KUCHING: The government is helping the struggling poultry industry tide over difficult times but economists say a market forces approach is important for long-term growth.
Universiti Malaysia Sarawak (Unimas) economist Jerome Kueh said the government wants to make sure the chicken industry keeps running smoothly.
These subsidies are like a safety net, they help reduce costs and give financial help where it is needed.
“Subsidies make sure chicken farmers and businesses related to them can keep working, producing chicken and other poultry products and supporting the economy,” Kueh said.
Furthermore, these subsidies help keep a steady supply of chicken and other poultry products in local markets, he said, adding, by encouraging local businesses, there is no need to rely so much on imported chicken.
“Without subsidies, if anything goes wrong in the supply chain or if we depend too much on imports, we risk not having enough chicken. This could lead to shortages or make chicken more expensive,” Kueh said.
He also pointed out that these subsidies could help keep chicken prices stable in that by reducing costs for chicken farmers, the savings can be passed on to the consumers.
He also said that the government is committed to looking after the people’s needs, especially when it comes to changes in the economy that could make chicken more expensive.
“If these changes cause chicken prices to go up, it could make it harder for people to buy them. So, the government wants to make sure people’s needs are not negatively affected,” Kueh added.
However, he reminded us that subsidies are more like a short-term solution.The governme
nt is now looking into making the subsidy system more specific, so it can help the people who really need it.
“The government is trying to fine-tune the subsidy system. By separating households based on how much money they have to spend, the government can manage resources better,” he said.
But we need to remember, relying on subsidies for a long time can lead to problems, he said, adding it might make the chicken industry too dependent on government help and stifle its growth and competitiveness.
“Subsidies can be good in the short term, but if we depend on them for too long, it can lead to problems and too much reliance on government support,” Kueh warned.
He believes that demand and supply, the basis of any market, should in the end, determine the long-term availability and prices in the chicken industry.
Supporting Kueh’s view, Centre for Market Education (CME) economist Carmelo Ferlito, said any subsidies definitely throw the economy off balance.
“These subsidies from the government cannot last forever,” said Ferlito.
He understood very well that the government’s idea to control prices and give RM200 million per month as ‘help’ to farmers is to make chickens and eggs cheaper for consumers.
However, Ferlito sees some problems with this strategy.
“Controlling prices might make some things cheaper, but it doesn’t stop the real reasons why prices go up, like the cost to produce something and the conditions in the market,” he explained.
“Also, it’s hard to believe that the government can correctly guess the prices for things like chickens and eggs, as they change based on how much there are and how much people want.”
Ferlito said that when the government puts a fixed price for things like chickens and eggs, people might want more than what’s available.
This could mean farmers produce less, or they may try to sell their goods in other countries where they can get higher prices.
“Farmers were once allowed to sell their chickens and eggs to other countries, but there was a time when this was not allowed.”
“If these prices continue for a long time, as we’re seeing now, the way people respond on the supply side might get delayed,” Ferlito said.
“Farmers might be scared to spend money on making more because they may not make enough money from the controlled prices.”
This delay can cause several problems, like not having enough chickens and eggs in the market, scaring new farmers from starting this business, and possibly making prices go really high when these policies are removed.
“When the price limits are finally removed, people might suddenly want a lot more, making things unbalanced,” Ferlito warned.
“Because of the delay in the supply side because of the price limits, there might not be enough to meet the high demand, which causes prices to go really high.”
So, according to him, the longer the government keeps a limit on prices, the higher the prices might suddenly jump when these limits are removed.
This can happen because the amount of things like chickens and eggs that farmers produce is slow to change and adapt. This could lead to a situation where a lot of people want these items, but there just aren’t enough of them available.
“It’s time to face the consequences. Sooner or later, we have to let the market do its job.”
Prime Minister Datuk Seri Anwar Ibrahim agreed to continue subsidising and controlling the prices of chicken and eggs from July 1. Up until June, this policy had cost the government around RM1.28 billion.
Right now, the highest price consumers can pay for a regular chicken is RM9.40 per kg, and for eggs, the prices are Grade A (45 sen per egg), Grade B (43 sen per egg), and Grade C (41 sen per egg) in the peninsula.
In places like Langkawi, Sabah, Sarawak, and Labuan, the highest prices for both chicken and eggs can be different depending on zones and locations.
