PETALING JAYA: An agriculture expert has urged the government to liberalise the downstream paddy and rice value chain so as to loosen Bernas’ grip on the market.

Fatimah Mohamed Arshad, a research fellow at Universiti Putra Malaysia’s Institute of Agricultural and Food Policy Studies, said 63.6% of the paddy and rice market was effectively under Bernas’ control.

Speaking to FMT, she noted that Bernas and its associates account for 48% of the total amount of paddy milled, which translates to 33.6% of the rice demand in Malaysia, and it is the sole importer of 30% of the country’s rice requirement.

Fatimah and her colleague Yeong Sheng Tey have written a research paper on the subject of Bernas’ virtual monopoly.

She said Bernas, as the sole importer, could impose policies such as short credit terms on companies relying on imported rice.

She also noted that Bernas also enjoyed a monopoly in rice stockpiling, a task given to it by the government in the name of food security. The stockpile it manages is distributed only during national emergencies.

Concerns have been raised by the Malaysian Vermicelli Manufacturers Association that Bernas was also gaining a monopoly over broken rice used in making fine noodles.

Fatimah noted that manufacturers under Bernas’ umbrella could sell their vermicelli at prices that are significantly lower than the prices charged by their competitors since they had the advantage of buying broken rice at cheaper rates.

She said this had resulted in a rise in the vermicelli production of Bernas and its associates and caused several unaffiliated manufacturers to close shop.

“If the distorted competition continues, vermicelli would become another Bernas monopoly market.”

Fatimah said Malaysia was not yet ready for total market liberation, but she urged the government to start the ball rolling by allowing competition in the import of rice.

She said this would minimise collusion between Bernas and its associates, such as in the forging of joint ventures to strengthen its paddy and rice procurement.

“This behaviour kills competition, strengthens Bernas’ market power and increases the barriers to entry into the rice business. This is proven by the non-existence of paddy-based and rice-based small and medium enterprises.”

Fatimah said there was a huge wealth divide between paddy farmers and Bernas, big millers and wholesalers. She noted that about 90% of paddy farmers belong to the Bottom 40 income group.

She said farmers should be given support and incentives to venture into value-added activities to improve their income and to deal a blow to monopolies and collusive activities.

Economist Barjoyai Bardai of Universiti Tun Abdul Razak agreed that the import of rice should be open to competition.

He also said the government should take over from Bernas such social obligations as the stockpiling of rice and the purchase of paddy from farmers at guaranteed prices because it was not feasible for the company to continue doing so, now that it has become a private corporation.