum to the cabinet on the proposed methods to break up Bernas' monopoly. “I have also instructed the ministry’s secretary-general to inform all of our departments to identify several rice import models used in other countries,” Salahuddin said. A committee will also be formed to advise the government on the matter before the final memorandum on dismantling the monopoly is tabled to the cabinet. The move to end monopolies is to avoid enriching certain crony companies, he was quoted as saying by Malay daily Berita Harian last month. – June 6, 2018.