Supply chain of our rice; what the ETP missed out

The 2011 election budget has attracted the proper criticism as reverting to the past spending spree on expensive construction projects in already overcrowded and over taxed part of Malaysia without wide spread, tangible and real benefit to Malaysians.

PKR's Latheefa on World Food Day served a rightful notice telling the government the need to priortize food security.

I have always wondered aloud why purchase power parity and quality of living in Malaysia is inferior to developed nations. Sure, corruption plays a part but what about the structure of our supply chain? Should BN administration not look at this when they do that Economic TRANSFORMATION thingy?

If the supply chain is too long, there are more middle men and the end consumers have to pay more.

My Japanese friend told me that the sushi here is nowhere as good as the Japanese ones because of the inferior rice here; and from personal experience, I do find the rice in Hong Kong is of superior quality.

Since almost all Malaysians have rice as their staple diet, I decided to look into its supply chain, which takes me to Padiberas Nasional Berhad ("Bernas")

Source: Padiberas Nasional Berhad, Annual Accounts and Reports 2009.

It certainly has a big role to play in the food security of Malaysians whereby it is in charge of subsidies, stockpile, retailing, procurement, manufacturing and everything else relating to rice, bar cooking it.

According to its Chairman's speech in the 2009 annual accounts and reports, Dato’ Wira Syed Abdul Jabbar Bin Syed Hassan stated,

"At the outset, I must say that we have discharged our responsibilities well to the extent that at the height of the crisis, BERNAS practically had to forego its profit objective for national interest; in fact we posted a record loss in 2008. After the dust has settled, what is clear is this - we had done our job well."

hmmm....Dato Wira admitted that BERNAS, a company where Minister of Finance holds 1 Special Share with veto power and a monopoly of staple diet of Malaysians, are in for PROFIT.

Oh yes the sacrifice of 2008 was celebrated, but take a look at his next statement a few paragraphs later.

I am also pleased to report that profit, revenue and volume of rice sold recorded in 2009 were the highest since BERNAS’ privatisation.

Talk about coming back with a vengeance. Is this privatisation necessary? Why Malaysians have to pay additional middleman profits? Can't the well remunerated Barisan Nasional Federal Government with more than 50 years track record operate rice system without this middleman at Malaysians' expense?

Bernas' reported that revenue (read: amount paid to additional middleman) increased from RM2.2 bil in 2005 to RM2.5 bil and RM3.3 bil in 2008 and 2009 respectively; while the profits for 2005 till 2009 are as follows:

2005 + RM131mil

2006 + RM135 mil

2007 + RM107 mil

2008 - RM57 mil

2009 + RM180 mil

So Bernas "claw back" its "losses" of 2008 immediately. The profits above is actually additional cost to Malaysians, probably a hidden form of taxation.

The RM3.3 bil works out to be RM120.74 per person over total population of 27 million so if papa works to support a family of 5, that's RM603 per year for him. Additional RM50 on your food bill a month, please, thank you very much.

The amount looks bearable (for some) until you read note 31 to the accounts "Paddy Price Subsidy Account" which states that pursuant to the Corporatization Agreement of 1996, the government shall pay rice subsidies into banking institutions and Bernas is suppose to disburse the subsidies.

The audited accounts specifically mentioned that the above account is not part of Bernas assets and liabilities, hence an off balance sheet finance.

In 2009, RM600 million subsidies were disbursed from opening balance of RM75mil plus 2009 subsidy funding of RM599 million.

So why Malaysians are paying for their rice twice? Do we have to do that? What Bernas can do that the MOF can't do?

Being a "corporate body", despite having the status of a virtue monopoly of an essential good with no threat of substitute good or competitor, Bernas have to get a bank loan and Malaysians serviced bank interest amounting to RM24 million annually for 2009 and 2008.

And being a "corporate body" it has to pay dividends. Dividend per shares was 8 sen per share for 2005; increasing steadily to 20 sens per share for 2009. The 2009 accounts show dividend payout of RM84,672,000 was made for 2009 financials.

Would this money be better spent in channelling it to R & D to achieve better quality and rice yield, or like Singapore's NTUC, be given back as a rebate to Malaysians?

Who are the major shareholders who benefited from the payout? A review of its 2008 annual report shows that, Budaya Generasi (M) Sdn Bhd held 145 mil shares or 30.79%, Serba Etika Sdn Bhd held 29.8 million shares or 6.39%. I do not know these people who I have to belanja every time I eat white rice, fried rice, nasi lemak, nasi dagang, nasi kandang, pulut etc

To add salt on injury, according to note 23 of its 2009 annual accounts, Tradewinds (M) Berhad has acquired Bernas in 1st quarter of 2010, holding 72.57% or 341 million shares whereby Tradewinds raised a term loan of RM1 billion bearing interest at 5.2% to 6.5% hence another layer of debts for Malaysians to grapple with.

So immediate windfall to the previous shareholders, financed by all Malaysian rice eaters.

Sigh, the bowl of rice I have is getting harder to chew on from now on.


  1. thank you for the analysis.
    1. fyi, eventhough bernas is a monopoly in term of imported rice, the bernas market share in m'sia is just 30%. whereas the remaining balance belongs to private miller & industry.

    2. beside than profit objective, bernas also need to continue its social obligation which inherited from government. namely
    a. buyer at last resort - means bernas need to procure whatever condition of paddy from farmers if other private millers refused to do so.
    b. sufficient supply at fair and stable price - means bernas need to control market price eventhough bernas only has 30% market in malaysia
    c.managing stock pile - means bernas need to manage goverment stock pile, ensure security, with their own cost
    d.paddy subsidy - pay on behalf of government which later can be claimed


  2. semuanya OK kot10/21/2010 04:15:00 PM

    It is not just quality of rice. Most of it is poisoned with banned pesticides. Most of the bread is poisoned with too much preservatives. Most of the maize flour and soya flour are GM. Noodles and tow hoo are poisoned with boric acid or benzoic acid. Meat and fish are poisoned with boric acid or formaldehyde. Good luck!

  3. Dear Tengku,

    thank you very much for your useful comments, however 30% or whatever the market share (the MD's 2009 report stated is 25% of rice production share), a profit earned is still a profit earned from all Malaysians. And when did the profit in the form of dividends go?

    the mission statement, according to Bernas is

    "Adalah menjadi matlamat kami untuk
    menjadi peneraju pasaran Malaysia"

    so it will only gets bigger

    Anway, given the wide spread authority and role of Bernas, including as a buyer of last resort, why on earth they need to earn profits and pay dividends to private shareholders?

    Bank Negara is the lender of last resort and manage the currency and I do not see it state profits as its main aim

    (the last time Bank Negara tried to gain a profit was when they entered into forex trade in the 1990's and got bankrupt)
    By the way, do you know who are the shareholders in Budaya Generasi Sdn Bhd?


    written by DPG, October 21, 2010 15:09:51

    It's not only our rice where we have to pay for twice, thrice, or even four times, it's the same with almost all Government-controlled(read UMNO-controlled) projects and GLC's. The longer the supply chain, the more cronies will benefit, and they benefit for doing nothing, just by being a crony. No need for any expertise, management skills, or worse, even no capital is required, just by using their company name, invoices, and chop. Why do we need to play such high toll rates for using our Expressways, which were awarded to cronies and the projects financed with our tax money? In fact, the expressways belong to the rakyat because the "soft loans" given to cronies are from our pocket. Of course, there are also cronies like the IPP's whose profits are already assured by UMNO, no matter what. Still the master race continue to support the master race party, because they have been brainwashed into believing only this party can protect and defend them.
    +5 ...
    written by Eskay345, October 21, 2010 14:05:42

    Bloody Fu@#$##@@k!.
    Only in this Bolehland are the one-sided Corporatization Agreements drawn-up thereby giving the various concessionaires who are also Umno crony-owned companies "enormous & eternal wealth".
    +13 ...
    written by syd, October 21, 2010 12:02:03

    This issue can only hapen in Malaysia, where working class people are forced to subsidies the cost of NEP and the IPP's. No wonder many migrated to land where cars, education and healthcare are cheaper and affordable.

  5. Consider that in terms of food security, Malaysia only grows 70% of its rice requirements and needs to import the remaining 30%. So basically, as an equatorial nation with all-year sun and rain, we can't grow enough food for ourselves, instead relying on our neighbouring countries to sell us rice. And since rice is subsidized, this would be at the cost of consumers and taxpayers.

    Then consider why we don't have enough rice. Because land is expensive and the government has encouraged the growth of the palm oil sector. Malaysia has 4.5 million hectares of palm oil plantations. And the profits of these palm oil plantations would benefit the shareholders of these companies.

    Yay! Another brilliant example of socialising the losses and privatising the gains.

  6. I love your last para, brilliant

    Indonesia has achieve self-sufficiency in rice production since 2007 while S'pore has taken initiative to secure their fish supply by investing in fish farm im Vietnam and the Sultan of Brunei has purchased cattle farm in Australia to ensure sufficiency for his majesty's subject