Analysis on Rice Industry in Malaysia

1. Rice supply-demand status in Malaysia

Rice is the third most important crop in Malaysia after rubber and palm oil, being a key part of everyday Malaysian food. It is the most common grain in Malaysia, both in production and consumption. In Malaysia, rice is mainly grown on the Peninsular and Borneo Island, about 300,500 hectares in Malaysia Peninsular and 190,000 hectares in Borneo Islands.

The average consumption of rice of Malaysian citizen is about 82.3 kilograms per year. The contentious growth of the population is calling for more research and technological advancement to increase rice production for consumption within the nation.

Malaysia Milled Rice Domestic Consumption by Year Market Year

From the above chart, we can conclude that: with a population growth rate of 2.7% annually, an estimated additional 45,000 tonnes of rice is required each year just to maintain the current per capita consumption levels.
But, how is the rice production situation in Malaysia?
Malaysia Milled Rice Production by Year Market Year
1106.74

Malaysia has also increased its production of rice in many ways to ensure food security and to meet the demand of the population, but still, there are many restrains in its local rice industry.

The average annual growth rate of estimated rice consumption in the long and short run, consumption, production, and population
The national average of rice production in Malaysia is only 3.0 tons per hectare. The per capita consumption of rice is 82.3 kg per year. The local productions of rice can fulfill only 60-65% of local requirements, even with the high production, it still needs import rice from other countries, like Thailand, Vietnam, China, and Pakistan. With the increasing demand for rice in the future due to the increasing population, lesser supply is estimated for the future. This situation can lead to a shortage in the rice market and as an open economy, Malaysia needs to import rice from other countries to fulfill future market demand.
That is to say, Malaysia is a net importer of rice!
Data shows that 40% of rice consumption in Malaysia is imported from countries.

Rice in Malaysia is protected by its government through price controls, subsidies, tariffs, and buffer stocks. Thanks to the national interest in food security, protection of farm incomes, and ensuring a sufficient supply of rice, and since rice is the main staple food for the majority of the populace. Due to the rice crisis in 2008, the Malaysian government has increased the rice stockpile from 92,000 Mt to 292,000 Mt, aims to ensure the adequate supply for the higher consumption for rice. Trade barriers also protect domestic producers.

2. Problems faced by the rice industry in Malaysia

Even though rice production in Malaysia showed positive growth, rice production still faces many challenges, which are related to economic, social, technology, and conformity to field infrastructure, etc.

Those constraints include:
★ Industrialization, urbanization, and expansion of residential areas lead to limited available farmlands;
★ Promising and attractive employment in industrial sector leads to an acute energetic labor force shortage;
★ Substantial efficiency gaps between smallholders and estate sector lead to low productivity and uneconomic holding size overall;
★ lack of modern farming machines (paddy reaper harvester, paddy transplanter), rice processing equipment, for example, rice milling machine, and rice by-products reprocessing facilities to utilize them at full economic potential, such as rice husk processing machines – flat die wood pellet mill and biomass briquette machine;

★ The existing by-products from rice mills are not fully utilized by the rice company. The rice mills produce a significant quantity of by-products such as broken rice, rice bran, and rice husk. However, only a mall portion of those by-products are fully utilized. Most of the by-products are sold directly to the downstream industries at a subsistent price. ★ The limited paddy drying capacities of rice mills still is the bottleneck of the rice industry in Malaysia. Quality degradation is caused by the delay in the drying of harvested paddy which can adversely affect the yield and the productivity of rice mills.

3. Effective methods to help Malaysia out of difficulty

Government: to achieve the aim of 70% rice self-sufficiency level (target in the Tenth Malaysia Plan), several measures have been taken by the government to stabilize the rice supply, for instance, by maintaining the rice stockpile at 292,000 tonnes or sustained consumption for 45 days.

Also, the government will establish a long-term contract with countries to import rice, with the agreements to export palm oil or oil products to the corresponded countries. Furthermore, the Malaysian government aims to maintain or improve the rice production rate by upgrading the infrastructure of the existing planting areas.

Enterprises in the rice industry: rice processing activities consist of paddy harvesting, drying, rice milling, and packaging plant. The downstream industry involves the value-process industry, for instance, vermicelli plant, rice flour mill, animal feed mill, rice bran oil plant. The aforementioned challenges, along with the continuous rise in the energy cost and stricter environmental regulations, have combined to emphasize the growing importance of the optimal planning and synthesis of a resource-efficient network of processes for the rice industry.

There are prospects for the development of the rice industry in Malaysia in order to cater to the increased demand. With the improvement in domestic incomes and a rising standard of living, the production of affordable quality rice can be a step in the right direction.