Sunday, January 8, 2012

A Proofy Bowl of Rice

Lim stressed that there is a need to address the weaknesses in the current system that is characterised by “corruption, crony capitalism and monopolies”.

He pointed out that Malaysia is the only rice-producing country that has privatised rice production and consolidated it into a monopoly under a “single crony capitalist company”.

As a result, while Thailand and Indonesia are self-sufficient, we are dependent on imported rice for one third of our consumption. And because of the monopoly, we are paying more for imported rice than even Singapore,” he said. Source here
I'm not quite sure where I should start today.

Let's start with Indonesia's "Self Sufficiency"

Indonesia Must Do More to Boost Rice Yields: IRRI October 06, 2011

 Indonesia must take more aggressive action to boost yields on its rice paddy fields rather than expand planting areas, if it is serious about being self-sufficient in the staple diet, the International Rice Research Institute (IRRI) said. The world’s most populous Muslim nation was self-sufficient in rice in the early 1980s but then farmland was turned into housing for a booming population, while rampant smuggling put pressure on local growers.

Southeast Asia’s largest economy, which is forecast to produce 68 million metric tons of unmilled rice in 2011, has set itself an ambitious goal to be self-sufficient in rice in the next few years. “Yes, definitely Indonesia could reach rice self sufficiency by increasing its rice yield,” Robert Zeigler, director general at IRRI told Reuters late on Wednesday. “[But] They need to be able to increase the yield on the existing paddy field.

They do not need to expand paddy fields and they do not need to cut down forest to produce rice in paddy fields,” he added. “It is much better to increase the productivity on existing field using existing irrigation infrastructure, roads and farmers.”

Last week, the Indonesian agriculture minister said the self-sufficient rice target of 2014 was achievable, and that the aim was for the country to again become a net exporter. Source here

Take a look at Singapore's prices ( here and here) compare that with KL

But before you do that, please ask yourself if Singapore produces any rice domestically and if there is any need to protect its domestic farmers income by applying any tariffs on imported rice?

Now let us go into his main dish.

The indirect attack on BERNAS and a direct attack on our National Rice Policy

First of all did we actually

"privatised rice production and consolidated it into a monopoly under a “single crony capitalist company” 
Rice production is a very large value chain Mr Proofy main tibai aje

Let us try understand the Government Agency before BERNAS and how the Privatisation agreement was put in place

Souce here from EPU 

So is BERNAS really a MONOPOLY besides its exclusive import license ?

Padiberas Nasional Berhad (BERNAS) is a company listed on the Main Market of Bursa Malaysia. As the nation's partner in the domestic paddy and rice industry, BERNAS and its group of companies are involved in the procurement and processing of paddy; as well as the importation, warehousing, distribution and marketing of rice in Malaysia. BERNAS currently controls about 24% of the paddy market and 45% of the local rice demand. source here
If you recall above there is a public function being transferred

The National Stockpile that needs to be maintained in case of major supply disruption for Food Security Reasons.

When you do that you will run the risk that the rice may go bad as these are perishable items unlike Gold.

Source here

Let's go down south sekejap

PROCEDURE FOR IMPORT OF RICE TO SINGAPORE In Singapore, rice of all description is a controlled item under the Price Control (Rice) 1990 of the Price Control Act (Chapter 244). 
The Government requires an importer to apply for a licence, obtainable from the International Enterprise Singapore Board (IE Singapore). IE Singapore is the administrative arm of the Rice Stockpile Scheme (RSS). It issues licences for importers, processes import permits and enforces the import and stockpile obligations by importers. The management of the rice stockpile scheme as well as the licensing of both the stockpile and non-stockpile rice importers is under the control of IE Singapore, a statutory Board under the supervision of the Ministry of Trade & Industry.

The import and distribution of rice for domestic sale or consumption are carried out by the importers and traders in the private sector. Importers and wholesalers of rice must be separately licensed. A Rice Stockpile Scheme is currently operated under the legal framework for the Price Control Act (Cap 244) and the Price Control (Rice) Order 1990.

Each rice importer of a stockpile grade is required to apply for a licence and to participate in the RSS. The Scheme ensures there should be an adequate supply of rice in the market. Under the RSS, all White Rice, Basmati Rice, Ponni Rice and Parboiled Rice are classified as stockpile grade rice. Importers of white rice, basmati rice, ponni rice and parboiled rice for local distribution must join the RSS as licensed stockpile participants. Stockpile participants have to pre-commit on the quantity that they wish to import monthly for local distribution.

This monthly amount is known as the Monthly Import Quantity (MIQ) which can be adjusted under certain conditions and notice period, driven by market forces. The minimum MIQ for white rice is 50 tonnes. There is no minimum MIQ for basmati rice, ponni rice and parboiled rice. The stockpile participant must also keep a Stockpile Quantity (SQ) in a government-designated warehouse. The Stockpile Quantity is twice the MIQ for white rice and twice the average monthly import quantity for ponni rice, parboiled rice and basmati rice. The Stockpile Quantity shall be constantly replaced with new stock and shall not be kept in the government-designated warehouses for more than a year. Each stockpile participant is expected to rotate their stocks. The ownership of the rice belongs to the individual stockpile participant, although the Government has the right to acquire the rice (with compensation) during an emergency. The Singapore Storage & Warehouse Pte Ltd (SSW) is the designated warehouse operator for the stockpile rice. Apart from the Prescribed SSQ) that is kept in SSW's warehouses, the stockpile participants can keep their trading or excess stocks in their own warehouses or in SSW's warehouses. For all rice consignments, importers are to submit declarations for rice imports and exports. Rice importers can sell either to wholesalers or directly to retailers. The stockpile participants may establish their own local distribution network. Source here
Imagine a public function being executed by say 50 people all competing with one a country that does not need to support the Paddy Farmers....much cheaper ka ? Come show me the numbers (after you deduct the cost of support to Paddy Farmers ya)

Now back to this "Single Crony Capitalist Company"

Since when does Capitalist undertake Public Function??

The Exclusive Import Licence was extended

Padiberas Nasional Bhd (Bernas) recently made headlines when it received a letter from the public-private partnership unit under the Prime Minister's Department on the extension of the Bernas Agreement. This gives Bernas a monopoly over the country's rice imports for a period of ten years. The extension commenced from Jan 11, 2011 to Jan 10, 2021, subject to terms and conditions. The Government has also agreed to grant Bernas an interim period of six months from Jan 11 to July 10, 2011 to enable both parties to finalise the terms and conditions of the new agreement According to RAM Ratings, demand for rice is expected to increase, supported by growth in the domestic population. The consumption of rice in Malaysia is estimated to be 2.6 million metric tonnes (MT) in 2010.

The company's major shareholder is Tradewinds (M) Bhd. On 3 November 2009, Tradewinds (M) completed the acquisition of a 31.52% stake in Bernas from Wang Tak Company Limited. It completed the purchase of another 22.24% stake from Gandingan Bersepadu Sdn Bhd on 20 January 2010. For its year ended Dec 31, 2010, Bernas recorded a 1.97% decrease in revenue to Rm1.97bil, but net profit increased 4.61% to RM177mil. Meanwhile, Bernas' debt load stood at RM924.86mil as at its year ended December 31, 2010, compared with RM773.36mil as of end December 2009.

The increased in borrowings was mainly for the group to fund its working capital, especially for its rice imports. Despite the higher debt, the group's gearing ratio was manageable at 0.81 times as at end Dec 2010. Going forward, RAM Ratings anticipates Bernas' gearing ratio to remain around 0.80 times with funds from operations debt cover ratios of around 0.2 times in the next few years.

“While this is somewhat on the lower end of the scale vis-vis its similarly rated peers, this is supported by Bernas' strategic profile and the nature of business,” said RAM. It added that there were moderating factors for Bernas, for instance, its loss-making milling and retail operations. “The group's paddy milling and retail operations are currently operating at a loss. As the buyer of last resort at a guaranteed minimum price, Bernas has to purchase all paddy offered to it regardless of quality; sub-quality paddy would result in lower rice recovery rates. “Furthermore, the group faces competitive pressure from private millers; some of these private millers may operate more cost-efficient mills and hence are able to offer higher prices to purchase better quality paddy from paddy farmers,” said RAM. Bernas is also exposed to fluctuations in international prices of rice. This could have a direct impact on Bernas' profitability. “A steep increase in prices could dampen the group's profit margins if Bernas is constrained from quickly adjusting selling prices upwards due to its social obligation to maintain price stability. Such a situation occurred in FY08,” said RAM. Source here
Source here

By the way incase all of you forgot BERNAS is a Listed Company folks so anyone can buy into it...

Source the Edge (tak bagi copy...kedekut here)

So Beng........

Stock pampers sudah habis ka?
Minds are like parachutes; they work best when open. -Lord Thomas Dewer