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Innovation must be allowed to enter the rice industry, both in production and in the market.
Murray Hunter, FMT
Most Malaysians are aware of the rice import monopoly. However, few, other than those directly involved in the rice industry, are aware that under the Paddy and Rice Control Act 1994 (including all amendments up to 1 January 2006), the Director-General (DG) of Agriculture has complete control over the industry.
Under laws and regulations, the director-general can dictate which varieties and strains of rice farmers can (and cannot) grow, regulate the marketing of rice through designated licensed wholesalers, retailers, specific rice mills, and exporters. The director-general can also set maximum and minimum prices for rice and control the disbursement of subsidies to farmers. Even the circulation of rice is regulated.
This has had serious implications for the productivity and vibrancy of the Malaysian rice industry.
Rice is a staple food for many people and it is illegal to grow, harvest, mill and distribute rice without permission from the DG.
Current rice farmers are tied into a rigid system of harvesters, millers and dealers that has proven to be flawed over the past few decades.
Corruption and extortion are rampant in the industry, with some millers and dealers hoarding rice, mixing domestically produced rice with imported rice and selling it in bulk, misappropriating subsidies and misrepresenting the origin of rice in the retail market.
Rice farmers are basically prisoners of the system and can’t do anything. Farmers are not even free to produce their own fertilizer to save money. They have to listen and accept what they are given. We wonder then why Malaysians don’t want to be farmers.
The current rice/paddy industry structure oppresses small farmers while industry cartels and monopolies profit from it. Small farmers have no say in what happens to their rice land.
Over the years, consultants and bureaucrats have come up with many top-down ideas to try to make the industry more efficient and increase productivity.
One of these is to establish “rice estates” where smallholders’ land is rented out to farmers, achieving economies of scale in rice production through a high degree of automation. The idea sounds good, but the smallholders themselves will be hired as laborers on the estates, which many older rice farmers find degrading and insulting.
The consultants and bureaucrats simply do not understand the cultural dimensions of rice production.
Another problem for the rice industry is that consumer tastes and preferences have changed radically over the past few decades.
A variety of rice is suitable for a variety of dishes and cuisines. Health and nutrition issues are now at the forefront of many consumers’ minds. The local rice/rice industry has taken this into account.
Innovation must be allowed to enter the rice sector, both in production and in the market. In short, this means completely re-examining the current view of the entire rice sector.
A paradigm shift in the rice industry
If productivity is viewed as value created divided by input costs, then perhaps it is better to focus on adding value to the basic rice product in line with current consumer preferences. This approach would maintain the cultural integrity of smallholder farmers.
Just a decade ago, local authorities in Pattalung, an agricultural province north of Songkhla bordering the states of Kedah and Perlis, visited villages in the province to help rural communities decide what activities they were best suited to undertake (the author had the privilege of accompanying some of these teams). Rice farmers could grow rice and some supplementary vegetables and fruits, but that was it.
The community, with the assistance of the village council, the local agriculture department and the regional university, developed a plan to change rice production practices and introduce complementary activities in the village.
Farmers formed cooperatives, produced their own organic fertilizers, switched to local brown rice varieties from the surrounding mountains and Songkhla Lake, which better suit consumers’ tastes for healthier food, developed small mills, and packaged their products under regional names.
This is called Geographical Indication (GI) marketing, which is the use of a region or village name to brand a product. Some of the Phatthalung rice varieties, such as Sung Yod, are registered and certified in the European Union. This allows the community to export to Europe at more than double the price of traditional rice varieties. Brown, black and wild rice are very popular and are sold online.
This is just the beginning. The area receives tourists, and the villagers make woven baskets and other products to sell to visiting tourists. Local travel agencies promote the villages as tourist attractions. The villagers build mud houses and traditional Thai wooden houses for tourists to stay in, and cook local food for tourists.
The traditional rice milling process has now become an important tourist attraction. Today, there are several agricultural and eco-tourism village clusters in Phatthalung, which has greatly promoted the local tourism industry in Thailand.
Some of these villages have prospered, attracting young people to return and run these growing businesses. Some of these villages have set up trading companies to buy rice, mushrooms, other local vegetables and coffee and sell these products through the Internet in Thailand and overseas.
Over the past decade, the Phatthalung farming community has established a farm-to-table production and distribution system that is locally owned, locally operated, and where all profits go to the locals.
This is how many communities in the region are currently reorienting rice cultivation and agriculture.
Malaysia’s stringent rice controls have hampered success stories like this one. This is a great way to redistribute wealth to marginalized communities.
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