Potential growth: Experts are calling for reform and innovation to enhance farmer welfare and productivity, ensuring a sustainable future for rice production.
PETALING JAYA: Monopolies in agriculture, particularly in rice production, must be dismantled for the sector to grow, says a food security expert following recent government action in suspending a key farmer’s association.
Datin Prof Fatimah Mohamed Arshad of Universiti Putra Malaysia (UPM) stressed the importance of opening the industry to competition to promote growth and innovation.
Currently, the supply of fertiliser is controlled by one national entity that distributes it to regional and state farmers’ groups, said Prof Fatimah, who is Fellow Consultant at UPM’s Laboratory of Agricultural and Food Policy Studies.
This stifles the growth of the padi industry by allowing a single body to dominate the supply of a key farming input, leaving no room for others to offer competitive prices, she added.
“Clearly, monopolistic structures and procurement through direct negotiation were responsible for the so-called ‘cartel’ behaviour or malpractices in the ecosystem,” she said.
Prof Fatimah said a notable effect of the monopoly was the direct negotiation of fertiliser contracts valued at RM1.8bil from 2021 to 2023.
She explained that nine organisations were selected through direct negotiation to produce fertilisers, which raised concerns about possible unethical practices, such as awarding contracts to inactive companies and sourcing materials in questionable ways.
She suggested these allegations point to a potentially cartel-like environment, where limited competition may have allowed misconduct to occur.
These concerns go beyond distribution practices alone as the fertiliser monopoly may have also contributed to poor agricultural outcomes.
For example, she said a report by the Auditor General in 2019 indicated that fertiliser deliveries were delayed by as much as 220 days, which caused significant disruptions in crop yield.
Despite the issues, the fertiliser supply system has operated without substantial reform for over five decades, she added.
The monopoly also means that since the 1980s, only one type of fertiliser has been used instead of a variety.
This oversight has resulted in substantial financial losses for the industry and contributed to declining yields.
Prof Fatimah pointed out that the government has spent nearly RM40bil on agricultural subsidies since 1980, yet yields have dropped from four tonnes per hectare in 2009 to 3.5 tonnes in 2023.
Another issue with the current system is that it focuses on developing subsidiary companies rather than supporting farmers.
“If the system was more about enhancing farmers’ productivity and welfare, many of the issues plaguing the industry would have been avoided.
“The monopolistic control created a rigid supply chain that stifles innovation and discourages the entry of new players, especially young entrepreneurs,” she said.
In contrast, Taiwan and South Korea serve as examples of countries where farmers’ organisations focus on farmer welfare and productivity, contributing to a more resilient agricultural sector.
“Government-driven interventions are only needed in the early stages of industry development. Once the industry is established, the market must be open for competition to allow growth and innovation.
“The government should allow private sector involvement, including individuals, young entrepreneurs, or cooperatives, to participate,” said Prof Fatimah.
She suggested encouraging start-ups that can enhance the supply chain, with services such as online input purchasing, e-credit, and advisory services.
Another food security expert, Nurfitri Amir Muhammad, said complaints about monopolies have long been raised.
“What’s happening now is that some parties want to dominate by engaging in malpractice that has been present for a long time,” said the chief coordinator of the Malaysian Food Security and Sovereignty Forum.
“The question is whether current political appointees will simply be replaced with a fresh round of political appointments. This would be just more of the same.”
