By Danial Dzulkifly
KUALA LUMPUR, Oct 16 — The government should rely on market forces to determine the prices of essential commodities like chicken and eggs instead of implementing fixed ceiling prices, said Titiwangsa MP Datuk Seri Johari Abdul Ghani.
He pointed out that producers often face challenges maintaining their operations in the event of government interventions, as price caps can lead to potential losses.
This particularly rings true when the producers are grappling with rising operational costs, compounded by an upsurge in the cost of chicken feed as a result of global spike in soybean meal and corn prices, he said.
In the Malaysian context, Johari said the Federal government has never had to subsidise chicken and eggs in the past, since the country often produces them beyond its self-sufficiency rate.
“However, due to rising commodity prices, especially for corn and soybean and the effects of the government setting a ceiling price, many producers are hesitant to continue their businesses.
“Producers are selling at a loss because their operational costs have risen two or threefold. An open market policy will determine the state of food security in the country.
“We cannot continue with past practices as the global landscape is evolving,” he said during his debate of the Budget 2024 in Parliament today.
Johari also noted a significant change in the global approach to food security, citing protectionist measures by major commodity-producing nations to ensure ample domestic supplies.
“If these nations practise protectionism and, domestically, we set unrealistic ceiling prices, local producers may become reluctant to pursue their business further.
“They feel they’re operating at a loss even if we provide subsidies. Also, some of these subsidies do not reach them due to leakages in the system,” he said.
Taking the production of rice in Malaysia as an example, Johari expressed concerns over the country’s yield per hectare compared with that of neighbouring countries.
He said Malaysia, despite its expansive 700,000 hectares of land dedicated to rice cultivation, still lags behind in terms of productivity.
“We achieve a yield of 3.1 tonnes of rice per hectare. However, when we look at our neighbours like Vietnam, there’s a stark contrast. Despite having a history of importing rice, Vietnam now boasts a yield of between five and six tonnes per hectare.”
He said the key difference in approach in Vietnam is that major rice production stakeholders take good care of their farmers, ensuring they are well-supported.
Johari added that for Malaysia’s rice production to be both self-sufficient and sustainable, it is imperative that every stakeholder in the supply chain benefits.
“From the farmers tilling the land to the rice mills and factories processing the grain, everyone should see a profit.
“Similarly, it’s crucial to ensure that subsidies are not only provided but also reach the intended beneficiaries. Additionally, promoting the adoption of best practices is vital. This comprehensive approach is key to safeguarding our nation’s rice future.”
Subsidy rationalisations
On a separate matter, Johari commended the government’s decision to rationalise subsidies, which are expected to cost over RM80 billion this year.
While he acknowledges the concerns of average Malaysians over rising costs, Johari suggested that savings from these subsidy rationalisations could be better used for targeted cash aid, which is projected to be far more cost-effective than blanket subsidies.
“If we compare the provision of cash aid through the Bantuan Rahmah programme, which I’ve estimated to be around RM10 billion, it’s clear that blanket subsidies cost us nearly four times more.
“By merely halving these blanket subsidies, the government could redirect those savings to the cash aid programmes, allowing for multiple disbursements with amounts to be decided by the government.”
Johari believes that such cash transfers can foster a healthy economic cycle through increased consumption, leading to a notable multiplier effect on the economy.
He estimated that, with the rationalisation of fuel subsidies, low-income households could benefit by up to RM900 in monthly assistance.
However, Johari stressed that fuel subsidy rationalisation should not be implemented abruptly but phased in gradually over five to ten years.
Last Friday, Prime Minister Datuk Seri Anwar Ibrahim, who is also the finance minister, had tabled the Federal government’s budget for 2024, amounting to RM393.8 billion.
The allocation is an increase of RM5.8 billion from this year’s allocation, which stood at RM388 billion.
Among the key points of Budget 2024 is the phased introduction of a targeted subsidy for diesel. The government will also pursue broader rationalisation of electricity subsidies.
The savings from this approach will be redirected to augment the Rahmah cash aid fund, increasing its allocation from RM8 billion to RM10 billion.
