The Malaysian Insight

SUSTAINABLE solutions to the problem of high food prices lie in holistic policies and not knee-jerk reactions that the government has been taking, a food security expert and economists said.

These include intensive farming methods as well as adoption of technological advancements to generate higher yield and self-sufficiency levels, in order to reduce Malaysia’s dependence on food imports.

Others are calling on the government to step up enforcement and cut off middlemen from the supply chain to avoid price gouging.

Dr Larry Wong Chee Yoong, senior visiting fellow at the Institute of Strategic and International Studies, said to ensure there is food and nutrition security in Malaysia, the country needs a “seed to shelf” or “farm to fork” approach in building forward better post-Covid-19.

“Malaysia tends to be production- or producer-centric as well as consumption- or consumer-centric, in the sense we focus on both ends of the agrofood supply or value chain rather than along the various sequential segments of the supply chain holistically and in a poly-centric manner,” he told The Malaysian Insight.

“We need to be mindful that we are not lulled into short-term solutions or knee-jerk reactions that largely address and treat symptoms rather than the underlying causes.”

The price of vegetables skyrocketed recently, some up to 200%. Farmers have blamed a combination of factors such as labour shortages, higher cost of input materials, climate change and supply chain disruptions.

Wong said the surge in prices of goods is not just a problem faced by farmers or consumers.

It is a collective one that requires the Agriculture and Food Industries Ministry, as well as the Domestic Trade and Consumer Affairs Ministry to work hand in hand to mitigate.

While the Agriculture and Food Industries Ministry has set up a task force to look into prices of pesticides and fertilisers which have gone up by 200%, the Domestic Trade and Consumer Affairs Ministry is looking at bringing down prices of goods.

But this, Wong said, is only a stop-gap measure that will hurt farmers as their profit margins get squeezed further. And inadvertently, the government may end up subsidising both farmers and consumers.

Subsidies are not sustainable in the long-term either, he said.

Time to think out of the box

Wong said there are other seemingly unrelated factors that the government must look at. This includes the weak ringgit to the US dollar, drought, rain and pests, the increase in energy prices as well as the prices of wheat and maize.

“The food price index between last year and this year has gone up by 30%. Commodity prices are linked to food, fuel, feed and finance; they are interrelated.”

Wong suggested that government leaders think outside the box and consider counter trade, where Malaysia uses palm oil to trade for commodities that it does not have.

“By doing this, we can lock in supply and give natural hedge against currency fluctuations and you only pay the balance. This will be a whole-of-government response that will involve the International Trade and Industries Ministry, as well as the Foreign Ministry.”

A consultative framework, which involves all the stakeholders, food diplomacy as well as digitalisation can also be used to guarantee Malaysia’s food security, he added.

Countries like India have a Commission for Agricultural Costs and Prices, which makes recommendations to the government in the form of price policy reports each year. The government then sets minimum support prices for selected food items for the following year.

“This is something worthwhile for Malaysia to adopt, adapt and become adept at implementing it, to suit Malaysia’s changing needs and future food systems,” Wong added.

The government’s response to the spike in vegetable and food prices has so far included pledges to step up enforcement against profiteering, to hold cheap sales of goods and to set up committees to study the matter.

Increasing self-sufficiency

Universiti Malaya economics professor Dr Rajah Rasiah said Malaysia should start focusing on increasing self-sufficiency levels for food items to reduce imports.

“The government should target self-sufficiency levels to more than 90% for rice, and over 80% for other food items. As with palm oil, a guaranteed floor price should be used to purchase food items when prices fall below that floor. 

“Export taxes on food items can be imposed to offer that subsidy. The taxes should be used to buffer prices when they break the floor price, as well as to support technological adaptation to raise productivity. 

“This way, volatile fluctuations in import prices owing to changes in exchange rates does not undermine the small farmers.”

According to the Agriculture and Food Industries Ministry’s Agrofood Statistics 2019, only poultry meat, poultry eggs, fish and pork were reported to achieve above 90% self-sufficiency level. 

Rice, vegetables, fruits and beef stood at 63%, 44.4%, 78.2%, 22.3% and 63% respectively. The total imports of foodstuff in 2019 amounted to RM51.4 billion as compared with RM50.14 billion in 2018. 

Rajah said technological adaptation such as the use of drones and robots by small farmers can increase efficiency.

“We did this successfully in the 1970s using tractors and combined harvesters, albeit the technologies then were simpler. Rice self-sufficiency in Malaysia was highest in 1976 at 87%.”

Deal with middlemen, not point of sale

Meanwhile, Dr Rais Hussin and Jason Loh of Emir Research said in a research note that price gouging could be used to explain the current “skyrocketing” prices of vegetables, poultry, eggs and other food items.

Price gouging refers to raising or hiking prices excessively or exorbitantly. This is set against the backdrop of escalation of demand or contraction of supply, beyond a level that is reasonable, common or fair, especially for the ordinary consumer.

Price gouging could also happen when certain stakeholders and players in the supply chain have exploited and taken advantage of the situation to further increase prices and enjoy higher profit margins.

Emir Research proposed that the government use cooperatives to combat “middlemen” and wholesalers who exploit their bargaining power to short-change farmers and producers. 

“The Domestic Trade And Consumer Affairs Ministry must apply section 4 of the 2011 Act (Price Control and Anti-Profiteering Act) with respect to the determination of prices – to the middlemen or the mid-stream of the supply chain – and not merely focusing its attention on the wet markets and supermarkets or hypermarkets – retailers and end-distributors,” they said.

On Tuesday, Domestic Trade and Consumer Affairs Minister Alexander Nanta Linggi said the government will sell food and goods cheaply in a twice-monthly Keluarga Malaysia Sale to help the people cope with rising living costs.

The dates of the sale, he said, will be announced soon, but it will begin tomorrow in all 222 parliamentary constituencies.

Additionally, enforcement officers will also conduct price checks on 1,500 outlets selling essential goods. – December 3, 2021.