Cover Story: Time to act on food security

This article first appeared in The Edge Malaysia Weekly, on November 11, 2019 - November 17, 2019.

Daim: The current pattern of food imports is not sustainable and we must quickly turn the tide before it is too late. Photo by Shahrin Yahya/The Edge

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FOOD security, says the Food and Agriculture Organization of the United Nations, exists when all people, at all times, have physical, social and economic access to sufficient, safe and nutritious food that meets their dietary needs.

So when Malaysia, which derived 8.2% of its GDP from agriculture in 2017, was ranked 40th in food security among 113 countries tracked by the 2018 Global Food Security Index, while Singapore, whose agricultural sector is negligible by comparison, topped the ranking, the million-dollar question is, how did we get here?

Former finance minister Tun Daim Zainuddin, for one, says Malaysia has been ignoring the agricultural sector for the longest time. As it happens, this is an area the Council of Eminent Persons chairman has been very vocal about in the media of late. In an email interview with The Edge, he assesses the status of food security and agriculture in Malaysia.

“[Since the 1980s] the Malaysian economy has grown at an unprecedented rate that is unmatched to this day. The shift from primary industries to export-oriented industries helped us secure our footing in the global manufacturing market. However, as people flocked to manufacturing and assembly, the agriculture sector was neglected,” he says.

“As this neglect continued, our food imports went up and this year, our food import bill has hit almost RM60 billion. We are not in a food security crisis currently but we need to act fast to prevent one. The current pattern of food imports is not sustainable and we must quickly turn the tide before it is too late.”

According to reports, Malaysia’s food import bill ballooned from RM10.5 billion in 1998 to RM51.28 billion in 2017 while food exports increased from RM6.15 billion in 1998 to RM31.84 billion in 2017.

 

The weak ringgit and the middleman

The weakening of the ringgit against the US dollar has not made the situation any easier, given that most of our food, as well as animal feed and fertiliser, is imported. At 4.1240 to the greenback last Thursday, the ringgit is 23% weaker compared to five years ago.

Daim cites 2017 statistics for fruits and vegetables, which show that Malaysia imported more than it exported in almost every category.

“The amount of onions, garlic, chilli and ginger that is imported is shocking. These are basic ingredients that every household needs for their cooking, and every restaurant is buying kilos and kilos of these agricultural products,” he says.

According to a Khazanah Research Institute (KRI) report entitled “Achieving Food Security for all Malaysians” that was authored by economist, KRI research adviser and CEP member Prof Dr Jomo Kwame Sundaram and KRI research associate Tan Zhai Gen, Malaysia’s imports of vegetables rose from 79,000 tonnes in 1961 to 1.1 million tonnes in 2013. In the same period, annual imports of fruits increased twentyfold to 863,000 tonnes.

“Prohibitive production costs, compounded by high production risks, have constrained the expansion of fruit and vegetable production. Mismatched climatic and horticultural conditions for particular fruits and high production costs have worsened yield gaps between potential and (average) actual yields for various fruits,” says the report.

Daim stresses the need for a concerted effort by the Federal Agricultural Marketing Authority (FAMA) to link the hypermarkets, cooperatives, and hotel and restaurant associations to farmers and to ensure that the farmers are kept well informed of what is lacking in the market.

He says Malaysian farmers should look at planting ginger, chilli, onions, garlic, cabbage, sweet corn, cucumber, eggplant, okra, long beans, potatoes, avocado, coconuts, asam jawa, figs, grapes and mangoes.

“We are importing far too much of these items and yet we know there is a local market for them. FAMA is encouraging local suppliers to promote local products but more needs to be done.

“Locally grown food means that the food travels a shorter distance, so it is fresh when it reaches the consumer and less carbon is produced. It also means a greater share of profits goes to the farmer who produced them, and in the event of a weak ringgit, this means resilience against external fluctuations,” he explains.

A part of the food value chain that needs to be looked at seriously by the government is the role of middlemen.

In its report “Market Review on Food Sector in Malaysia under the Competition Act 2010”, the Malaysia Competition Commission (MyCC) highlights that the bargaining power of farmers is generally low due to their dependence on middlemen, and limited price transparency.

“Their dependency is due to the financial support provided by the middlemen in assisting them to purchase the inputs required for production and to overcome any uncertainties during the production period,” says the report.

According to Daim, this problem persists because many of the local farmers are not well off. “Although we know they deserve, say, RM8 for a product, if the middleman offers them RM5 and they need the cash, they cannot afford to wait for a better buyer. In a capitalist system, you need capital to succeed — you need money to make money.

“Middlemen are taking a huge cut and they control the prices. This means the farmers remain poor as they don’t receive fair payments for their produce. This, in turn, means that the consumer pays more than is necessary for the goods received.

“If the middlemen offer a tangible service for their fees, for instance, transport of goods, storage and marketing, then perhaps their fees are justifiable. But they are not. They are taking an unreasonable cut, disproportionate to the service that they provide. So the government must step in to provide these services at reasonable prices. By doing so, it will be able to drive food prices back down,” he says.

 

Localising the animal feed business

The MyCC report also highlights the fact that the import bill for animal feed in Malaysia is higher than the total import bill for live animals and meat products.

It states that the cost of animal food accounts for about 10% of total production cost per cattle in integrated farming and about 60% of production cost for feedlots. Hence, the price of local beef is influenced by the supply and availability and price of animal feed.

Daim says the problem of expensive animal feed is not new and that one of the reasons for it is that the raw materials for animal food, for example wheat, corn, soybean, cereal and grain, are not locally produced.

“There should be more research on how to make better use of by-products from other industries. Currently, by-products from palm oil are used to make food but these are not sufficiently nutritious for livestock feed. As the local aquaculture industry grows, so will the output of fish waste. This will influence the production of fishmeal, which can also be utilised in animal feed production.

“We also need to encourage research in identifying and modifying grain varieties that are suitable for the local soil and climate conditions. Crops that are suited to local conditions, like sorghum, napier grass, barley, coconut and tapioca, can be utilised in making locally sustainable animal feed,” he says.

In its report, MyCC recommends the development of an integrated national animal feed policy to reduce the cost of animal feed. “Various financial and non-financial incentives can be considered to promote the entry of new players to formulate animal feed from local agro-industrial products as well as encourage existing manufacturers to provide consistent supply for the local market at an affordable price.

“This will eventually reduce the dependence on imported animal feed ingredients and lower the cost of animal farming in the country.”

 

Food monopolies and oligopolies

The KRI report notes that privatisation in recent years has led to many key institutions, including monopolies, moving from the public to the private sector, implying that economic rent associated with import permits as well as government-organised subsidies are being increasingly captured by private rentiers.

It adds that the food system resulting from these policies has caused Malaysia to become more dependent on and dominated by a few politically influential food monopolies or oligopolies, and monopsonies or oligopsonies.

“An example is the consolidation and monopoly of the rice industry under Bernas. Lembaga Padi dan Beras Negara (LPN) was set up by the Lembaga Padi dan Beras Negara Act 1971. However, this was later repealed, putting the rice industry under the control of a single government-linked company — Bernas — before it was eventually sold into private hands.

“Consequently, farmers are now obliged to accept much higher ‘deductions’ on padi sold by them to millers, which increased from 14% to 17% in the 1970s to more than 20% recently,” the report says.

When asked to comment on Bernas, Daim reveals that its role is being studied by the Ministry of Agriculture.

“Rice is a sensitive topic. It is as much political as it is economic. Nevertheless, the fact remains that about 97% of Malaysians eat rice at least twice a day. We need rice to survive, we need rice to thrive.

“However, this isn’t working well here because though we spend billions on subsidising padi farmers, many of them remain poor, depending on the subsidies to survive. They are also highly vulnerable to natural disasters. We saw the terrible impact of Typhoon Lekima on padi farmers in Kedah and Perlis,” he says, adding that Malaysia also imports huge amounts of rice with more than RM1 billion spent last year.

“The local farms can only cater for 70% of domestic needs. The government is thinking of how it can make farming a self-sustaining business for padi farmers. While we cannot beat Thailand and the Philippines on cheap rice, perhaps we can look at how planting premium rice like brown rice and red rice can be a better source of income for our farmers.

“The government must also look at alternative crops that can bring in higher incomes for these people and use the land to make profit for the farmers,” he says (see accompanying story).

In Budget 2020, the government announced that it will be allocating RM30 million for the production of glutinous rice in Langkawi, which is expected to benefit 1,200 farmers.

To raise padi yields, the government increased the allocation for padi inputs from RM796 million this year to RM855 million in 2020 under Skim Baja Padi Kerajaan Persekutuan (SBPKP) and Skim Insentif Pengeluaran Padi (SIPP).

To build a sustainable ecosystem for the food industry in Malaysia, the effects of climate change need to be taken into account, as well as listening to people on the ground, such as the farmers and manufacturers, says Daim.

“When farmers don’t have sufficiently long leases on the land, they are not invested in protecting soil quality and environmental integrity. Why would they? At the end of the lease, they move on, and any negative impact is not their problem to deal with.

“We need to give people more ownership of their farms to ensure that they take responsibility for them. It is the same financially. If people are financially liable, they will take greater interest in making a particular venture succeed,” he points out.

He adds that climate change, which means more floods and rainfall, will have a major impact on productivity. “The world is changing and we must adapt to it or face the consequences. We need to be sure that our farming practices are ecologically sound — diversity of crops, agro-forestry initiatives, use of data analytics to ensure maximum efficiency and prevent the straining of our natural resources are important.

“We need to be wary of pollution, which, if left unchecked, can negatively affect our future productivity. Green technology can be a useful tool if we encourage such initiatives to flourish in our local ecosystem.”

An immediate action plan is also needed to ensure our water supply can sustain the nation’s population and agricultural activity, Daim opines.

“As it stands, about 75% of our national water supply goes towards agriculture and 90% of this is used for padi farming. On a more practical level, we need to improve food processing and storage facilities. These systems must be open to all. By democratising these institutions and ensuring that all producers have access to them, we can cut out middlemen and ensure that costs are kept low.”

On food security, Daim says it is important to discuss the issue of food sovereignty. “This means that those among us who produce food, namely the farmers and manufacturers, should have a say in how land, seeds, livestock, bio-diversity and other resources are used and managed. As in all things, we need to listen to the people on the ground.”

The 81-year-old, once described as the architect of modern Corporate Malaysia by The New York Times, understands that there is not much interest in agriculture today as it is considered unglamorous and not a money-spinner.

“But I beg to differ. No matter what, people always need to eat. Food is a basic necessity and if your business is to satisfy a basic human need, there will always be a market for your product,” he says, adding that there needs to be a clear roadmap and key performance indicators for Malaysia to prevent a food security crisis from happening.

“Singapore, which has hardly any agriculture, has been ranked No 1 for food security. It can have low agricultural import tariffs as it does not have many local farmers to protect. Malaysia, with its abundance of land, stable climate and wealth of natural resources, has been rated No 40 worldwide.

“Clearly, the government needs to take the issue of food security seriously if Malaysia is to grow economically. We cannot have an unplanned economy that may result in an uncontrolled rise in the cost of living. Food is a universal need and human right and the government must ensure that all the rakyat have access to sufficient food and resources.”

And that is food for thought for the government as it embarks on its 2030 Shared Prosperity Vision.

 

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