Several years ago, I was working for about 2 years in the food industry. I had come to realize back then that the increase in price of rice is quite inevitable. Luckily, the government made 5 initiatives in order to curb the rising prices of rice. These initiatives are;
- Maintaining the controlled price of between RM1.65 and RM1.80 per kilo for the Super Tempatan 15% rice.
- Ceiling price for Super Special Tempatan 5% at RM2.80 per kilo and Super Special Tempat 10% at RM2.70 per kilo effective 1 June 2008. Note that the 5%, 10% and 15% percentile means how much percentage the quantity of broken rice in a kilo. That is why 5% rice is slightly more expensive than the rest as it has less broken rice in the mix.
- Price of imported rice are floated.
- Movement of rice across state borders is to be freed in stages.
- Raising the Guaranteed Minimum Price (GMP) for farmers from RM650 to RM750 per tonne.
Apart from that, the national stock buffer will be increased from 92,000 tonne to 292,000 tonne. Will this solve the looming crisis of price increase? Probably yes. Will this solve the actual root cause of the problem? Sadly no. The root cause of the price increase is the shortage of food worldwide. But the government seemed to tackle different issue altogether.
I can see that the government had approached the problem from the consequential evidence, which is – people can’t afford to pay the expensive food. What they should have done is to approach the cause of the problem – output of food supply is dwindling under the impact of increased demand (increased population + food consumption). So what did they do? By focussing on the consequence, they worked on the above initiatives which predominantly only tackling the pricing issue.
To me, one of the things that they should have done as in the case of this rice issue is to urge the local farmers to increase output of rice. From two seasons a year to 5 seasons in two years at least. Officially the farmers are currently producing paddy crops twice a year but I do know that most of them are only producing it once a year. The remaining idle months they spent doing something else. Let me tell you a secret; the farmers are a lazy lot. They scream and rant that BERNAS are squeezing them by only buying their paddy crops at RM650 per tonne. But at the same time, they actually are selling bad quality crops to BERNAS while their good quality crops are sold to the highest bidder in other private paddy mills not belonging to BERNAS. There were cases where BERNAS officials found debris, rocks and tree branches in a pile of paddy crops after it had been unloaded from the lorry right after disembarking from the weighing bridge. To accuse them of cheating will make the farmers run straight to the nearest ‘wakil rakyat’ and soon, BERNAS will be called all sorts of names in the Parliament for not thinking about the ‘welfare’ of the farmers.
BERNAS can’t afford to pay more than RM650 because to increase it, will make the price of rice too expensive for the end customers. Remember, a tonne of paddy crops will not necessarily be transformed into 100% of rice at the end of production. In a good batch of crop, only about 60% (this is called the ‘rice recovery rate’) of the whole tonne can be turned into pure rice. The balance 40% are actually the paddy’s inedible parts, its husk and other impurities. In a bad quality crop, BERNAS would be lucky even to reach 40% rice recovery rate.
Furthermore, the process of separating the paddy from its husk, cleaning, polishing the rice, sorting and packaging them costs another RM700 to RM800. Eventually, the total cost of producing local rice is between RM1,400 to RM1,450 per tonne. And what’s the price ceiling for the controlled local rice? Around RM1,300 per tonne. For every tonne of rice that BERNAS produces, they lose about RM100 to RM150. All in the name of social obligation. And how much does BERNAS produce rice locally? Around 1.3 million tonnes per year. That is why BERNAS who has an average sales of RM1 billion per year can only manage to gain profit before tax of about RM100 million per year or less.
Their production costs are eating 90% of their sales figure! And what saved BERNAS from being in the red? The imported rice. Inported rice from Thailand and other parts of the world is bought cheaply by BERNAS and sold at a higher price to the end users. But the import of rice is regulated by the government in order to protect the local farmers. Everytime BERNAS has to place and import purchase, they have to seek approval from the Ministry of Agriculture. That is why, import rice are limited to about 700,000 tonnes per year. If only BERNAS could at least break even on their local rice production, they can gain at least 30% more of their profit before tax.
The average annual demand for rice in Malaysia is about 2 million tonnes of rice. How do they arrive at this figure? Okay the average eating consumption of a Malaysian is about 80kg of rice per year. This is an average figure. It could be more or it could be less. Depends on whether a person likes pizza more or their ‘nasi campur’ more. But the difference won’t be that much. 80kg times the population of Malaysia at 27 million people gives you 2.16 billion kg or 2.16 million tonnes per year.
Approximately 2 million tonnes of rice per year will satisfy the demand of the Malaysian public. But why is there shortage? Easy. The foreign workers.
The accounted and the unaccounted (illegal) foreign workers. To date, the official count of foreign workers is slightly less than 3 million people including the illegal ones estimated around half a million.
Let me digress a bit by telling you a story of a friend of mine who went to China recently to visit some coal mines there. He visited a small village deep in the heartland of China. It was a small village by the Chinese’ standards because it only has a population of 12 million people in it! That wasn’t a typo. I kid you not. Now China has a ‘one child policy’ in placed since 1979. If a couple gave birth to a second child, they will be imposed huge fines upon the moment they wanted to register the newborn child. The fines were normally so heavy they had no choice but to leave the child unregistered all their lives. In rural areas, most families have children as many as they liked since they couldn’t afford to pay the fines for the second child anyway. The unregistered children may face problems in the future but they can still have adequate resources to live as they are geographically isolated and can afford to self sustain with the use of their own farmlands and making their own supplies etc.
Recently, they have millions and millions cases of young adults wanting to register themselves and had collected enough money to finally pay the fine and get themselves registered. For all we know, China, with the official population rate of 1.1 billion people could actually have 2 billion people instead!
Coming back to the topic at hand, foreign workers especially the Indonesians and Myanmars eat a lot of rice. The average eating consumption of Indonesians and Myanmars is 125kg of rice per year. With the huge surge of foreign workers in the country and the inability of the authorities to curb the rising number of illegal immigrants into this country, no wonder our food source is drying up as soon as it went into the shelves of hypermarts and sundry shops. This is a grave situation that the government had failed to see its many impact. Not just on the crime rate, but on our food supply as well.
Another matter which is the factor is the dwindling of cultivated lands. In Malaysia, each paddy fields are lined with dividers known as ‘batas’. This is purely territorial in nature. Historically, one paddy field owned by a farmer long ago could have reached the size of 10 acres each. But due to passing down inheritance to their descendants, the once huge paddy field is divided to give away to his many sons and subsequently divided further to his grandsons by the use of these ‘batas’. These dividers are eating up precious land area if you total them up together. An acre of paddy field can produce up to 5 tonnes of paddy crops in a season. But if an acre is strewned with so many dividers then the amount produced would be much smaller than 5 tonnes per season.
In Thailand (one of the biggest rice exporter in the world), there is no such thing as these ‘batas’. Each paddy field is so huge you can’t even see the edge of it if you’re standing at one side of the field. No dividers lining their fields in sight. Thus, the Thais can maximise their output. This was what BERNAS was trying to achieve some time ago but as usual, our territorial local farmers were so paranoid that they might confuse their own paddy fields to another if the dividers were to be disintegrated. Thus, they would rather keep their underutilised paddy fields rather than helping BERNAS to achieve greater output. They were too deaf to hear that an increase of output will eventually increase their income.
I believe, taking everything into account from the above, those are the root causes of food shortage. Lack of reliable data to correctly calculate the demands of food supplies in the country vis a vis the rate of food production/output. The government should solve these illegal workforce problems, increase the output of farmers, motivate them to produce more before finally moving on to tackle the pricing issue. The food shortage will always be there regardless of the inititatives done to tweak the prices. In this, the government should be more focussed and should obtain more intelligent advice from the experts. Relying on just the Ministry of Agriculture to tackle this problem is not universally adequate. All areas should be covered and all ministries should chipped in ideas to solve the root of this problem.
Just my 2 cents…