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Stagnating yields, unyielding profits: The political economy of Malaysia's rice sector

  • Jamie S. Davidson
Abstract

Since the 2008 rice crisis, Malaysia's rice policies have been caught between government efforts to raise production and its support of the country's monopoly rice importer (Bernas). This article argues that when the politics behind the country's policies are revealed, the paradox is more apparent than real. The three principal policy components — gratifying Barisan Nasional's coalition partners in East Malaysia by expanding the acreage devoted to rice; buttressing the rural Malay economy by providing subsidies through a yield-enhancing programme; and relying on big business for financial support (Bernas's new owner is one of Malaysia's richest businessmen) — aim to serve the same end: to perpetuate UMNO's political power amid increasing electoral competition.

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Correspondence in connection with this article should be addressed to: poldjs@nus.edu.sg.
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I would like to thank two anonymous referees and the journal's editors for their insightful remarks. Funding for this research has been generously provided by a FRC National University of Singapore grant (R-108-000-070-112).

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9 Important exceptions include the work of scholars associated with the Institute of Agricultural and Food Policy Analysis at the University of Putra Malaysia — see for example, 50 years of Malaysian agriculture: Transformational issues, challenges and direction, ed. Arshad, Fatimah Mohd, Ahmad, Nik Mustafa Raja, Kaur, Biswant and Abdullah, Amin Mahir (Serdang: Universiti Putra Malaysia, 2007).

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12 Government of Malaysia, Perangkaan agromakanan 2013 (Putrajaya: MOA, 2013), p. 135, table 10.1.

13 Ibid., p. 6, table 1.4.

14 Government of Malaysia, Laporan tahunan 2014 (Putrajaya: MOA 2014), p. 28, table 2. The 2017 federal budget, however, owing to the government's current weakening financial position, shows that this subsidy will be cut by at least 50 per cent.

15 Gomez, Edmund Terence and Jomo, K.S., Malaysia's political economy: Politics, patronage and profits (Cambridge: Cambridge University Press, 1997).

16 For population growth figures, see http://countrymeters.info/en/Malaysia.

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20 Otto C. Doering III, ‘Malaysia rice policy and the Muda Irrigation Project’ (PhD diss., Cornell University, 1973), p. 209. Since the threat of Malaysian communists at this time had been largely eliminated, the programme's geopolitical imperative, though important, was less pressing than in the Philippines, for example.

21 Richard W.A. Vokes, ‘State marketing in a private enterprise economy: The padi and rice market of West Malaysia, 1966–1975’ (PhD diss., University of Hull, 1978), p. 38.

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23 Barker, Randolph and Herdt, Robert W. with Rose, Beth, The rice economy of Asia (Washington, DC: Resources for the Future, 1985), p. 45, table 4.11.

24 Courtenay, The rice sector, p. 114.

25 Tamin, M., ‘Rice self-sufficiency in Malaysia: Policy and reality’, Jurnal Ekonomi Malaysia 3, 4 (1981): 6, table 3.

26 Goldman, ‘Staple food self-sufficiency’: 268.

27 Jenkins, Glen P. and Lai, Andrew K., ‘Malaysia’, in The political economy of agricultural pricing policy, ed. Krueger, Anne O., Schiff, Maurice, and Valés, Alberto (Baltimore, MD: Johns Hopkins University Press, 1991), pp. 82–3.

28 Courtenay, The rice sector, p. 80.

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31 Selvadurai, S., Padi farming in West Malaysia (Kuala Lumpur: Ministry of Agriculture and Fisheries, 1972), p. 41.

32 Brown, C.P., ‘Rice price stabilization and support in Malaysia’, The developing economies 11, 2 (1973): 175. One picul of paddy equals 133.3 pounds or 60.3 kilograms.

33 Goldman, ‘Staple food self-sufficiency’: 265.

34 ‘Govt. cuts the padi subsidy’, Straits Times, 18 Dec. 1954.

35 ‘Towards rice self-sufficiency’, Straits Times, 7 Oct. 1957.

36 Funston, John, Malay politics in Malaysia: A study of the United Malays National Organisation and Party Islam (Singapore: Heinemann Educational Books [Asia], 1980), pp. 150–51, 174.

37 Aziz, Ungku A., ‘Poverty and rural development in Malaysia’, Kajian Ekonomi Malaysia 1, 1 (1964): 7096 .

38 Shamsul, A.B., ‘The development of the underdevelopment of the Malaysian peasantry’, Journal of Contemporary Asia 9, 4 (1979): 450; Ness, G.D., Bureaucracy and rural development in Malaysia (Berkeley: University of California Press, 1967), pp. 123–41.

39 Gee, Lim Teck and Said, Muhammad Ikmal, ‘Malaysia: Rice peasants and political priorities in an economy undergoing restructuring’, in Agrarian transformations: Local processes and the state in Southeast Asia, ed. Hart, Gillian, Turton, Andrew, and White, Benjamin (Berkeley: University of California Press, 1989), pp. 183–5. The Pan Malayan Islamic Party, now known as PAS, had scored surprising electoral victories in Kelantan and Terengganu in 1959.

40 Jegatheesan, S., ‘The Green Revolution and the Muda Irrigation Scheme: An analysis of its impact on the size, structure, and distribution of rice farmer income’ (Alor Setar: Muda Agricultural Development Authority, 1977), p. 36, table 3.2.

41 Doering, ‘Malaysia rice policy’, p. 147.

42 Courtenay, The rice sector, p. 87, table 3.5.

43 Gibbons, D.S., Paddy poverty and public policy: A preliminary report on poverty in the Muda Irrigation Scheme area, 1972 and 1982 (Penang: Centre for Policy Research, Universiti Sains Malaysia, 1984), p. ii.

44 K. Das, ‘Bitter harvest in the rice bowl’, Far Eastern Economic Review, 8 Feb. 1980, p. 20. PAS had withdrawn from the BN in 1978.

45 Interview, Fatimah Mohamed Arshad, former director of the Institute of Agricultural and Food Policy Analysis, University of Putra Malaysia, Serdang, 12 Feb. 2015.

46 Gibbons, D.S., Ghee, Lim Teck, Elliston, G.R., and Kassim, Shukur bin, Land tenure in the Muda Irrigation Area. Final report, Part 2: Findings (Penang: Centre for Policy Research, Universiti Sains Malaysia, 1981), p. 22.

47 Barnard, ‘The modernization of agriculture’, p. 56.

48 Doering, ‘Malaysia rice policy’, pp. 187–8.

49 de Koninck, Rodolph, ‘Of rice, men, women and machines in Malaysia’, Jurnal Ekonomi Malaysia 3, 4 (1981): 2930 .

50 Ho, Robert, ‘Land ownership and economic prospects of Malayan peasants’, Modern Asian Studies 4, 1 (1970): 8392 .

51 World Bank, ‘Sector report: Malaysia: Review of the rice industry’, Report no. 7395-MA, Agricultural Operations Division, 16 Aug. (Washington DC: World Bank, 1988), p. iii.

52 Scott, James C., Weapons of the weak: Everyday forms of peasant resistance (New Haven: Yale University Press, 1985), pp. 75–6. There was some evidence that labour was later rehired by richer farmers because mechanisation allowed for larger cultivation areas. See Koninck, Rodolph de and Ahmat, Raiha, ‘State-orchestrated agrarian transition on the Kedah Plain of Peninsular Malaysia’, in Revisiting rural places: Pathways to poverty and prosperity in Southeast Asia, ed. Rigg, Jonathan and Vandergeest, Peter (Singapore: NUS Press, 2012), p. 58.

53 Scott, Weapons of the weak, pp. 82–3.

54 From 1976 to 1980, manufacturing grew annually on average three and half times faster than agriculture. Fatimah Mohd Arshad, ‘Agricultural development path in Malaysia’, in Arshad et al., 50 years of Malaysian agriculture, p. 12.

55 Courtenay, The rice sector, p. 110, table 5.1.

56 Barnard, ‘The modernization of agriculture’: 56.

57 World Bank, ‘Sector report’, p. iv.

58 Ibid., pp. ii, iii, 37.

59 See Food and Agricultural Organization data at http://faostat.fao.org/site/567/DesktopDefault.aspx?PageID=567#ancor. In 1985, the yield was 2,664 kilograms per hectare, and 3,636 in 2010. Yields vary across the peninsula, the granaries, East Malaysia, and main and off-seasons.

60 Interview, Arrifin Tawang, former head of Malaysia Agricultural Research and Development Institute (MARDI), Serdang, 9 Mar. 2015.

61 72.8 per cent of the agricultural labour force is 45 years old and above. Government of Malaysia, Malaysia banci pertanian 2005 (Putrajaya: Jabatan Perangkaan Malaysia, 2005, p. 17).

62 Gee, Lim Teck, Peasants and their agricultural economy in colonial Malaya, 1874–1941 (Kuala Lumpur: Oxford University Press, 1977).

63 Courtenay, The rice sector, p. 6.

64 Ding, E.T.H., The rice industry in Malaya, 1920–1940 (Singapore: Malaya Publishing House, 1963), p. 31.

65 von Vorys, Karl, Democracy without consensus: Communalism and political stability in Malaysia (Princeton: Princeton University Press, 1975), pp. 230–34. On the cooperatives’ ultimate failings, see Vokes, ‘State marketing’, pp. 103–12.

66 Rudner, Martin, ‘The Malayan quandary: Rural development policy under the First and Second Five-Year Plans’, in Readings on Malaysian economic development, ed. Lim, David (Kuala Lumpur: Oxford University Press, 1975), pp. 81–4.

67 Fredericks, L.J. and Wells, R.J.G, Rice processing in Peninsular Malaysia: An economic and technical analysis (Kuala Lumpur: Oxford University Press, 1983), p. 148.

68 For example, Food and Agricultural Marketing Agency (FAMA), Laporan tahunan dan penyata kira2 1965 & 1966 (Kuala Lumpur: FAMA, 1966), pp. 22–3. For a more nuanced view on the problem, see Arshad, Fatimah, ‘An evaluation of the Malaysian padi and rice market: Structure, conduct and performance’, Pertanika 5, 2 (1982): 164–77.

69 Lembaga Padi dan Beras Negara Act 1971 (Act 47), especially articles 20(1a, 1b) and 22(1) (repr. in the appendix of Fredericks and Wells, Rice processing, pp. 156–69).

70 Mehmet, Ozay, Development in Malaysia: Poverty, wealth and trusteeship (London: Croom Helm, 1986), p. 10.

71 Fredericks and Wells, Rice processing, p. 82.

72 LPN, Laporan tahunan 1985 (Kuala Lumpur: LPN, 1985) p. 24, fig. V.

73 World Bank, ‘Sector report’, p. 9.

74 S.H., Tan, ‘Malaysia's rice policy: A critical analysis’ (Kuala Lumpur: Institute of Strategic and International Studies, 1987), pp. 2, 52.

75 World Bank, ‘Sector report’, pp. iv, 9.

76 Tan, ‘Malaysia's rice policy’, p. 31, table 11.

77 Teik, Khoo Boo, Paradoxes of Mahathirism: An intellectual biography of Mahathir Mohamad (Oxford: Oxford University Press, 1995).

78 Gomez and Jomo, Malaysia's political economy; Tan, Jeff, Privatization in Malaysia: Regulation, rent-seeking and policy failure (London: Routledge, 2008), pp. 3977 .

79 Raja Petra Kamarudin, ‘Esklusif: Bernas selepas 7 tahun penswastaan; Bernas: Penyelamat atau perompak petani?’ [Exclusive: Bernas 7 years after privatisation; Bernas: Saviour or robber of farmers?], Seruan Keadilan Online, 10 Feb. 2003, http://seruankeadilan.tripod.com (accessed 17 Apr. 2016).

80 Tan C.S., ‘Corporate: Major Bernas stake on the market’, The Edge, 27 Jan. 2003.

81 Bernas, , Annual report 1999 (Kuala Lumpur: Padiberas Nasional, 1999), pp. 912 . The reshuffle was induced by BGSB's sale of about half its equity in Bernas (see Yunus, K., ‘G. Bersepadu yet to finalise Bernas stake buy’, Business Times, 27 June 2003 ).

82 Bernas, Annual Report, p. 19.

83 Khairul A., ‘Unsexy Bernas seeks to jazz up image’, The Edge, 1 Apr. 2002.

84 Bernas, , Annual Report 2000 (Kuala Lumpur: Padiberas Nasional, 2000), p. 55; Bernas, , Annual Report 2001 (Kuala Lumpur: Padiberas Nasional, 2001), p. 66.

85 They were first elaborated in the 1994 Padi and Rice Control Act (Act 522), art. 4, of which some were LPN's responsibility.

86 Bernas, Annual report, 1999, pp. 18, 53.

87 Nazatul I., ‘Striking a balance’, Malaysian Business, 16 July 1997, p. 7.

88 ‘Commercial and social roles’, Corporate World, 16 Aug. 1997, p. 16.

89 E. Bani, ‘Call for Bernas to play more significant role in markets’, Malaysia Business Times, 3 Mar. 2000.

90 Raja Petra Kamarudin, ‘Pagar makan padi: The Bernas story’, www.malaysia-today.net 26 Aug. 2003, http://www.malaysia-today.net/the-bernas-story-revisited/ (accessed 20 Aug. 2016).

91 M. Shanmugam, ‘Bernas VSS gets overwhelming response’, The Edge, 22 Sept. 2003.

92 Bernas, , Annual Report 2003 (Kuala Lumpur: Padiberas Nasional, 2003), pp. 62, 67.

93 Government of Malaysia, Third National Agricultural Plan 1998–2010 (Putrajaya: Ministry of Agriculture, 1998), p. 51.

94 Raja Petra, ‘Pagar makan padi’.

95 Chander, Ramesh, ‘Abdullah's economic policies: Between promise and delivery,’ in Awakening: The Abdullah Badawi years in Malaysia, ed. Welsh, Bridget and Chin, James U.H. (Petaling Jaya: Strategic Information and Research Development Centre, 2013), pp. 419–32.

96 Rappa, Antonio L. and Wee, Lionel, Language Policy and Modernity in Southeast Asia: Malaysia, Philippines, Singapore, and Thailand (New York: Springer Science, 2006), pp. 35–6.

97 The urban–rural income disparity had widened from 1:1.81 in 1999 to 1: 2.11 in 2004. Government of Malaysia, Ninth Malaysia Plan 2006–2010 (Kuala Lumpur: National Printing Department, 2006), p. 360; http://www.epu.gov.my/en/rmk/ninth-malaysia-plan-2006-2010 (accessed 18 Jan. 2017).

98 Ibid., p. 91 (tables 3–4) and p. 95.

99 Ibid., pp. 493–510.

100 Mohanlall, Premila, Syed Mokhtar Albukhary: A Biography (Petaling Jaya: pVm Communications, 2012), pp. 43–4, 48–9, 57, 72–3.

101 Yassin became deputy prime minister in 2009 (until 2015 when he was sacked by PM Najib Razak for disloyalty amid the 1MDB scandal).

102 Mohanlall, Syed Mokhtar Albukhary, p. 87.

103 Jomo, K.S., M-Way: Mahathir's economic legacy (Kuala Lumpur: Forum, 2003), pp. 151–8.

104 S. Elegant, ‘Malaysia's chosen one’, Time (Asia), 24 Jun. 2002, pp. 16–18.

105 Mohanlall, Syed Mokhtar Albukhary, pp. 105, 107.

106 Case, William, ‘Malaysia: New reforms, old continuities, tense ambiguities’, Journal of Development Studies 41, 2 (2005): 284309 .

107 L. Lopez, ‘Syed Mokhtar's coming-out party’, Far Eastern Economic Review, 29 May 2003, p. 41.

108 The purchase by Gandingan Bersepadu Sdn Bhd was priced at RM100 million. Having sold shares to pay off AFC-related debts, BGSB's share of Bernas had been reduced to one-third. Reportedly the BGSB entities associated with Nor and Kassim sold their stakes to Albukhary-related interests. Yunus, ‘G. Bersepadu yet to finalise Bernas stake buy’.

109 I thank one of the referees for emphasising this point.

110 Bernama, ‘Bernas blames private millers for rice shortage’, 8 May 2008.

111 Interview, Larry Wong, former Bernas executive, Kuala Lumpur, 25 Sept. 2013.

112 With the Group's pre-tax profits from 2004 to 2007 averaging RM161 million per year, this meant that the import business contributed to about 84 per cent of the Group's profits. Bernas, , Annual Report 2007 (Kuala Lumpur: Padiberas Nasional, 2007), p. 6.

113 Salman, M., ‘Food security in the context of Malaysia's paddy and rice industry: A balancing game’, in Proceedings of Bernas Seminar 2013: ‘Leveraging the past to move forward’, ed. Salman, M. (Kuala Lumpur: Bernas, 2013), pp. 328 .

114 Bernama, ‘Bernas blames private millers’.

115 C. Yeap, ‘Prospects for a nationalised Bernas’, The Edge (Weekly), 21 July 2008.

116 Tey, Y.S., ‘Malaysia's strategic food security approach’, International Food Research Journal 17 (2010): 506.

117 Following the crisis the government implemented a subsidised rice scheme for low-income families. Riddled with corruption and complaints from growers and millers about the over-supply of cheap rice, the programme was finally abandoned at the start of 2016.

118 Government of Malaysia, Dasar Agromakanan 2011–2020 (Putrajaya: MOA, 2011), p. 23; Government of Malaysia, Eleventh Malaysia Plan 2016–2020 (Putrajaya: National Printing Office, 2016), p. 58, http://rmk11.epu.gov.my/index.php/en/ (accessed 17 Jan. 2016).

119 Ibid., p. 15, table 2.5; USDA Foreign Agricultural Service, ‘Grain report—Malaysia’, 14 Feb. 2014, http://gain.fas.usda.gov (accessed 16 Apr. 2016).

120 One (Pekan) is 647 hectares; the other (Rompin) is 2,874 hectares.

121 ‘Four new paddy granaries to be developed — Najib’, Borneo Post, 29 Sept. 2012, http://www.theborneopost.com/2012/09/29/four-new-paddy-granaries-to-be-developed-najib/ (accessed 17 Aug. 2016).

122 The projects’ official status as granaries will be conferred upon completion; it is unlikely either will be completed by their 2020 deadline.

123 Interview, Syahrin bin Suhaimee, Deputy Director, MARDI, Serdang, 13 Feb. 2015.

124 Interview, Dzulkifli Hj. Ghulamdin, Head of Planning, Department of Agriculture Sabah, Kota Kinabalu, 28 Apr. 2016.

125 James Chin, ‘Exporting the BN/UMNO model: Politics in Sabah and Sarawak’, in Weiss, Routledge Handbook of Contemporary Malaysia, pp. 83–92.

126 At best both projects would raise SSL in rice in each state by 10 per cent (Interview, Bin Yusup, Head of Beras Corporation Sdn Bhd, Bernas's Sarawak subsidiary, Kuching, 17 Feb. 2016; J. Lamdin, Mohd. S.S., W.W.W. Wong, and J. Gumpil, ‘Sabah's roles and contributions towards fulfilling the nation's strategies in achieving 100% SSL in rice production’ [Kota Kinabalu: Department of Agriculture Sabah, 2015]). The failure of prior, smaller-scale programmes in Sarawak stemmed from the lack of trust between officials and local communities (Interview, Nicholas Mujah, Head of Sarawak Dayak Iban Association, Kuching, 19 Feb. 2016).

127 ‘Bernas rice import monopoly extended by more 10 years’, Borneo Post, 7 May 2012, http://www.theborneopost.com/2012/05/07/bernas-rice-import-monopoly-extended-by-more-10-years (accessed 17 Aug. 2016).

128 ‘Budget 2016 provides RM29.2 bln for development in Sabah, Sarawak’, Borneo Post, 23 Oct. 2015, http://www.theborneopost.com/2015/10/23/budget-2016-provides-rm29-2-bln-for-development-in-sabah-sarawak (accessed 20 Aug. 2016). I am grateful to Yi Fan Chung for alerting me to this development.

129 Interview, Kamaruddin bin Dahuli, Director, Rice Industry Division, MADA, Alor Setar, Kedah, 30 Mar. 2017.

130 See the government website http://etp.pemandu.gov.my.

131 Interview, Kamaruddin bin Dahuli.

132 On the declining Malay urban vote, see Saravanamuttu, Johan, ‘Power sharing politics and the electoral impasse in GE 13’, in Coalitions in collision: Malaysia's 13th general elections, ed. Saravanamuttu, J., Lee, H.G., and Mohamed, N.M.O. (Singapore: ISEAS, 2015), pp. 3762 . On bias in Malaysia's electoral system, see Weiss, Meredith, ‘The antidemocratic potential of party system institutionalization: Malaysia as a morality tale?’, in Party system institutionalization in Asia: Democracies, autocracies, and the shadows of the past, ed. Hicken, Allen and Martinez Kuhonta, Erik (Cambridge: Cambridge University Press, 2015), pp. 2448 .

133 For a study of two villages on the Kedah plain, see De Koninck and Ahmat, ‘A state-orchestrated agrarian transition’, pp. 61 fig. 4.1, 64 fig. 4.17.

134 Rigg, Jonathan, Southeast Asia: The human landscape of modernization and development, 2nd ed. (London: Routledge, 2003), pp. 291–5.

135 Preston, David and Ngah, Ibrahim, ‘Interpreting rural change in Malaysia’, Singapore Journal of Tropical Geography 33 (2012): 351–64.

136 Rigg, Jonathan, Salamanca, Albert, and Thompson, Eric C., ‘The puzzle of East and Southeast Asia's persistent smallholder’, Journal of Rural Studies 43 (Feb. 2016): 118–33.

137 The figure had peaked at 625,093 in 2013. See Ministry of Home Affairs, ‘Jumlah pekerja asing di Malaysia mengikut sektor, 2000–2015’, c.2016, http://www.epu.gov.my/sites/default/files/1.5.1.pdf (last accessed 17 Jan. 2016).

138 Jacob Ricks and Rick Doner, ‘Tasks of development: Beyond technical answers’, Working Paper, Singapore Management University, 2017.

139 Alavi et al., Trusting trade.

140 Mohd. A.S.A., ‘Umno's chief crony’, www.freemalaysiatoday.com, 28 Oct. 2012; http://www.freemalaysiatoday.com/category/opinion/2012/10/28/umnos-chief-crony (last accessed 17 Aug. 2016).

141 Gooi H.L., ‘Did Ismail Sabri lie to farmers & fishermen? Syed Mokhtar's Bernas denies any relisting plan’, Malaysians Must Know the Truth, blog, 12 Feb. 2014, http://malaysiansmustknowthetruth.blogspot.sg/2014/02/did-ismail-sabri-lie-to-farmers.html (last accessed 20 Aug. 2016).

142 Reportedly some RM700 million has been advanced to Tradewinds. M. Chan, ‘Explain Bernas cash transfer worth millions, says MP’, Free Malaysia Today, 10 June 2015; http://www.freemalaysiatoday.com/category/nation/2015/06/10/explain-bernas-cash-transfer-worth-millions-says-mp (last accessed 17 Aug. 2016).

143 Anon. interviews, Bernas staffers, Kuala Lumpur, 27 July 2015 and Kota Kinabalu, 25–27 Apr. 2016.

144 Even if not all the money was used for this purpose, it is still a staggering sum for an election with just over 13 million eligible voters.

145 Davidson, Jamie S., ‘Why the Philippines chooses to import rice’, Critical Asian Studies 48, 1 (2016): 100122 ; Timmer, C. Peter, Operationalizing pro-poor growth; Country study for the World Bank: Indonesia (Washington DC: PREM/World Bank, 2005).

146 This concept refers to the transition of an agrarian economy via increased agricultural productivity to one preponderantly based on industrial, urban economic activity (Timmer, Food security and scarcity, pp. 75–113).

I would like to thank two anonymous referees and the journal's editors for their insightful remarks. Funding for this research has been generously provided by a FRC National University of Singapore grant (R-108-000-070-112).

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