The Green Revolution

Starting in the late 1960s, a new package of paddy production technologies was applied intensively in Peninsular Malaysia, an area that had experienced perennial rice deficits under British rule necessitating the regular importation of rice.Footnote ¹⁸ As in other such Green Revolution countries as Indonesia, India, Sri Lanka, and the Philippines, the changes thereby induced in Malaysia's rice sector were incredible; whether they had positive or negative consequences for the society in question stoked animated debates among officials and scholars.

In the mid-1960s, the country's Department of Agriculture began introducing a series of short-maturing, fertiliser-responsive, high-yielding seed varieties (HYVs) whose grain quality and pest resistance gradually improved with time. In 1966, work began on an expansive irrigation scheme in the northwestern Muda River area of Kedah and Perlis, in part financed by a RM135 million (US$45 million) loan from the lending arm of the World Bank, the International Bank of Rehabilitation and Development (IBRD).Footnote ¹⁹ In 1970, a government agency, the Muda Agricultural Development Authority (MADA), was established to oversee the approximately 95,000 hectare project. Two years later, the IBRD funded a smaller irrigation project in the eastern coastal state of Kelantan. Buoyed by the country's surfeit of foreign reserves, owing to strong agricultural export performance and fiscal conservativism, the lending body clearly considered Malaysia ‘bankable’.Footnote ²⁰ By 1975, the Muda project was in full operation with a 93 per cent coverage rate for the double cropping of rice.Footnote ²¹

Increases in production were rapid and striking. In 1971–72, for example, the off-season crop, made possible with improved water control and the use of HYVs, accounted for 40 per cent of country's total production against 5 per cent in 1962.Footnote ²² Total production, which had averaged 971,000 tons from 1956 to 1965, rose some 73 per cent, or 1.68 million tons, on average per annum, from 1966 to 1975.Footnote ²³ Despite naysayers, the willingness of Malaysian growers to adapt to the new technology allowed the government to achieve its rice self-sufficiency target of 90 per cent under the Second Malaysia Plan (1971–75). For the subsequent five-year plan (1976–80), 92 per cent of a 100 per cent target was fulfilled.Footnote ²⁴

Massive public investment also accompanied the production surges. In the First Malaysia Plan (1966–70), over 35 per cent of the development expenditure on agriculture was budgeted for irrigation.Footnote ²⁵ By the Third Malaysia Plan (1976–80), the RM621 million budgeted was over 80 per cent higher than in the first plan in absolute dollars. Moreover, public spending schemes included subsidies for the individual farmer. In the late 1960s and early 1970s, Muda planters paid about one-third of the estimated real costs of irrigation services per acre per year.Footnote ²⁶ Meanwhile, the costs of nitrogenous fertilisers were subsidised by 30 per cent from 1966 to 1970. Subsequently, officials introduced and scrapped a number of credit and price support programmes, as the price of urea fluctuated wildly.Footnote ²⁷ On the whole, Malaysia's rice farmers responded positively to these price discounts. Between 1970 and 1982, the use of chemical fertilisers more than doubled per hectare of arable land.Footnote ²⁸

Despite the subsidies, the application of pricey inputs, including imported pesticides and herbicides, required farmers to use more cash than was needed under more traditional cultivation techniques.Footnote ²⁹ As production loans for farmers surpassed the importance of off-season consumption loans, the government established institutional channels to supply the cash and credit that was exceeding the means of the average Chinese shopkeeper or paddy dealer who had served as the farmers’ lender of first instance.Footnote ³⁰ Notably, in 1969, with World Bank support, the state set up Bank Pertanian Malaysia (Agricultural Bank of Malaysia, Agrobank). Moreover, existing grassroots organisations such as the Lembaga Pertubuhan Pertanian (Farmers’ Co-operatives Societies) and the Farmers’ Associations were replaced by larger Farmers’ Organisations (FO) predicated on the successful Taiwanese model. The FOs became the main channels through which the fertiliser credits were distributed to farmers.

Paddy farmers were also compensated for their output. Increases in production could have led to lower prices, but the government decided otherwise. Between 1965 and 1972, guaranteed minimum prices (GMP) were about 17 per cent above world market prices.Footnote ³¹ Meanwhile, from 1971 to 1976, the GMP rose 63 per cent in domestic price terms, all the more striking because of Malaysia's high production costs, estimated in the early 1970s at RM27.41 per picul, or about double the world price.Footnote ³²

Domestic political considerations accounted for Malaysia's distinctive pro-producer policies in contrast to pro-consumer policies in the Philippines, Indonesia, and Thailand. The usual objectives of improving allocative efficiency and raising national income were marginal considerations in Malaysia's rice policies.Footnote ³³ For the semi-sovereign, federal elections of 1955, high rice prices did become a campaign issue for urban consumers and the GMP was lowered.Footnote ³⁴ But with the victory of the Alliance — a coalition comprised of UMNO, MCA, and the Malayan Indian Congress — and the granting of Malaya's independence in 1957 (renamed the Federation of Malaya), attention was increasingly drawn to the plight of the country's poor rice farmers. More than 90 per cent were estimated to be ethnic Malays. While professed desires to be self-sufficient in rice may have been propagandist,Footnote ³⁵ populist pressures to enhance the incomes of rural Malays were weightier. This was especially voiced by UMNO's rank-and-file members, who demanded state intervention replace the laissez-faire approach of the colonial past. Yet UMNO's leadership, led by Tunku Abdul Rahman, demurred and favoured a continuation of British policies; where intervention was justified, if at all, it was on behalf of Malays in the economy's modern sectors. The Alliance's first Five-Year Malayan Plan (1956–60) reflected this view.Footnote ³⁶ Increasing criticism over the state's neglect of the rural sector from the likes of the economist and one-time vice-chancellor of the University of Malaya, Ungku Abdul Aziz,Footnote ³⁷ and rising electoral competition forced the government to commit more fully to rural development beyond existing but ineffective programmes headed by the Rural Industrial Development Authority.Footnote ³⁸ Notably, there were political motivations behind the government's decision in the early 1960s to approve the aforementioned Muda project as a means to bolster the Alliance's standing among Kedah's rice farmers.Footnote ³⁹ Yet, as the project neared completion, the country's politics shifted dramatically. The devastating ethnic riots of May 1969, the subsequent suspension of parliament, and introduction of the redistributive, interventionist NEP in 1971 raised the stakes of the government's commitment to poverty alleviation among rural Malays, regardless of cost, to a matter of national stability and even state survival.

Poverty alleviation

The government's rice policies produced more ambiguous results regarding poverty alleviation. According to one study, the income of farmers in the Muda area rose nearly two and half times from 1966 to 1975.Footnote ⁴⁰ Yet some cautioned against generalising from Muda-related data because of the high level of public investment in infrastructure the area received.Footnote ⁴¹ Nonetheless, by 1980 the national poverty rate among paddy farmers had declined to 52.7 per cent from 88 per cent in 1970. Yet with the national figure at 29.2 per cent, and the overall rate in agriculture at 45.7 per cent, paddy growers were falling further behind the rest of the population. And the disparity continued to worsen; by 1985, paddy farmer poverty rose to 58.3 per cent against a shrinking national rate of 24.1 per cent.Footnote ⁴² Even in Muda ‘still almost half of the paddy farm households … were poor in mid-1982 and half of these were living in hardcore poverty’.Footnote ⁴³

Disquiet over the paddy farmer poverty rates contributed to the introduction in 1980 of a controversial paddy bonus scheme, a policy that remains in effect today. The plan was to price the bonus at RM33 per ton and implement a system where the grower could exchange a coupon for cash after six months. Displeased with the amount offered and the forced savings element of the plan, growers staged a large demonstration in Alor Setar, Kedah's capital. Although blaming the unrest on opposition Pan-Islamic Party (PAS) and communist troublemakers,Footnote ⁴⁴ officials acquiesced to both demands: They converted the scheme into a direct cash payout of RM165 per ton (on top of the official procurement price of RM463 per ton). A seasoned expert recalls that rice policy in the 1980s focused on tackling the ‘3Ps’ — poverty, paddy, PAS.Footnote ⁴⁵

In fact, because gains from the bonus scheme accrued disproportionately to the richer farmers, the programme exacerbated the income disparity between large and small farmers. Nor was the scheme able to address structural impediments to poverty alleviation. Here I will highlight just two. One concerned uneven land distribution. In the mid-1970s, for instance, some 60 per cent of farm holdings in Muda accounted for only about 25 per cent of the project area.Footnote ⁴⁶ Throughout Kedah, average farm sizes declined from 1.31 hectares in 1967 to 1.20 hectares about a decade later.Footnote ⁴⁷ These figures fell far short of estimates of scholars of the three-to-five hectares that were required to lift a paddy farming household of five out of poverty.Footnote ⁴⁸

The shrinking farm was in part the result of land consolidation in the Muda area, where large farmers dismissed tenants to reap the rewards of the new technology and price distortions themselves.Footnote ⁴⁹ Despite some land consolidation taking place, at the same time, in Muda and elsewhere fragmentation of land ownership was having a larger impact. To be sure, the oft-mentioned inheritance practices of Islam and customary practices (adat) where descendants were bequeathed equal amounts of land played their part. These cultural practices were long-standing, however.Footnote ⁵⁰ What had changed in the meantime was, first, increased land pressure owing to rapid population growth (2.95 per cent per annum from 1960 to 1971) and, second, subsidies and government price supports were capitalised into land values, leading to paddy land inflation.Footnote ⁵¹ For good or ill, government programmes and the concomitant rise in land values facilitated the marginal farmer's ability to eke out a subsistence lifestyle. But if he was able to double crop no matter his precarious state, he was better off than those without access to modern irrigation who continued to sow a single crop each year.

During the early Green Revolution the landless did benefit, since double cropping afforded more employment opportunities. But the second structural impediment to poverty alleviation under discussion, mechanisation, soon altered the landscape. Landless labourers were squeezed by the arrival of the large combine harvesters toward the end of the 1970s, which included their active promotion by the agricultural agencies. James Scott reported a 44 per cent decrease in wage receipts as of 1980.Footnote ⁵² The politicised provision of state resources only worsened matters. Richer farmers dominated the FOs by forging tight alliances with UMNO that sought to deprive PAS supporters of state largesse.Footnote ⁵³

Caused by push and pull factors, outmigration did ensue. Agricultural labourers and small growers, for example, abandoned paddy lands in search of urban-based jobs in the booming manufacturing sector.Footnote ⁵⁴ In the early 1980s, it was estimated that over 2 million hectares of agricultural land, one-fifth of which was paddy land, was left idle.Footnote ⁵⁵ Those who stayed behind sought to increase their off-farm income. But while at this time official granaries where public resources would be concentrated for double cropping were established, efforts at consolidating the smallholdings into larger efficient units were frustrated by the unwillingness of many land owners to sell for economic (aforementioned rising land values) and cultural factors.Footnote ⁵⁶ This kind of inefficient use of resources, including the pumping of hundreds of millions of ringgit into the sector via subsidies and price supports, piqued the ire of the World Bank. Its scathing 1988 report contrasted the paddy sector's marginal economic value — exemplified by its 1 per cent contribution to Malaysia's gross domestic product — with the massive subsidies the sector was still receiving. In 1986 alone, subsidies totalled about RM490 million, or RM585 per ton of rice produced domestically.Footnote ⁵⁷

In all, the Bank decried the industry's ‘increasing market disorder’ and ‘extreme market rigidity’, which resulted in a contraction in production and stagnation in yield growth, despite the government's ‘benevolent intervention’.Footnote ⁵⁸ Although yields vary considerably from year to year, the pattern of low yield growth had become the norm — from 1985 to 2010, on average annual yields rose a tick above 1 per cent.Footnote ⁵⁹ Improved seed quality, mechanisation, and limited expansion of irrigation systems in the country's then eight granaries accounted for the existing growth.Footnote ⁶⁰

Reasons for low yield growth are rooted in the constraints and policies highlighted above; others resonate beyond Malaysia — from the lack of a second Green Revolution productivity boost to a rapidly ageing farm labour force.Footnote ⁶¹ In its 1988 report the World Bank predictably recommended liberalising factor prices and output prices to remedy the sector's ills. Just as predictably, the Malaysian government, even with the official phasing out of the NEP in 1991, demurred. But belatedly it did implement a policy prescription that is popular with the World Bank — privatisation. We now turn to events leading to the privatisation of Malaysia's rice parastatal.

FAMA to LPN

Besides increasing paddy production and buying the political support of farmers through income enhancement schemes, Malaysia's Green Revolution policies also sought to ensure that Chinese interests did not disproportionately profit from the production surges through the milling of paddy and marketing rice. These post-harvest, inter-ethnic dynamics have shaped the evolution of the grain sector's governance in Malaya (later Malaysia) resoundingly. The British, as is well known, favoured the export commodity sector over that of the food sector. This policy preference resulted in a colony dependent on rice imports to feed its bourgeoning population. Increasing numbers of Chinese tin-mine workers and Indian rubber-plantation labourers, for instance, consumed rather than cultivated the foodstuff. Therefore their capitalist bosses, beneficiaries of the colony's open economy, preferred cheap imports to keep wage bills low.Footnote ⁶² Courtenay's coarse characterisation of British rule as ‘the century of neglect’ of the Malay peasant is not without merit.Footnote ⁶³ The colonial government did try to establish rural cooperative societies in the 1920s to address the farmers’ plight, particularly in Kedah. Yet, the societies lacked the administrative and technical expertise and sufficient capital to supplant the network of Chinese shopkeepers-cum-moneylenders, traders, and millers who have been perpetually accused of exploiting the Malay peasant.Footnote ⁶⁴

With the granting of the colony's independence in 1957, the movement gained ground under the stewardship of Abdul Aziz Ishak, the Minister of Agriculture and Cooperatives. Ishak aggressively promoted the cause to counter the stranglehold the Chinese had on the rural economy. The movement opened hundreds of co-operative milling societies.Footnote ⁶⁵ Ishak's belligerence, however, angered the premier, Tunku Abdul Rahman. The Tunku, as he was known, was protective of the inter-ethnic cooperation intrinsic to the electoral juggernaut that the Alliance was becoming. Reflective of the intra-UMNO tension mentioned above, the Tunku sided with the MCA in defence of its constituents’ economic interests and in 1963 he dismissed the populist Ishak from the cabinet.Footnote ⁶⁶ While this meant that the ‘powerful political lobby of capitalism’ had prevailed in the countryside,Footnote ⁶⁷ the federal government also came to understand that more regulation of the food marketing system was needed. Accordingly, in 1965 it formed the federal Food and Agricultural Marketing Agency (FAMA).

A motivating factor behind FAMA's founding was to protect Malay farmers against the so-called exploitative Chinese middleman, including the deceitful usage of weights and excessive deductions for wet paddy.Footnote ⁶⁸ Yet, FAMA was operating in an environment that preceded the production spurts of the late 1960s and the 1969 riots, so efforts to turn the agency into a body with rigorous executory powers were lukewarm. As the Green Revolution-led increases came on stream, the government decided that an agency devoted to paddy and rice would be beneficial. Formed in 1967, the Padi and Rice Marketing Board managed a dozen or so local regulatory and trading schemes as an effort to enforce regulations that guided the sector according to the act upon which FAMA was established. But significantly the Board could not help farmers overcome credit constraints in a market dominated by paddy buyers. As was noted above, the government sought recourse by promoting FOs with financial backing from Agrobank.

Changes in the political environment after 1969 radically transformed governance in Malaysia; the grain sector was no exception. The restrictions on civil liberties and the growing coercive authority of the federal government were manifested in powers granted to the Lembaga Padi dan Bernas Nasional (LPN, National Paddy and Rice Authority), the Padi and Rice Marketing Board's successor. To be sure, the broad objectives of LPN, established in 1971, had public good intentions: safeguarding fair and stable prices for paddy farmers and consumers, overseeing a national emergency stockpile, recommending policies, and coordinating their implementation. The LPN's founding Act of 1971 also gave LPN officers extraordinary powers of arrest, seizure, and confiscation. While the government justified the granting of these powers to curb smuggling, their insertion into the Act was also designed to control or threaten Chinese interests in a politically delicate sector.Footnote ⁶⁹

To control the price of rice, LPN had an array of mechanisms at its disposal — managing a buffer stock, determining import quotas, instituting variable tariffs, and enforcing compulsory sales by millers. The 1973–74 international rice crisis inadvertently furthered LPN's consolidation of the industry. When private traders baulked at purchasing rice stocks at inflated prices on the world market, in 1974 the government introduced price controls and tasked LPN to contract with exporting governments to secure rice. Two years later, the government issued the body its monopoly import rights.

LPN's staff expanded rapidly — from 29 in 1970 to almost 5,000 by 1983.Footnote ⁷⁰ The agency was busy constructing and operating a number of integrated milling, drying, and storing facilities. Boosting the sector's artificial drying capacity was vital because the threat of rain made drying the wet-season crop outside risky. Large amounts of ruined paddy would have been a ‘political embarrassment for the government’.Footnote ⁷¹ LPN also extended its reach via procurement. By 1985, it was purchasing nearly one-half of all paddy produced.Footnote ⁷² Not only did Chinese traders fret this crowding out; so too did the World Bank. Besides LPN's increasing procurement rates, in part prompted by political pressure to buy low quality rice, the Bank complained about inefficient LPN mills. The latter's recovery rates hovered between 52 and 60 per cent, below the average of 62 to 64 per cent in private mills.Footnote ⁷³ Yet, the latter were the ones closing; some remained but operated at one-third capacity.Footnote ⁷⁴ Overall, the heavy costs borne by consumers and the government on account of LPN's growth worried the Bank. In 1986 alone, it reported that the agency's domestic activities operated at a RM96 million loss, which did not include the hundreds of millions spent on farmer subsidies.Footnote ⁷⁵ Aided by strong oil revenues, however, the government readily bore these costs. As demonstrated earlier, cost–benefit analysis hardly figured in the government's paddy and rice policies. Nor were its policies placing a strain on its finances. After all, in this same year, 1986, the costs of imported rice constituted a mere 0.03 per cent of Malaysia's export earnings.Footnote ⁷⁶ By the early 1990s, however, consonant with the country's budding privatisation programme, Prime Minister Mahathir Mohamad, who cared little for smallholder agriculture, opted to embark on a different course of action regarding the rice industry.Footnote ⁷⁷

Bernas

In 1994 after incorporation, LPN became known as Bernas. Privatised in 1996, Bernas's shares were floated on the Kuala Lumpur Stock Exchange (KLSE) a year later. Although the first grain parastatal in the region to be privatised, its change in status failed to stoke controversy in large part because Mahathir's privatisation drive had been expanding for a number of years amid robust economic growth. Privatisation was fundamentally altering the foundation of Malaysia's political economy, especially as a politically-inspired means to increase Malay private capital accumulation.Footnote ⁷⁸ Illustratively, the manner in which Bernas was privatised, distinct from the neoliberal approach where entities are sold to high-bid investors who gain management control, was consistent with Mahathir's modus operandi. Notably, there was only one bidder for LPN from an obscure consortium named Budaya Generasi Sdn Berhad (BGSB). BGSB turned out to be controlled by political insiders. Representatives of thousands of farmers (and others) were also cut in on the deal.

Owning 75 per cent of Bernas, BGSB comprised four public entities — farmer associations under the auspices of MADA and the Kemubu Agricultural Development Authority, the National Farmers’ Association, and the National Fishermen's Association. Together they may have controlled 34 per cent of BGSB.Footnote ⁷⁹ BGSB's largest shareholder, Permatang Jaya Sdn Bhd, with a 44 per cent stake, was owned by Shahidan Kassim, the former head of FAMA and then Chief Minister of Perlis (1995–2008). Bernas's managing director, Mohamed Ibrahim Nor, was a former senior executive at Fleet Group, a major UMNO holding company; his company (Simpletech Sdn Bhd) held a 5.5 per cent stake in BGSB.Footnote ⁸⁰ Other minority BGSB shareholders included a former deputy prime minister and a Mahathir confidant. The Finance Ministry, with a 10 per cent stake, retained a golden share, meaning it held veto power over the board's decisions. The ministry also placed a representative on the board and after a 1999 reshuffle, so too did the ministries of Agriculture, Trade, and Home Affairs. In all, despite ‘privatisation’, government and UMNO control over Bernas remained paramount.Footnote ⁸¹

Even before its 1997 initial public offering (IPO), Bernas began acquiring local rice industry firms, which entailed buying Chinese-owned entities. By 2000, Bernas had purchased some 25 companies. It also restructured by establishing four subsidiaries under a corporate umbrella known as the Bernas Group. Alongside domestic expansion, the corporation entered into joint-ventures to facilitate direct participation in international trade. In 1997 alone, it signed agreements with companies in Pakistan, Thailand, Australia, and the Republic of Guinea. Subsequently, it made similar arrangements with state-owned heavyweights in Vietnam and China.

Despite this expansion, early on Bernas's share price had trouble gaining traction. It took almost two years for it to return to its November 1997 IPO price of RM2.20.Footnote ⁸² Ostensibly the economic turmoil of 1997–98 Asian Financial Crisis (AFC) hurt Bernas, but in reality investors simply did not find rice and regulation ‘sexy’.Footnote ⁸³ Still, the company's fundamentals were sound. Population growth of over 2 per cent ensured a steady increase in demand, and Bernas had cornered over half the rice market — about 35 per cent through imports and another 20 per cent via domestic procurement. It owned almost 40 mills and, most valuably, held a 15-year monopoly concession on imports (starting from January 1996). Import rice operations from 1999 to 2001 comprised on average about 77 per cent of the Bernas Group's profits.Footnote ⁸⁴

As part of its 1996 privatisation agreement, the company was mandated by the government to fulfil several so-called social obligations.Footnote ⁸⁵ In addition to managing the national stockpile, they included acting as the buyer of last resort, which meant purchasing low quality rice at an inflated GMP, administering both the bumiputera rice millers programme intended to increase Malay equity in the industry, and the Paddy Price Subsidy Scheme. As Bernas was expected to pay these programmes’ costs in exchange for the profits it would earn from its monopoly on rice imports, the company's profitability would be limited. In 1999, for example, revenue of RM1.9 billion delivered only RM120.4 million in pre-tax profits for a profit margin of just 6.3 per cent.Footnote ⁸⁶ Bernas's managing director quipped: ‘We make some money, but we don't make much’.Footnote ⁸⁷ Nor's admission failed to quell complaints from competitors about the firm's apparent aim to monopolise the industry. In response, Nor retorted: ‘That is not our intention. Why should we? … Anyway, the industry is big. A lot of players can participate’.Footnote ⁸⁸ The Minister of Agriculture appreciated Bernas's industry presence: Since its privatisation, he crowed, it had saved the government RM1.5 billion in annual expenditure.Footnote ⁸⁹

To overcome perennial rice industry problems of smuggling (from neighbouring Thailand) and of inconsistent earnings owing to fluctuating rice prices, Bernas continued to diversify, restructure, and expand. In 2001, it purchased a 30 per cent stake in Singapore-based Gardenia Bakeries for about RM55 million. The company also expanded vertically to improve efficiency and distribution networks; horizontally, it ventured into such dry foods as flour and sugar. As its corporate strategy of achieving a 50:50 split in rice and non-rice revenue generation became apparent, word spread about ambitions of becoming a Malaysian Nestlé.Footnote ⁹⁰ To reduce operating expenditures, Bernas cut staff too, a controversial, though common, tactic in privatisations. It used a financially difficult year (2002) as pretext to offer a voluntary separation (VSS) scheme to over 1,500 of its staff. The scheme was recommended by the accounting and consultancy firm Ernst and Young, which had estimated overstaffing at about 50 per cent.Footnote ⁹¹ Despite the VSS, Bernas paid executive and non-executive directors over RM4 million in salaries in 2002 and a 10 per cent dividend to shareholders of RM21 million.Footnote ⁹²

Since Bernas made most of its money from imports, maintaining the national self-sufficiency level (SSL) in rice for the Third National Agricultural Plan of 1998–2010 at 65 per cent benefited the corporation.Footnote ⁹³ Still, its vigilant leadership did not take favourable government treatment for granted. Prior to Mahathir's October 2003 resignation, for example, it was reported that Bernas struck a marketing and distribution deal with a marketing and sales unit of a food manufacturer linked to the family of then deputy prime minister Abdullah Badawi, Mahathir's hand-picked successor.Footnote ⁹⁴ It was also around this time that Bernas's ownership structure was undergoing changes that proved more controversial than its original privatisation.

Three crises: Economic, electoral, food

It is well known that Abdullah Badawi strove to devise a distinctive policy framework in order to move out from the large, overbearing shadow cast by his former boss. Badawi cancelled some of Mahathir's favourite economic megaprojects, such as the double-tracking Malaysia–Singapore rail project.Footnote ⁹⁵ In social policy, Badawi promoted the concept of Islam Hadhari (Civilizational Islam), with its emphasis on personal piety and tolerance, as a means to soften some of the government's Islamist policies that had characterised the late Mahathir period.Footnote ⁹⁶ Less well-known was Badawi's attempt to revitalise the food-based agriculture sector, including the rice industry. One reason for this thrust was to arrest the urban–rural income gap that worsened under Mahathir.Footnote ⁹⁷ Mahathir's indifference toward the rice sector can be gleaned from the measly target of 0.2 per cent per annum for rice production growth set in the 8th Malaysia Plan (2001–06), Mahathir's last. Badawi's five-year plan, in contrast, pledged a target of 2.3 per cent growth per annum to be achieved by enhancing productivity through improved irrigation and drainage systems and more farm-to-market roads.Footnote ⁹⁸ To accomplish these results, Badawi needed, first, to improve local public service deliveryFootnote ⁹⁹ — which had deteriorated under Mahathir — and, second, the necessary time and authority to implement his programmes, especially at the local level. In the end, as a weak prime minister, Badawi had neither.

Where Badawi's approach demonstrated more continuity with that of Mahathir's was with the cultivation of bumiputera tycoons for political purposes. Illustrative was the case of Syed Mokhtar Albukhary, Malaysia's wealthiest such businessman today. Albukhary was born of humble origins in Alor Setar, Kedah in 1951. According to his authorised biography, he began his career as a small-scale trader, and soon thereafter, he obtained an LPN licence to trade in rice. Subsequently, he received considerable help in the field by the agency's officials as a bumiputera in a Chinese-dominated field. Through opportunity and industriousness, he continued to take advantage of NEP-inspired, bumiputera government programmes to secure loans and supply contracts from the likes of pro-Malay entities such as the Federal Land and Development Agency and the Ministry of Defence. Having expanded into manufacturing, by the mid-1970s he had befriended Muhyiddin Yassin, then managing director of a state-owned, government supply company. Albukhary also worked closely with the aforementioned Shahidan Kassim.Footnote ¹⁰⁰ By the 1980s, Albukhary had business interests in shipping, construction, palm oil, sugar, and property development, especially in Johor, where Yassin, by 1986, had become chief minister.Footnote ¹⁰¹ Albukhary's ascent to the pinnacle of Malaysia's corporate world, however, would need a path cleared by the destruction caused by the 1997–98 AFC.

Reportedly Mahathir and Albukhary first met face-to-face in early 1997 when the former tasked the latter to build an Islamic civilisations museum in the nation's capital.Footnote ¹⁰² Having passed Mahathir's ‘test-case’ with aplomb, Albukhary earned the autocratic prime minister's trust. In the meantime, the AFC began battering Malaysia's economy — by early 1998, the ringgit had lost almost 50 per cent of its value; by mid-year the stock market shed about 70 per cent of its valuation; and by year's end the gross domestic product contracted 7.5 per cent. Aligned with the government, the companies of Mahathir's so-called cronies incurred colossal debts that required equally massive state bailouts.Footnote ¹⁰³ Notable casualties included Halim Saad's Renong and Yahaya Ahmad's DRB-Hicom, entities that the Mahathir had designated as Malay pioneers in his vision of the country's large-scale industrialisation.Footnote ¹⁰⁴

Although hit hard, Albukhary's companies were less entangled in the tentacles of national political power and thus were less exposed financially. They survived the AFC, bruised but not beaten.Footnote ¹⁰⁵ If some pro-market reformers hoped that the experience of AFC would convince the country's leadership to dismantle the dense, collusive networks among UMNO, the government, and big business, the budding Mahathir–Albukhary relationship would disappoint them.Footnote ¹⁰⁶ In 2002, Albukhary bought the UMNO investment fund National Corporation, which became part of Albukhary's Tradewinds Corporation, another government entity that had been privatised. By gaining control of other such prominent companies as the Malaysian Mining Corporation Bhd, DRB-Hicom, and the carmaker Proton, Albukhary was being tasked with rescuing indebted entities or reviving stalled projects. On accusations of being a new breed of crony, the well-known UMNO donor responded: ‘What crony? I have to be a reverse crony to be getting troubled projects.’Footnote ¹⁰⁷

Around this time, Albukhary began acquiring shares in Bernas. In 2003, a company understood to be associated with the tycoon bought about 18 per cent of equity interest in BGSB.Footnote ¹⁰⁸ Thus began a process that would take more than ten years for Albukhary to complete: to acquire the rice corporation in order to take it private from the renamed Malaysian Stock Exchange. Before showing how Bernas's mishandling of the 2008 rice crisis almost scuttled Albukhary's plan, the reason for Badawi not withdrawing the state protection that Albukary had enjoyed under Mahathir deserves a brief mention. After all, it is common in Malaysia for ‘disgraced’ political elites to have their crony-like business networks dismantled, as happened to the network of former deputy prime minister Anwar Ibrahim during the 1997–98 AFC following his dismissal from the cabinet and subsequent arrest.Footnote ¹⁰⁹

First, Mahathir, unlike Anwar, was not ‘disgraced’; he merely retired on his own accord, and thus retained significant influence within UMNO (which he used to lead the charge against Badawi following UMNO's dismal 2008 electoral result). Second, the swathe of strategic assets Albukhary controlled created a deep, encompassing co-dependence between him and the state. Sidelining Albukhary could have had repercussions for the economy in the immediate term, something which Badawi wanted to avoid. Lastly, the UMNO leadership's need for a stable of wealthy bumiputera did not dissipate with Mahathir's retirement. Badawi's working relationship with Albukhary, while less cozy than Mahathir's, made sense for the primary parties involved.

Whereas during the 1973–74 rice crisis the price spikes on the international market caused private traders to cease purchases, in early 2008 it was Bernas's turn. It cut imports by as much as 40 per cent.Footnote ¹¹⁰ While stockpiles remained adequate, worries among the populace over the availability of rice deepened. Already reeling from an electoral thumping in March of that year in which it lost its two-thirds majority in parliament for the first time since 1969, the government insisted that Bernas resume its imports. But the company baulked, infuriating government officials.Footnote ¹¹¹ They felt aggrieved because, first, the company had been profiting generously from its import operations (on average about RM135.8 million per annum from 2004–07Footnote ¹¹² ), and secondly, as recently as 2007, it had been treated with favour by having its import monopoly licence extended another five years. Seeing themselves as victims rather than culprits of the crisis,Footnote ¹¹³ Bernas officials sought to shift blame onto hoarding by ‘private’ (read Chinese) dealers, millers, and wholesalers.Footnote ¹¹⁴ Such provocations of course did little to resolve matters; so, the government felt compelled to procure rice directly from the Chinese and Thai governments. By late 2008, the crisis had abated, but the government's strained relationship with Bernas had not. With pressure mounting from Malay business associations eyeing a piece of the so-called import pie, the government commissioned a study to explore the possibility of nationalising the industry.Footnote ¹¹⁵ Upon further examination, the commission did not recommend this option; neither did it approve the large increase in the rice stockpile that the government ordered Bernas to hold because of its expense.Footnote ¹¹⁶ A year later, the government still claimed to be reviewing the contractual conditions under which Bernas holds its monopoly licence.Footnote ¹¹⁷

What course of action then has the government embarked upon since the crisis? One set of policies has pursued semi-autarky in food provision, principally by jettisoning the long-standing policy of maintaining rice production at about 65 per cent of domestic requirements. The gradual lowering of the rice SSL from a peak of 100 per cent in the 1970s had enabled more agricultural lands to be used for such high value-added, agro-industrial export commodities as palm oil, flowers, and tobacco. Since the rice crisis, the official SSL in rice has been raised, first, to 71 per cent in 2011, then increased further 100 per cent by 2020.Footnote ¹¹⁸

The federal government has invested heavily in boosting rice production by expanding the planted area and by raising yields, although not without controversy. From 2008 to 2014 lands devoted to paddy cultivation grew almost 5 per cent against the 6.7 per cent contraction experienced from 2001 to 2005.Footnote ¹¹⁹ Moreover, in 2012 PM Najib announced the establishment of four new granaries totalling 19,000 hectares — the first additions to the country's eight granaries since their initial designation in the mid-1980s. Planned since at least since 2010, two modest-sized projects are located in Pahang.Footnote ¹²⁰ Pahang is among Peninsula Malaysia's poorer states and Najib's home state where he began his career in politics. Over 100,000 small-scale farmers were expected to receive RM13,000 each in special compensation in addition to other poverty alleviation subsidies and standard farming subsidies such as the paddy bonus.Footnote ¹²¹

The two larger, forthcoming granaries are situated in less densely populated East Malaysia. The two 5,000 hectare projects, one in the coastal district of Kota Belud in Sabah and the other in Sri Aman in Sarawak, each involve about 3,500 farming households. Through improved irrigation, both schemes aim to roughly double existing yields to reach levels approximate to those achieved on the peninsula.Footnote ¹²² For years the federal government had hesitated from expanding paddy cultivation in the Borneo states because of the lack of post-harvest marketing tradition among the area's many indigenous groups, the expense of opening new wet-rice lands, the area's poorer soils that affect yields and taste, sensitivity over the autonomy of state officials in land matters as stipulated in the country's federal constitution, and general indifference.Footnote ¹²³ Yet the federal government responded to long-standing demands of local stakeholders to increase rice production following the twin shocks of 2008.Footnote ¹²⁴ East Malaysia may be part of the federal government's plan to bolster food security, but UMNO officials also now realise the indispensability of their Borneo BN counterparts in keeping UMNO in power nationally. During the 2008 and 2013 federal elections, BN retained power at the federal level only with the dozens of BN-won seats from East Malaysia.Footnote ¹²⁵ Accordingly, Sabah and Sarawak are referred to as the BN's ‘fixed deposit’.

Costs associated with economically unviable rice projects in East Malaysia are revealing for their political implications, and because of the token contribution they will make in improving local rice self-sufficiency levels even in best-case scenarios.Footnote ¹²⁶ The federal government has budgeted RM250 million for the Sarawak project and RM380 million for its Sabah counterpart. Both are construction boons, necessitating the building of flood mitigation works, water storage dams, local mills, and many kilometres of drainage and pump irrigation systems and roads by local contractors (and sub-contractors) with ties to state assemblymen.Footnote ¹²⁷ Rent-seeking opportunities also abound for local officials in the issuing of multiple permits related to the projects, and over time for other state-backed private actors through land grabs as local land values are likely to rise. In addition, in his 2015 budget speech, Najib announced that RM70 million has been allotted for expenditures associated with hill rice cultivation in the two states.Footnote ¹²⁸ This amounts to a nontrivial form of largesse circulating among local officials in charge of the distribution. Food security matters. It also cannot be denied, however, that the UMNO-led federal government subsequent to the electoral shock of 2008 heeded the complaints from stakeholders in East Malaysia, an area that imports 70-to-75 per cent of its rice requirements, to boost local rice cultivation. Electoral considerations have played their part.

Given different demographics and political dynamics, the addition of granaries in East Malaysia appears to be more about appeasing local state leadership while those in Pahang are concerned with providing individual voters with material incentives to stay within UMNO's fold. The latter dynamic also pertains to a large yield boosting, land consolidation programme under way in Kedah and Perlis on the peninsula. Rice estate management projects have existed in Malaysia since in the 1980s. With a target of 50,000 non-contiguous hectares by 2020, this latest attempt is the largest thus far. As of early 2017, some 30,000 hectares had been consolidated, with MADA targetting low producers of two-to-four metric tons of paddy per hectare for its programme.Footnote ¹²⁹

Discussions among relevant policymakers over amalgamating plots in the Muda area were a result of the 2008 rice crisis, but gained in earnest thereafter when the project was designated as part of Najib's multi-sector Economic Transformation Programme. Launched in 2010, the programme aims to promote innovation, competiveness, and efficiency in Malaysia's economy as means of raising the country above the much-debated middle income trap.Footnote ¹³⁰

Farmers are expected to lease their land rights to MADA for ten planting seasons (or five years). In addition to enhanced extension services provided by MADA, participants will receive extra subsidies from Bernas for land preparation, for fertilisers and pesticides, and for tractors. The government also has committed over RM2 billion to upgrade the area's decaying irrigation system (specifically to build over 100 tertiary canals).Footnote ¹³¹ Undoubtedly, this project furthers decades-old government initiatives designed to bolster the economic fortunes of rural Malays for, among others, political purposes. This constituency has been a stalwart of UMNO electoral support. Its importance has not only been enhanced by persistent gerrymandering to boost its electoral weightage, but with the erosion of UMNO's urban support in the 2008 and 2013 elections, rural constituencies have become even more critical.Footnote ¹³² This MADA-led project invokes the production versus income and technocratic versus political patronage dimensions of the Green Revolution described above.

Undoubtedly, rural Malaysia has undergone significant transformations since the days of the Green Revolution. The number of cultivators solely relying on income derived from paddy cultivation has shrunk. Increasingly members of farming households either no longer farm, having moved to towns or cities, or more heavily draw from non-farm sources of income.Footnote ¹³³ Nor does this imply, however, a complete deagrarianisation is underway.Footnote ¹³⁴ For starters, some farmers have turned to more organic means of cultivation in line with the growing awareness of the environmental consequences from a pure chemically-dependent, productivist approach to cultivation (although admittedly this number is still small in Malaysia). Moreover, further economic and spatial integration of the rural and urban has seen some urban-based, degree holders return to the countryside as part-time or weekend farmers,Footnote ¹³⁵ ostensibly facilitated by the state's generous paddy production subsidies. Lastly, in accounting for the surprising persistence of the smallholding class,Footnote ¹³⁶ Malaysia has, as elsewhere in its economy, relied heavily on foreign labour. Government data shows that in the agricultural sector, while broader than the rice industry per se, the foreign worker population has more than doubled from about 200,000 in 2000 to nearly 500,000 in 2015.Footnote ¹³⁷ Interviews on the subject give the impression that all cultivators, no matter how small their plot of land, employ foreign labour (the majority are Bangladeshi) in some manner.

Of course, from a development perspective, bolstering rice production via such yield growth programmes as MADA's estate project in Kedah is a far more complex enterprise than simply purchasing greater quantities of rice from the international market. The former requires increased coordination among a number of actors across ministries and agencies, as well as the dispersal, reception, and implementation of technical knowledge.Footnote ¹³⁸ Meanwhile, as market liberals are at pains to point out, it is less costly and more efficient to purchase one's rice needs on the international market, which Malaysia has done more or less consistently for over a century.Footnote ¹³⁹ Although in apparent contrast to its production programmes, the government remains committed to this enduring policy, as evidenced by its latest extension of Bernas's import monopoly licence in 2011. To be sure, Albukhary only took over the rice corporation in 2014, but as we saw above, his intention to acquire it had been clear beforehand. As a major UMNO donor,Footnote ¹⁴⁰ he also has pledged commitment to the social obligations that are integral to Bernas's possession of its monopoly licence. We know this because the then Minister of Agriculture revealed in 2013 that Albukhary had written him a personal letter expressing his company's good intentions.Footnote ¹⁴¹ In other words, continuing cooperation between Bernas and the government appears to rest on a private, non-legally binding document. Since Tradewinds has purchased Bernas, worries by the deal's critics that Albukhary will use Bernas's strong cash flow to pay down the debt of his other companies apparently have been realised.Footnote ¹⁴² Bernas staffers also fear more layoffs.Footnote ¹⁴³ But as winning elections has become outstandingly expensive — as the current 1Malaysia Development Berhad (1MDB) scandal that erupted in 2015 over some RM2.7 billion (then approximately US$700 million), and possibly more, purportedly used by Najib to ensure UMNO's victory in the 2013 elections, has revealedFootnote ¹⁴⁴ — UMNO needs to maintain its stable of major donors whom Albukhary exemplifies. This is especially so if UMNO wants to maintain its status as the longest ruling party among so-called democracies.