paper 1_role bernas gls arcofs 13 final.pdf

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ROLE OF BERNAS AS GLC: SUPPORTING AND COMPLEMENTING NATIONAL (MALAYSIA) FOOD SECURITY FOOD POLICIES ASEAN Regional Conference on Food Security (ARCoFS’13) 8-10 October 2013 Bayview Hotel Penang Malaysia By: Salman Muhammad BERNAS

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Presented at the ASEAN Regional Conference on Food Security, 8-10 October 2013, Penang, Malaysia

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Page 1: Paper 1_Role BERNAS GLS ARCoFS 13 final.pdf

ROLE OF BERNAS AS GLC: SUPPORTING AND COMPLEMENTING NATIONAL

(MALAYSIA) FOOD SECURITY FOOD POLICIES

ASEAN Regional Conference on Food Security (ARCoFS’13)

8-10 October 2013

Bayview Hotel Penang Malaysia

By:

Salman Muhammad

BERNAS

Page 2: Paper 1_Role BERNAS GLS ARCoFS 13 final.pdf

Introduction

BERNAS’ Role to Support Food Security

How It Is Done

Closing Remarks

Contents

Page 3: Paper 1_Role BERNAS GLS ARCoFS 13 final.pdf

Introduction

BERNAS’ Role to Support Food Security

How It Is Done

Closing Remarks

Contents

Page 4: Paper 1_Role BERNAS GLS ARCoFS 13 final.pdf

Paddy and rice industry exists in Malaysia because of three reasons

Ensure food security to the nation

Ensure farm incomes and

productivity

Ensure supply of rice at fair and

stable prices

Page 5: Paper 1_Role BERNAS GLS ARCoFS 13 final.pdf

Food security a policy concern by…

Paddy Cultivation Act

1930

Department of Irrigation

and Drainage (DID) 1932

Rice Commission

1933

Page 6: Paper 1_Role BERNAS GLS ARCoFS 13 final.pdf

Measures to protect the security of food taken as early as 1939…

• Restrict labor movement out of paddy sector;

• Land gazetted for paddy cannot be converted for other uses; and

• Restriction on transfer of land titles applied.

Page 7: Paper 1_Role BERNAS GLS ARCoFS 13 final.pdf

More measures taken to ensure food security, farmers’income and price stability after WWII

Guaranteed Minimum Price

(GMP) 1949

Stockpile Scheme 1949

Fertilizer Subsidy 1952

Page 8: Paper 1_Role BERNAS GLS ARCoFS 13 final.pdf

After independent, massive infrastructure development embarked and support institutions established…

PRMB to oversee the marketing of paddy (1967)

MADA and KADA projects were initiated (1961-1965)

MARDI and BPM to undertake R&D and to provide credit to farmers, respectively (1969)

Page 9: Paper 1_Role BERNAS GLS ARCoFS 13 final.pdf

And the establishment of a dedicated institution to the industry in 1971, the National Paddy and Rice Board

LPN

Page 10: Paper 1_Role BERNAS GLS ARCoFS 13 final.pdf

All these are done because we do not want to end up like this…

Page 11: Paper 1_Role BERNAS GLS ARCoFS 13 final.pdf

But to continue being like this

Page 12: Paper 1_Role BERNAS GLS ARCoFS 13 final.pdf

Introduction

BERNAS’ Role to Support Food Security

How It Is Done

Closing Remarks

Contents

Page 13: Paper 1_Role BERNAS GLS ARCoFS 13 final.pdf

FAO Policy Brief, June 2006, Issue 2 states…

4 dimensions of food security:

a) Supply availability

b) Supply accessibility

c) Fit for use/purpose (utilization)

d) Price stability (hence affordable)

Derived from World Food Summit, 1996.

“Food security exists when all people, at all

times, have physical and economic access to

sufficient, safe and nutritious food that meets

their dietary needs and food preferences for

an active and healthy life.”

Page 14: Paper 1_Role BERNAS GLS ARCoFS 13 final.pdf

Compare that to the objectives of LPN…

a)To ensure fair and stable prices for farmers;

b)To ensure fair and stable prices for consumers;

c)To provide sufficient supply to meet all

emergencies;

d)To recommend policies to promote the

development of the paddy and rice industry; and

e)To store and maintain adequate supply of paddy

and rice.

Page 15: Paper 1_Role BERNAS GLS ARCoFS 13 final.pdf

And to BERNAS’ duties and obligations

Social Obligations •National stockpile

•Buyer of last resort at GMP

•Administer rice subsidy payment

•Bumiputera Miller Scheme

Duties •Ensure fair and stable price

•Ensure sufficient supply

•Ensure quality and standard

Page 16: Paper 1_Role BERNAS GLS ARCoFS 13 final.pdf

Thus, although a private entity, its job is not to maximize profit, but…

To ensure that paddy’ market is guaranteed (BOLR at

GMP) for farmers; thus help defends SSL for the country

Page 17: Paper 1_Role BERNAS GLS ARCoFS 13 final.pdf

Although spread all over the countries, BERNAS cannot provide accessibility of supply all by itself, thus…

Must maintain industry stability and market harmony to

ensure other industry players can sustain themselves

Page 18: Paper 1_Role BERNAS GLS ARCoFS 13 final.pdf

It must provide rice at stable and affordable prices…

In accordance with what the consumers want to suit their

lifestyles

Page 19: Paper 1_Role BERNAS GLS ARCoFS 13 final.pdf

And keep the stockpile for the nation…

Page 20: Paper 1_Role BERNAS GLS ARCoFS 13 final.pdf

BERNAS’ role therefore…

Industry stability

Market harmony

Page 21: Paper 1_Role BERNAS GLS ARCoFS 13 final.pdf

Introduction

BERNAS’ Role to Support Food Security

How It Is Done

Closing Remarks

Contents

Page 22: Paper 1_Role BERNAS GLS ARCoFS 13 final.pdf

Industry stability and market harmony is maintained by employing:

Price mechanism

Gatekeeping mechanism

Stockpile operation

Page 23: Paper 1_Role BERNAS GLS ARCoFS 13 final.pdf

Price Mechanism…

Differential pricing (import vs

local).

• Benchmark price - natural

ceiling to local.

• Price gap – natural barrier to

smuggling activities

Single pricing – to group and non

group

Price cap/float (BERNAS to

propose, Government to

decide)

Page 24: Paper 1_Role BERNAS GLS ARCoFS 13 final.pdf

Gatekeeping mechanism…

Import restriction and control

of smuggling – to sustain

SSL

Single Gatekeeper – no

destructive, unbridled competition

which can lead to instability, or

market glut to domestic rice

Page 25: Paper 1_Role BERNAS GLS ARCoFS 13 final.pdf

Stockpile operation…

Availability and accessibility,

especially when in need

Stock flush– when market is too

active (unstable)

Stock purchase – during glut

Page 26: Paper 1_Role BERNAS GLS ARCoFS 13 final.pdf

Interplay of these mechanisms: simplified model…

Stockpile Operation

Price Mechanism

Gatekeeping Mechanism

Differential Pricing (Benchmark Price)

Import restriction Control of smuggling

Stock purchase

Price float

GMP

Stock flush

Price cap

Ceiling price

Page 27: Paper 1_Role BERNAS GLS ARCoFS 13 final.pdf

Introduction

BERNAS’ Role to Support Food Security

How It Is Done

Closing Remarks

Contents

Page 28: Paper 1_Role BERNAS GLS ARCoFS 13 final.pdf

Rice industry often appears as a picture of contradictions

NAP-3 and other

policies target

for subsidies to

be gradually

reduced, but in

reality have been

increasing

To reduce farmers’ poverty is an objective but

land conversion not allowed

Page 29: Paper 1_Role BERNAS GLS ARCoFS 13 final.pdf

Likewise with BERNAS…

• It is more like a rice institution, not a rice shop.

• But being a private company, it needs to make money,

hence the need to be competitive

• Not to compete with others:

• But to create industry stability and market harmony

whereby all players can have sufficient margin to be in

their businesses;

• So that essential elements of food security

(availability, accessibility, utilization and stability) can

be secured through market mechanism

Page 30: Paper 1_Role BERNAS GLS ARCoFS 13 final.pdf

Must do the

balancing act

And together with the

Government, weather

the storm

To harmony

Balancing these roles is delicate. When in conflict, institutional role takes precedent

Page 31: Paper 1_Role BERNAS GLS ARCoFS 13 final.pdf