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Malaysia offers to trade palm oil for rice
May 16, 2008
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Malaysia has offered to trade palm oil in exchange for rice as a short-term strategy to stabilize domestic supply of the grain.
Plantation Industries and Commodities Minister Peter Chin says that this is a logical move given that palm oil is a commodity that rice-exporting countries also need.
Malaysia is the world’s second largest producer of palm oil after Indonesia.
On Tuesday, the country bought 200 000 tonnes of Thai rice, paying 10 per cent more than it had offered on Monday.
So, is this idea of barter trading a good solution?
A question Saifulbahri Ismail put to Muhammad Sha’ani Abdullah (MSA), secretary general of the Federation of Malaysian Consumers Association :
MSA : Of course at this time, the rice suppliers are also demanding higher price, quoting other importing countries are offering better prices. In this situation, of course it’ll be more beneficial to the country to offer our own commodity which is actually also acquiring very high price at the moment, the palm oil in the market. So, it’s a good move by the country to offer our own product in exchange for rice. I mean, buying rice, in cash or barter trading, it’s trade. So, barter trading is more advantage to the country, so why not that mode? Provided the buyer would like to accept palm oil as a payment.
What effect do you think this will have on consumers? Will it give them the impression that the rice shortage is becoming a serious problem and put them on a panic buying mode?
MSA : The situation now is not really a shortage of rice. Actually, the panic or the concern is the rising price of the rice. And the rising price of the rice actually makes the exporting countries to limit the export in order to regulate the price at home. That’s the situation. There is no actually shortage in the market. It’s only to regulate the domestic prices in the exporting countries. Similarly, even in Malaysia we are not really short of rice but to regulate the market price, we need to pump in additional supply into the market to regulate the price. So, that’s what is happening at the moment, to pump additional supply in the market which requires additional stocks. So, that’s why countries are actually acquiring additional supply for their domestic market.
According to local newspapers, the price of rice in Malaysia seemed to be going up every day. Now, is this also causing serious concerns?
MSA : This is actually the spiral effect, and many do not understand that we are not happy with the Bernas, the agency which is suppose to act to regulate the market price domestically. So, when the international price goes up very high, and it also affects the local rice market. Again, the farmers actually attempted to demand a higher price for their paddy, so this is actually a spiral effect. Actually, there is no increase in cost of production for them to justify. It’s only that the beras (rice) is fetching a high price, so the farmers are demanding a higher price. Even the government’s guarantee of minimum price of 650, actually farmers are receiving more than 1000 ringgit for their paddy at the moment. Actually it’s because of the rising price in the international market.
Also this week, the government announced that it will spend around 725 million ringgit to subsidise imported rice. How much will this help to ease the burden of the people, especially the lower income Malaysians?
MSA : I mean we are actually coming to terms with the system of using subsidy to provide some comfort to the consumers. It’s not happening. Now, always people are taking advantage of the situation. The subsidised rice are actually being used by even manufacturers to acquire cheap supply of rice and they can mill it and use it for noodles production and all that. So, there is no effective way to control this and we are actually pushing for other means of providing assistance to lower income group, by way of providing direct payment or direct subsidy kind of payment for their purchases in order to provide assistance directly to the target group. Not by continuing with subsidies to the consumer good, which actually also the rich and traders are misusing.
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