How to combat increasing food prices

The price of food items in the market place is exorbitant. Food is certainly the most important expenditure of households. Malaysians in the Bottom 40 group spend a total of 48% of household expenditure on food.

Certainly, the poor will be more affected by high food prices as a greater percentage of their income is spent on basic food items.

Why is food so expensive in Malaysia?

Firstly, food production in Malaysia is low. Out of the eight million hectares of agricultural land, six million hectares are planted with oil palm and one million hectares with rubber. Less than one million hectares, or just 12% of agricultural land, is for food production. This has resulted in Malaysian consumers depending on imported food.

In 2017, Malaysia imported RM51.3 billion of agricultural and food products for local consumption, an increase from RM38.9 billion in 2013 or an increase of 32% in four years.

For example, Malaysia is only 22% self-sufficient in beef and 39% self-sufficient in ikan kembong.

When food is imported, prices would strongly be influenced by global factors, including monopolistic practices as well as climate change effects in food-producing countries. This can easily affect the price of food in Malaysia.

Next, the Federation of Malaysian Consumers Associations (Fomca) has long advocated a market review of the local food supply chain. We have always suggested that one of the key factors for the high price of food is monopolistic practices, along with the various parts of the food supply chain.

The recent report on the market review of key food items by the Malaysia Competition Commission (MyCC) has confirmed that one of the key reasons for high food prices is distortions and manipulations in the food supply chain.

For example, the price of ikan kembong increases by six times, from the time the fisherman sells his fish until it reaches the consumer.

Another example of a substantial price increase is the price of cabbage; the price at the farm is RM1.60 while the consumer pays a retail price of RM3.90 — a price increase of 143%.

MyCC, in its report, has identified multiple causes for the exorbitant food prices in the market.

These include market manipulation by middlemen, multiple intermediaries and manipulation of Approved Permits, causing an unreasonable increase in food prices.

For example, in the fish supply chain, middlemen are known to hoard fish when prices are low, thus restricting supply and forcing the prices of fish to increase. There is also opaqueness in price determination along the supply chain.

MyCC has also suggested the establishment of new wholesale markets to promote competition through greater transparency and market competition through the removal of market inefficiencies.

These market distortions need to be addressed. The government has two powerful laws to act against price manipulators, that is the Price Control and Anti-Profiteering Act, 2011 and the Competition Act, 2010.

These laws are powerful instruments to detect price manipulation practices and profiteering. They can be used to take strong action against the manipulators and profiteers. Through the market study, these offenders have been identified.

The issue then from the study is what next? If the monopolistic and market manipulation continues with no further action, then the MyCC report becomes just an academic exercise with no impact on consumers.

Thus, Fomca urges the authorities to act decisively in liberalising the market along the food supply chain through the effective enforcement of current laws to eliminate profiteering and market manipulation.

The role of MyCC and the domestic trade and consumer affairs ministry should not be just to identify the problems. More importantly, it must use the provisions in the Acts to eliminate the illegal and unethical practices that are having such a devastatingly negative effect on all Malaysian consumers, especially the poor.

To reduce food prices, the government needs to give greater priority to food production to increase food security so that we can decrease food imports and be more self-sufficient in essential agricultural products.

Paul Selva Raj is the Federation of Malaysian Consumers Associations (Fomca) CEO.

The views expressed are those of the author and do not necessarily reflect those of FMT.