Abstract
Malaysia’s stance on food security is largely translated in terms of achieving self-sufficiency in rice production at about 65-70% of the local consumption. Since Malaysia does not have the comparative advantage in rice production, it implements a wide range of market interventions to achieve the intended level of rice production. The policy instruments include among others: guaranteed minimum price for paddy, price control, price and input subsidies and import monopoly. These interventionist instruments may not be sustainable in the long-term as they incur a high budgetary burden to the government, misallocation of resources and liberalization demand from WTO. The industry faces challenges in terms of land competition for urbanization and industrial uses and declining soil fertility due to heavy use of chemical fertilizer. This paper examines the influence of the fertilizer and the cash subsidies, as well as land conversion and fertility on the level of self-sufficiency in rice. A system dynamics model is applied to analyse the causal and feedback relationships of these variables in the paddy production system framework. The study shows that Malaysia may not be able to sustain the targeted self-sufficiency level without adequate R&D to address the production constraints particularly below-optimum productivity and the threats of climate change. The consumption of rice on the other hand continues to rise due to the increase in population. Keywords: Paddy and rice, Malaysia, system dynamics, policy analysis.
Highlights
Malaysia does not have a comparative advantage in the production of rice, which is the staple food of the majority of her population.On average Malaysia imported about 28% of its local requirement between 1990–2009
The system dynamics model developed can be accepted with confidence
The study attempts to examine the sustainability of the Malaysian policy stance of assuring 70% self-sufficiency level (SSL) in rice until 2020 under a changing environment
Summary
Malaysia does not have a comparative advantage in the production of rice, which is the staple food of the majority of her population.On average Malaysia imported about 28% of its local requirement between 1990–2009. The extremely thin world-rice market is highly vulnerable to market vagaries in particular to supply disruptions caused by weather changes These phenomena forced Malaysia to embark on and maintain a protectionist regime on its paddy and rice industry to achieve food security for her population despite the call for liberalisation under WTO. Since 1973, the paddy and rice policy focused on achieving three main objectives, that is, to attain a reasonable level of production and self-sufficiency in rice, to increase paddy farmers’ income, and to ensure stable price and high quality rice to the consumers. On the other hand the input subsidies have increased from RM45 mn to RM258 mn during the said period (Figure 2)
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