Two economists have rejected a PAS MP’s proposal that the government nationalise the production and supply of essentials such as cooking oil and rice, saying these sectors should be left to the free market.
Sunway University’s Yeah Kim Leng and Barjoyai Bardai of the Malaysian University of Science and Technology (MUST) said nationalising these sectors would add to Putrajaya‘s fiscal burden and saddle it with direct responsibility for producing essential goods.
Yeah said the nationalisation of key food sectors should only be done in times of emergency, such as to prevent famines or malnutrition among the poorest.
“It’s less compelling for economies with well-functioning markets and relatively stable price environments. Unless there are excessive profits or market manipulation, it is unlikely that the government will be able to lower prices.
“It is more likely that a government takeover will cause disruptions in production and supply chains, especially if decisions are shaped by political rather than economic considerations,” he told FMT.
Yeah also said governments often lack industry expertise and tend to be inefficient. Allowing it to monopolise industries may lead to lapses in good governance, he said.
Barjoyai agreed, saying there was no necessity to take over the production and supply of rice and cooking oil as Putrajaya was already subsidising both.
“The government does not need to control the production of these food items. It just needs to ensure that the supply is stable and the price is under control,” he said.
The economists were responding after Permatang Pauh MP Fawwaz Jan called on the government to nationalise the production and supply of the two items to boost its revenue and keep them affordable.
Speaking at the recently concluded PAS muktamar, the party’s ulama committee member said the market for such essentials has been dominated by conglomerates for too long and that nationalising these sectors would allow Putrajaya to reduce its reliance on corporate taxation.
Barjoyai said the claim that it would boost federal revenue was “a mere assumption”, arguing that the government could raise its revenue by increasing tax rates.
“If the government wants to control any business or industry, it should be one that has a higher profit margin, like telecommunications, for example,” he said.
Yeah said the production of rice and cooking oil should be left in the hands of as many private sector players as possible. He said competition would ensure adequate supply and keep prices affordable.
“Equally important, household income, especially among the B40, should be raised sufficiently so that all families have the means to cope with food price hikes without straining government fiscal resources.”
