Animal Spirits of Privatization: Rice Value Chain Upgrading for Malaysia?

Abstract

The privatization of state-trading enterprises (STEs) is posited as enabling dynamic upgrading. Malaysia has trialled this approach through Padiberas Nasional Berhad (BERNAS) as the lead firm in charge of development in the rice industry. Using published information, this study makes a longitudinal analysis at the structure, conduct, and performance post privatization through the global value chain theory. It shows that the entity has developed from a rice importation monopoly into a virtual monopoly/monopsony in rice value chain stages. In that patronage system, privatization and concentrated market structure have limited upgrading opportunities to their associated partners. Concurrently, it has morphed to a private company. The efficacy of allowing the pillar of national food security to be controlled by a private monopoly needs close examination. Only through that can governments ensure that broader social and development objectives are met, while minimizing the risks associated with both excessive reliance on a particular firm and the abandonment of competition.

Keywords:

• state-trading enterprise
• privatization
• rice
• value chain
• upgrading
• downgrading

JEL codes:

• L33
• Q13
• Q18
• O13

Notes

1 Three additional dimensions of GVC analysis are input–output structures, geographic scope, and institutional context (Gereffi and Fernandez-Stark, 2011). The ‘input-output’ process is the chain and understanding its evolution helps to identify the underlying segments differentiated by the value-added interventions. Additionally, it identifies the player hierarchy involved in the industry and changes in relation to the governance model. ‘Geographical scope’ reveals the position of lead firms within the geography of a chain. The ‘institutional framework’ identifies how local, national, and international conditions and politics shape value chains.

Additional information

Funding

This work was supported by Institute for Democracy and Economic Affairs.

Notes on contributors

Yeong Sheng Tey

Tey Yeong Sheng is a Senior Researcher at the Institute of Tropical Agriculture and Food Security of Universiti Putra Malaysia. He is also an Associate Research Fellow at the Institute of Strategic and International Studies.

Mark Brindal

Mark Brindal is a Fellow at the Water Research Centre of the University of Adelaide, South Australia.