Abolish Aps, Manage Fuel Prices To Get Cheaper Food’ | Institute of Agricultural and Food Policy Studies
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Abolish Aps, manage fuel prices to get cheaper food’

WHEN Pakatan Harapan promised to bring down the cost of food and basic items, it was clear it was not going to be as easy as flipping a switch.

Indeed,the Mahathir administration would have to take a raft of measures, including abolish the Approved Permit scheme and strengthen the ringgit, before ‎Malaysians would see a drop in the price of chilli and ikan kembong, said Dr Mohd Yusof Saari of the Institute of Agricultural and Food Policy Studies at Universiti Putra Malaysia. 

The new prime minister would need to effect changes that would end import monopolies, control fuel prices and bolster the supply chains, Yusof told The Malaysian Insight.

“The government should also carefully review and draft policies and strategies that may push-up the food prices. For example, minimum wages do influence production costs which in turn affects prices,” said Yusof, who had advised the previous government on food policy.

“Future policies that may affect production costs must be carefully reviewed.”

While all this meant that it would be a while before Malaysians would see a significant decline in food prices, Yusof, said he “strongly believed the current government had the capability to stabilise prices in the short run”.

Import heavy

The people’s anger at high food prices was among the factors that led to Barisan Nasional’s historic defeat in GE14.

In the months before the elections, prices of food and non-alcoholic beverages went up by as high as 4% in November 2017 compared with November 2016.

 

In its campaign, PH promised to lower the cost of living within 100 days in office. In the Buku Harapan manifesto, it pledged to end monopolies on food production.

Food prices were high due to a combination of factors, said Yusof.

These include a weakening ringgit which makes imported food more expensive. In 2017, Malaysia spent more than RM38.1 billion on food imports as the local agricultural sector was unable to produce enough to meet the needs of the nation.

Malaysia has attained 70% self-sufficiency in rice production, meaning the farms are able to produce 70% of the demand for rice. The country must import rice to fully meet demand.

Malaysia also imports vegetables such as chilli (49.1% self-sufficiency) and round cabbage (61.9%). For mutton and beef, Malaysia has achieved self-sufficiency of only 11.8% and 25.1%, respectively .

“Although some products are above the self-sufficiency level, it does not mean zero imports for the products,” said Yusof.

For instance, although the country is able to produce enough poultry to meet demand, farms still depend on imported feed which can drive up the final price of chicken.   

Market-based approach

To bring down prices, the government must strengthen the ringgit, said Yusof. At press time, one US dollar is worth RM3.98.

“Import content in food products is considerable. For every ringgit of food produced, 11 to 28 sen of imports are required, depending on the product,” said Yusof.

The other big influence on price is monopolies on food imports and supply of locally sourced fresh produce.

“Monopolies distort the market by inhibiting competition and giving consumers fewer choices in price and quality,” said Yusof.

Approved Permits (AP) to import food for instance, are given to certain companies and this allows them to directly and indirectly set prices.

These monopolies need to be broken by abolishing APs and getting more companies involved in food production, he said.

The government also needs to control fuel prices and ensure policies such as the minimum wage does not drive up food production costs.

But in the end, the food policy has to be anchored in a market-based approach instead of being too heavily focused on increasing production.

“High food prices are mainly caused by market issues such as monopolies and weak linkages between SMEs (small medium enterprises) and large firm in agriculture sectors.

“Efforts that are focused on increasing production may not guarantee prices will go down, if market-related issues are not addressed.” – THE MALAYSIAN INSIGHT, 30 MEI 2018
 

Date of Input: 18/09/2018 | Updated: 18/09/2018 | zbaizura

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