Ministry sticks to eight sugar importers for Sarawak, says competition is healthy

Chong believes that competition in the sugar industry will do more good than harm to the country. — Reuters pic
Chong believes that competition in the sugar industry will do more good than harm to the country. — Reuters pic

KUCHING, June 14 — Domestic Trade and Consumer Affairs Ministry will maintain its decision to grant eight sugar import permits for Sarawak food and beverage (F&B) manufacturers despite concerns from two sugar refiners in Peninsular Malaysia, Deputy Minister Chong Chieng Jen said today.

He said the ministry believed that competition in the sugar industry will do more good than harm to the country, the business sector and the consumers at large.

Chong also noted that MSM Malaysia Holdings Berhad (MSM) and Central Sugar Refinery Sdn Bhd (CSR) have enjoyed monopolistic control over the sale and sugar in Malaysia’s domestic market for many years.

“However, it is the general policy of the Pakatan Harapan (PH) federal government to encourage more competition, reduce costs of doing business and enhance efficiency in all sectors,” he said.

He was responding to MSM and CSR’s concerns expressed yesterday that granting eight import permits for Sarawak would hurt local producers and lead to dumping by the foreign producers.

They also claimed that the move would force the domestic sugar refiners to slash costs, with  negative long-term impact on the local market.

However, Chong noted that the international raw sugar prices fell by more than 35 per cent in February year-on-year, going from US$0.45 per kg in 2017 to below US$0.30 per kg.

“Yet, despite the huge fall in its production costs for more than a year, the proportionate benefits of the reduced price were not passed on to the F&B manufacturers.

“This is especially the case for the F&B manufacturers in Sarawak who have no bargaining power against the two sugar refineries due to their relatively small volume of purchases.

“With the new policy to allow the F&B manufacturers in Sarawak to directly import sugar from foreign sugar refiners, it will provide substantial savings for these F&B manufacturers and reduce their costs of business,” he said.

Chong said one F&B manufacturer in Sarawak has entered into a contract to purchase sugar from the largest sugar refiner in Thailand at approximately US$400 (RM1,700) per tonne inclusive of transport charges.  

The deputy minister said the firm had been buying locally at RM2,700 per tonne and asked how it was possible for a Thai supplier to sell for RM1,000 less than local firms even after taking into account transport costs.

Chong said his ministry could not accept the two refiners’ explanation that they had to absorb the extra costs if international sugar price went up.

“This argument is untenable because at present the international raw sugar prices is US$0.28 per kilogramme,” he said, adding that for the past five years, the average raw sugar prices ranged from US$0.37 in 2014 to US$0.27 last year.

On MSM and CSR claiming they were obliged to hold stock for food security reasons at a cost of RM7 to RM20 million annually, Chong also rebutted this by saying Malaysians consumed 1.5 million tonnes of sugar worth RM3 billion annually.

The deputy minister said keeping up to RM20 million in sugar would be the equivalent of less than one per cent of total revenue and a poor justification for charging an additional RM1,000 per tonne over Thai suppliers.

Chong also gave his assurance that raw sugar imported from Thailand would be certified halal as Malaysia has a mutual arrangement recognising the halal certification issued by the relevant Thai authorities.

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