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Tools And Technique Resolving Issues of Food Price Increase Due To Raw Material Price Increase In Malaysia.

Jaudah Abd Rani, Mohd Syazwan Jaafar, Siti Nurulhuda Razali, Mohamad Sabri Kamal, Muhammad Aaqhimullah A Rahman, Mohamad Syakir Mohamed Yusuf

ABSTRACT Food is any substance consumed to provide nutritional support for the

body. It is usually of plant or animal origin, and contains essential


nutrients, such as carbohydrates, fats, proteins, vitamins, or minerals. The substance is ingested by an organism and assimilated by the

organism's cells in an effort to produce energy, maintain life, or stimulate growth. Historically, people secured food through two methods: hunting and gathering, and agriculture. Today, most of the food energy consumed by the world population is supplied by the food industry. Food industry has come up with so many innovations and technologies that somehow it also makes the price of them increase. At some times, the price increase was so drastic that it causes some problems to the countries all over the world. This report will analyze the causes of the increasing food price and will provide the most excellence solution to handle this problem.

I.

INTRODUCTION.

Malaysia is ranked as the most progressive developing countries according to IMF, an organization monitoring financial flow over 188

countries. However, Malaysia is nonetheless not a country that is


exclusive from the impact of food price increase. According to IMF, in developing countries food price had raised to 45 percent since 2006 and there is no sign it will slow down. Thus, Malaysia is unexcused from this issues. In fact all countries are facing the same problem. In general, food is an important things in human life. It give nutrition to human body to continue their daily live which means it is consume. This issue is closely related to the spike increase of fuel price due to many factors. Fuel provide

means of transportation for the food to be processed as well as for the


food to be delivered to consumer. The increase demands of fuel internationally had affected the local market of the fuel. Due to the demand, Malaysia Government had to freeze the fuel subsidy and allow the fuel price to go from RM1.20 in 2001 to RM2. 10 dated November 2013. Based on this major factor the steadfast increase of the fuel price give a huge impact on food price.

II.

SITUATION ON RAW MATERIAL PRICE INCREASE

According to Wikipedia, the term raw material is to describe the material that came from nature before it undergo any kind of process or the primary goods of production. Such term applied to latex, iron ore, coal, logs, fuel, fish, grain, vegetables, etc.

In recent years, the global raw material price had shown a steep increase starting from early 1990. However, around 2007, Indexmundi, a website

that gather world statistic from multiple source reported a steep increase of
raw material price. The world price increase gave a huge impact of raw material price in Malaysia as we practice open and state-oriented trading with the world. Therefore, the changes happening globally will make an impact on Malaysia. For example, in 2008 the gasoline price in Malaysia increase by 40% making Ron97 from RM1.92/litter to RM2.70/litter. The spike increase due to the global selling price of gasoline that rose from USD 2.89/gallon to USD 4.12/gallon.

In Malaysia, raw materials such as fuel, rice, sugar, meat, chicken, flour, vegetables and etc. are the common subject of price increase. All these raw material contributed to the daily product we consume daily were given subsidy by the government to increase the power of purchase by the consumer. However, over the years, to catch up with the price of developing country status that Malaysia hold, the government cannot further increase the subsidy of each raw material. Therefore, the increasing cost had to be faced by the consumer itself. Along with

Malaysia vision towards achieving the status of high income country,


meaning high standard living cost, Malaysian have to face the increasing cost of consumable product that rooted from the increase price of raw material. The increase price of raw material brings to the increase cost of producing daily product that we consume.

III.

SITUATION ON FOOD PRICE INCREASE

The media have been debate about the sugar price that have be increases 20 cent recently in year 2013 (RM 2.84 per kg). Sugar have been an important ingredient that used by the Malaysian in daily life. The increases of the sugar price will make the Malaysian food will be increases. For an example, before the sugar price increase, a cup of tehO at the mamak stall is RM 1 but now its been RM 1.20. . The government give a statement that the rises of sugar price cant be avoided due to the increases the subsidy that the government need to cover. Besides that, a shock news regarding the sugar intake by the Malaysian have been

increasing sharply from 17 teaspoons (1970s) to 26 teaspoon (2000s) per


day which in critical zone.

Apart from that, increase price of rice caused daily meal rose up abruptly. In year 2011, a bag of 10kg Siamese rice was sold at average price of RM22.00 compared to year 2012, the average price of the rice become RM30.00/bag. The supplier claimed that the increase due to several factors. The agricultural subsidies set by the new policies depressed the sustainable cost production of the rice. Therefore, they had no choice but to increase the selling price as well. Natural disasters due to climate and weather related incident occurred in rice producing countries such as Thailand and Japan disrupt the crop production. The drought suffered by most equator countries in year 2012 distorted the annual rice harvest as well. Even though Malaysia harvest rice in the Northern State and East Malaysia, the rice production are insufficient to combat the local demand. Thus, the import rice that are highly influenced by the international price increase transmitted to local consumer.

IV.

TOOLS AND TECHNIQUE TO RESOLVE FOOD PRICE INCREASE

In this section, we will provide the remedial tools and technique in analysing the issues of food price increase due to raw material price increase in Malaysia. Due to the large impact given the increase of the food price from the increase price of fuel as one of raw material, we gather data regarding the fuel price from late 1990s till year 2013 to obtain the pattern of the fuel price for analysis.

After some discussion, a solution has been chose which are to reduce the intake of import food and increase the production of local food. For starters, we can see that the local foods are far cheaper than the import food. The qualities of the food are almost the same. So, the best way is by reducing the intake of import food. After that, the production of local food need to be strengthen so that it can replace the empty space left by the import food. After a while, local food can gain more thrust by the customer because local food was always surrounded by the rumours that the quality

of them from the import food are very huge. There were some other
advantages when increasing the production of local food. First, more job opportunities will appear because more workers will be needed in doing that procedure. Next, the level of poverty in the country can be lowered. When more job are provided, less people become unemployed and then the vision of Malaysia towards achieving the status of high income country can be achieved faster. It was like killing two birds with one stone.

V.

LIMITATION

While doing this project, there were some limitations that existed within our grasp. First is the limitation of our samples. All of the samples we had gathered were the information for the world and most of them were to general. So we need to narrow down the information so that the issue in Malaysia can be related to that information. Our second limitation is that time limit. We had done a great mistake because we started out this project late. The assignment was given on 21st October. But we only

started it out a week after that. Thus time limit has become shorter.
Fortunately, we were able to gather all the needed information and completed the report on time. For the source limitations, the internet has become our main source. We searched and collect most of our articles and news mainly from the internet. It is because, by searching it through the internet it is much faster and we can get the desired information easier.

VI.

CONCLUSION

Malaysia is a developing country and it also facing the problem of many developing countries in the world which is the increasing food price. The government of Malaysia cannot afford to further increase the subsidy of each raw material. As for that, the prices of the food increases and bring forth many opposition. This report has come up with a solution that can slow down the increasing food price. The solutions are by reducing the intake of import food and increasing the production of local food. The local food is cheaper and the quality is as good as the import food. To make it

even better, more job opportunities will be provided, thus decreasing the
level of poverty in the country. Lastly, it will increase the income of the country and Malaysia will become the country with high income status.

VII.

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Feyder, Susan ( 2011, Jan ) STARTRIBUNE Manufacturers scrambling as raw material prices surge [Online]. Available :

http://www.startribune.com/business/114824744.html

Joachim Von, Braun. (April 11, 2008) "High and Rising Food Prices: Why
Are They Rising, Who Is Affected, How Are They Affected, and What Should Be Done?" U.S. Agency for International Development conference, The Challenges of a Changing World Food Situation: Preventing Crisis and Leveraging Opportunity, Washington, D.C. Mathews, Robert Guy. Steel-Price Increases Creep Into Supply Chain, Wall Street Journal, February 3, 2011, http://online.wsj.com/article/SB1 0001424052748704775604576120382801078352.html

Richard M. Apkarian, Jr. ( 2011, Feb ) DICKSON WRIGHT Rising Raw Material Costs - What Have We Learned? [Online]. Available : http://www.dickinson-wright.com/news-alerts/Rising-Raw-Material-Costs--What-Have-We-Learned-02-01-2011 200708

Wikipedia.

world

food

price

crisis

[Online]

Available

http://en.wikipedia.org/wiki/2007%E2%80%9308_world_food_price_crisis Comodities Price Index Mundi [Online]. Available

:http://www.indexmundi.com/commodities/