MBSA1523 Managerial Economic and Policy Analysis

SEMESTER II SESSION 2022/2023

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• Attach a properly prepared cover sheet for your assignments. The cover sheet
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figures and table numbered from 1 onwards.

• Refer to relevant journal papers and books, state all references to the assignment.
All references must follow the APA referencing style.

• Assignment should be submitted before presentation date.

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According to Chung & Tan (2015) states that rice is a staple food that provides daily caloric
needs for Malaysia’s 30 million people. (food security)
It is also a major source of income for rural households in Malaysia, many of whom fall into
a category of low income households. (income) (Chung & Tan, 2015, #)
Malaysia's paddy and rice industry has always been given special attention by the
government since pre-independence for purposes such as to alleviate poverty and improve
SSL (Harun, 2015).
Policy makers are keen on maintaining rice affordable for all consumers and at the same time
raising paddy farmers’ income. Hence, the Malaysian authority has implemented protectionist
policies like price controls and offered paddy farmers various types of subsidy to raise local
production. However, Malaysia is a net importer of rice as local production still falls short of
local consumption. About 30% of the rice demand in Malaysia is fulfilled by import.

Purpose:
Increase SSL -> Reduce foreign exchange resulted from importation
ensure food supply for consumers at reasonable prices
raise farm income and productivity
ensure food security for nation

Data:
Most rice supply price elasticities has estimates that are generally positive and small. has
been found to have similar findings where the elasticity in productive rice-growing areas such
as the Muda area as reported by Squire and Barnum (1980) found it to be 0.61 while Nik
Fuad (1985) found that elasticities differ from one area to another but the general finding is
that rice producers are unresponsive to price changes in all growing regions. WHY???

demand side wise, studies have indicated that consumers are unresponsive to price change
(Goldman, 1975). that price elasticity for demand had ranged from small negative value to
small positive value. Cheam (1984)

(BAHARUMSHAH, 1991, #)
● the economy depends on the world market for its supply of many food items such as
rice, wheat, fruits, mutton and beef. In 1985, food imports accounted for 28 per cent
of the nation’s total imports.
● Malaysia is 100 per cent self-sufficient in pork, poultry, eggs and fish.
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 ● Conclusion on Price elasticity of supply: We conclude that Malaysian rice producers
are generally unresponsive both in the short and long run to price change. The results
suggest that a high guaranteed minimum price will have little impact on domestic
production. An important factor preventing farmers' response to price change is the
lack of available land for paddy cultivation. Most land areas devoted to paddy cannot
be used for other crops. In the granary areas which produce more than 60% of the
domestic supply, paddy is a mono-crop. In the single cropped areas water supply is
the major constraint. This low supply response implies that continuing price incentive
at the expense ofconsumers may not be a meaningful way to increase domestic
production.
● In the short run

(Wailes et al., 2012) production efficiency:

● the 2007-2008 international food crisis where the cost of food increased significantly,
had profound effects on supply and affordability of food for consumers from across
the world.
● Export restrictions by key rice exporting countries, India and Viet Nam, combined
with the panic buying of major rice importing countries, such as the Philippines,
jacked up world rice prices by 117%-149% in the first quarter of 2008.
● began with
● caused a significant effect on poverty
ASEAN Initiative
● the ASEAN Integrated Food Security Framework with a Strategic Plan of Action was
founded to prevent the repeat of a rice price crisis
● where a regional emergency rice reserve was established, facilitating regional rice
trade, developing information system, and innovating through research and
development.
this will ensure
● less vulnerability to rice price shocks, maintains appropriate size of rice stocks at
regional and country levels, able to forecast and translate market information and
intelligence more accurately. (Wailes et al.)
● ensures that rice remains at an affordable price level - developing a regional rice price
index and standardizing rice grades (segmentation) (Wailes et al.)
● Due to climate change, regional reserves has to be increased to prevent and be
prepared to face an even more severe occurrence or frequent natural disasters.

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 ● Had affected millions of people, greatly affecting the poorest from Asia and Africa
who face poverty
●

1. https://www.adb.org/features/has-world-learned-2007-2008-food-price-crisis
2. Fukagawa, N. K., & Ziska, L. H. (2019). Rice: Importance for Global Nutrition.
Journal of nutritional science and vitaminology, 65(Supplement), S2–S3.
3. Obayelu, A. E., Wintola, A. O., & Oluwalana, E. O. . A. (2022). Households’ Rice
Demand Response to Changes in Price, Income and Coping Strategies during Food
Inflation in Nigeria: Evidence from Oyo State. Italian Review of Agricultural
Economics, 77(2), 61–75. https://doi.org/10.36253/rea-13602
4. Chung, B., Arshad, F. M., Noh, K. M., &; Sidique, S. F. (2016). Cost analysis of rice
milling: A case study of 7 rice mills in Malaysia. Journal of Agribusiness in
Developing and Emerging Economies, 6(2), 173–190. https://doi.org/10.1108/jadee-
05-2014-0019
5. Lo, Y. T., Chang, Y. H., Lee, M. S., & Wahlqvist, M. L. (2009). Health and nutrition
economics: diet costs are associated with diet quality. Asia Pacific journal of clinical
nutrition, 18(4), 598–604.

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