Tuesday, April 01, 2008

Forget About Cooking Oil... Rice, Rice, My Common Cents For Some Rice!

We return today to one of my favourite topics... the integrity of our nation's food supply chain, or lack thereof, on the back of a historic price control mechanism for selected food items that has lacked salt, been under cooked and was nigh close to being de-floured of late...

We begin our story with the arrival of the new Minister of Domestic Trade and Consumer Affairs Dato' Shahrir Samad, into office, suspicious that he's been sent to the ministry to ensure his political doom since his predecessor got moved to a more junior ministry, probably because of these events:
http://thoughtsintangents.blogspot.com/search/label/cooking%20oil

Being an ex-banker, having an MBA from IMD, experience as Welfare Minister in the 1980's, being linked by marriage to an influential JB business taukeh family and of course being a blogger (!) seems to have made Dato' Shahrir better prepared than his predecessor. The new minister quickly engaged businesses and the media on the need to look at the whole price control thing.

Unfortunately, just as he was starting to feel some warmth on his seat, the shortage of rice worldwide hit the headlines. This linked article is illustrative as to how the problem is complex, whilst again, not being quite real...

http://www.independent-bangladesh.com/200802212190/business/worldwide-shortage-of-rice-shoots-prices-soaring.html

In the meantime, our old man from the kampung, Pak Tam, is still wincing from the verbal barbs he's been getting from his wife up till last week. It was bad enough after they did the hoarding of cooking oil during the cooking oil 'shortage'...

Back in January, soon after they had secured some 60kg of Mazola from the local kedai runcit, topped up by 20kg of Minyak Cap Kerja which they 'luckily' found being sold 'at a bargain' when they decided to 'scout' for supplies in the next kampung at the height of the cooking oil 'crisis', Pak Tam was alerted of the coming shortage of flour, again from his kedai kopi circle.

Pak Tam rushed home to get his wife so they could secure flour supply. After a brief argument over the fact that they already had no space left in the pantry as it was full of cooking oil, and that they don't use much flour anyway outside of Hari Raya, they rushed directly to the Gigantic mall in town as Pak Tam was sure flour supply at the local kedai runcit must have completely run out.

Much to his horror, upon entering Gigantic, they were greeted with the view of piles and piles of cooking oil bottles of the cheap Palm Oil based Minyak Cap Kerja variety... Mak Tam's favourite brand as it was SO much CHEAPER than the non-Palm Oil brands, such as Mazola! They also saw witnessed an argument between the lady manager and the cooking oil delivery man about how MORE cooking oil was coming than the hypermart can store!

Mak Tam's restraint only lasted until Pak Tam started the car engine; they bought a modest 5kg of flour - Pak Tam couldn't take more as Mak Tam was giving him the silent treatment and glared lightning bolts whenever he reached for an extra packet. Thunder then came in a symphony of abuse, critique, sobbing, shrieking, historical baggage and genetic observation over the whole 20 minutes drive back home - a masterpiece of anger unsuitable for polite company!

Pak Tam continued to suffer for the remainder of the month, but thought all was over by February.

Unfortunately, his brother-in-law Pak Bakaq, the retired civil servant, came for a visit during election weekend and just had to show off how he had been quoted by a paper for correctly stating that the January cooking oil saga was not a 'crisis' but just a general panic based on no common sense. Of course the Bakaq family then had a good laugh at the Tam family's own undimished cooking oil stockpile! Mak Tam was angry for a good 3 weeks after that!

And now Pak Tam is hearing things about rice. Of course, he dare not say anything to Mak Tam now, despite his kedai kopi gang continuing to disbelieve the Pak Lah media assurances that the rice shortage will not hit Malaysia...

Back at his Ministry, Shahrir is still enjoying the relief from the 4th floor boys being too busy to 'advise' him on the price controls thing, what with the boys focusing on 'helping' Pak Lah fight for political survival. Nevertheless, to survive the on-going political storm, Shahrir has to be seen to be doing something now... well, this blogger would like him to consider the following.

How much do the cooking oil and sugar subsidies really cost Malaysians? The honest truth is, no one really knows. There are elements in the equation that are indirect and require further assessment, for instance:
  1. How much does the reduced price from the subsidies result in increased consumption of these goods, hence an overall higher subsidy costs.
  2. How much have the resulting increased consumption of dangerous subsidised 'luxuries' like oil and sugar aversely affected the health of Malaysians, resulting in increased medical costs per capita? The National Kidney Foundation will inform you that the majority of kidney failures in Malaysia is associated with diabetes (high sugar) or hyper-tension (from consumption of fats, including oils), statistically among the highest in the world!
  3. How much is guaranteeing a profit to the resultant monopolies of controlled goods in Malaysia via the price control mechanism worth it to these firms. For instance, in the case of Sugar, Robert Kuok is not known as the 'Sugar King' for no reason. How much has a guaranteed profit from these subsidies helped the Kuoks establish their family empire spanning the globe?
These economic sums are not difficult to establish, but does need effort and application to assess. Once they are assessed, Shahrir, if he is indeed a worthy minister should be able to sell the following policy changes such as these:
  1. Abolishing subsidies and price controls for food items that are really luxuries, such as sugar and cooking oil. These are bad for the health of Malaysians when consumed in excess, whilst not really adding that much more to taste - very important to us Malaysians. These subsidies are also making the rich tycoons richer by protecting the Malaysian market from competition whilst making the supply chain hard to sustain in periods of volatility.
  2. With savings resulting from the above abolishing of subsidies, as well as longer term savings on health costs, etc, the government may be able to continue supporting subsidies for staple food items such as rice and flour. Rice especially is worthy of subsidies both for strategically ensuring supply security locally and to support farmers that remain on the poverty line.
  3. With the abolition of price controls over luxury food items, there may be other savings also due to the government, such as in enforcement and monitoring of these subsidies specifically. Why not channel some of these and the less transparent medical savings to better agricultural approaches to our farmers and a better food supply chain for staple foods in Malaysia?

Such efforts would make much more common sense than the reactive behaviours of the government over the last 4 years, especially that of the last 6 months!

2 comments:

kazi said...

Salam

Nice article on price controls. I think more is to be done in that aspect. I can also say that Malaysia's pricing of certain goods are far too high compared to many other countries. These need investigation since there is now an accepted fact that subsidies - wrongly distributed - is causing strains on the economy of Malaysia as well as making a big whole in the consumers' pockets.

Wslm

Kazi Mahmood

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