The Impact of COVID-19 on the Economy in Malaysia, Especially on the Food Supply Chain: An Essay

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The Impact of COVID-19 on the Economy in Malaysia, Especially on the Food Supply Chain: An Essay

Food is a necessity and a basic human right. It plays a vital role in the promotion of health and disease prevention. However, as recorded in the 2020 Global Hunger Index the GHI score trend has increased to 13.3 by comparing to 2012 which is only 11.8 (Global Hunger Index Rank, 2021). In order to overcome the spreading of the Covid-19 pandemic, the Malaysian government released the Movement Control Order (MCO) that effective from 18 to 31 March 2020, later extended to 14 April 2020. This was caused by a rapid rise in Covid-19 cases that lead to a food shortage in Malaysia (Herbert Smith Freehills, 2020). Food supply chains were gravely disrupted during this pandemic due to agriculture production decrease, distribution issues, panic buying and storage level decline. Therefore, this report will discuss food shortage during Covid-19 in Malaysia and introduce some solutions to address this issue faced by society.

Causes

Agriculture Production

Agricultural production is one of the main important parts of the food supply chain. The MCO in Malaysia affected the activities of the agriculture sector especially the material needed and labor supply that resulted in food shortage. The agriculture sector’s median and average wage is the lowest relative to other sectors, as most farmers are under the heading of B40 category. Low-income farmers face difficulties under MCO, according to the Department of Agriculture (DOA) Penang, because they cannot afford fertilizers, pesticides, seeds, machinery spare parts, or farm equipment during the Covid-19 pandemic. This is because the inflationary due to the cost of production increase as the price of the basics farming needs increase when there is limited availability. Therefore, the supply of agricultural product decrease leads to food shortages. Malaysia is heavily reliant on foreign labor, especially in low-wage industries such as agriculture. In 2010, approximately 2.0 million foreign workers were registered in Malaysia, accounting for approximately 17.0 % of total employment (Ismail and Yuliyusman, 2014). On the supply side, the agriculture sector is labor-scarce, as many foreign workers returned to their home countries during the MCO. The laborers were unable to return because the government had closed the borders and halted the intake of migrant workers (Ng, 2021). According to the Malaysian Department of Statistics, during the pandemic, the number of workers in the sector has experienced a 22% reduction. Despite a growing need for foreign workers, Home Minister Datuk Seri Hamzah Zainudin said that no policy decision has been made to bring them back into the country. As an example, Hamzah said about 40,000 foreign workers are required for the farming sector alone (Bunyan, 2021). Thus, these conditions slowed the distribution of food and agricultural inputs, posing challenges in ensuring a steady supply of food to markets (Aday and Aday, 2020).

Transportation and Distribution

Limited demand problems (57.8%), transportation and distribution issues (12.5%), increased marketing management costs (12.2%), delayed orders (11.9%), and inventory storage (5.5%) all affect the food supply (Hairuddin et al., 2020). Food supply in Malaysia is highly dependent on land transportation, such as lorries, to transport goods from farms that are typically located outside of cities (Chin, 2020). Logistics interruptions limited access to markets for selling products created major disruptions in the food supply chain. The farm items are delivered to wholesale markets before being redistributed to stores, malls, and markets for sale. However, the road closure and transport restrictions implemented by the Malaysian government have slowed down most of the agricultural services (Negin, 2020). Besides, Tan So Tiok, president of the Malaysian Vegetable Farmers Association, told CNA that Malaysia’s 6,000 vegetable farmers are losing a total of RM948,000 per day. 6,000 farmers work on approximately 30,000 hectares of land and produce approximately 960,000 tons of vegetables per year which limited the food supply to market (Kanyakumari, 2020).

Panic Buying and Storage Level Decline

At the start of the outbreak, the limited knowledge of the virus makes people started panic buying in order to avoid the shortage of their necessities especially food. Food shortage concerns leading consumers to panic buy which resulting in dwindling store shelves instead of preparing a shopping list after checking their food stock (Burlea-Schiopoiu et al., 2020). Panic buying is a typical human reaction as Grasso said: The fear of scarcity is self-fulfilling, as the more people stockpile, the more others get infected with the panic, and leading the food runs out faster (Ben et al., 2020). According to the survey report by Vase.ai showed that consumers bought mainly groceries (97%), personal hygiene products (91%) and household items (88%) (Vase Actionable Intelligence, 2020). Consumers who purchase food do not normally stick to their shopping lists and prefer to buy even more food in general or uncontrollable compulsive buying things that they do not need, while often failing to prepare their meals (Ben et al., 2020; Lyndhurst, 2007). Therefore, the day before started MCO, people subconsciously stacked up on food. This behavior showed excess inventory stores in homes due to the survival instinct of humans typically contributes to food waste.

Effects

Unable to Process Sufficient Amount of Food

Covid-19 has wreaked havoc on the food supply chain in Malaysia, disrupting agricultural productivity, food production, transportation and logistics, and final demand all at the same time. Various goods have experienced delays at different points along the supply chain. (Egal, 2019). Most of the farmers even could not produce a minimum production level that makes the food supply drastically reduce. For example, the paddy industry in Malaysia is particularly important because the country imports 30% of its total consumption from around the world. Throughout this pandemic, it has been demonstrated that emerging technology fertilizers are required in order to increase production and become self-sufficient in paddy production as a country. However, paddy production is still insufficient to meet demand (The Star, 2019). In addition, the high rates of workers absence in the agriculture sector decreased the ability of farmers or firms to produce sufficient food to the market. Thus, the planting materials and labor supply drop could hit harvest in the agriculture sector.

Food Unable to Separate Equally to All People

The transportation and logistics get disrupted by the movement restriction implemented by the government lead to the food unable to separate equally to all people. This caused the food unable to transport from the production side to the market for consumers. For instance, Kong clarified that the farmers in Cameron Highlands were discarding tons of freshly harvested vegetables because they could not be transported to other locations due to the MCO. Kong claims that as a result, obtaining the transportation services needed to transport the bulky and perishable food products has been difficult (Bunyan, 2020). According to Malaysiakini, several vegetable delivery truck drivers and vegetable sellers have said they would rather end their service than face problems as a result of the numerous problems and regulations imposed by authorities (Ng and Ramieza, 2020).

Wasted Food

Panic purchasing caused by the pandemic has negative externalities to society because perishable products and household necessities are purchased in large quantities and left to food waste. Panic buying also makes another consumer that unable to purchase in one time from buying the goods, leading to a food shortage. Due to the closure of restaurants, consumers are cooking more at home, causing a rise in household food waste. The households sector accounts for 44.5 percent of the 16,667.5 tons of food waste produced daily in Malaysia, according to the study of SWCorp Malaysia (Solid Waste and Public Cleansing Management Corporation) (New Straits Times, 2020). Based on a Vase.ai survey on Malaysian food shopping activity during the Covid-19 outbreak, 89 percent of respondents said they were stocking up on vegetables at the time. Malaysian consumers were also going to stock up on dry and frozen food products but led to a 12 percent increase in food waste development at the household level (Statista, 2020). Therefore, in 2005, Malaysia produced 7.34 million tons of municipal solid waste (MSW), which is expected to rise to 10.9 million tons by 2020 (Manikam, 2020). Moreover, another factor contributing to food waste during the pandemic is that people do not know how to buy food rationally or store it properly, including which foods should be kept in freezers, cupboards and refrigerators, and some do not even know how to manage their refrigerator. As a result, approximately 24 percent of the food waste, or 4,005 tons, is still accessible, enough to feed 2,970,000 people for three days (New Straits Times, 2020).

Recommendations

Funds and Subsidies

The government implemented policies to allow farmers to purchase the basic inputs required for output. One of the policies is loan facilities for small and medium enterprises (SMEs) which are provided from the Agrofood Facility and the Bank Simpanan Nasional (BSN) Microcredit Scheme. This policy is a loan scheme for SMEs to increase food production for domestic consumption and export, with a loan amount of up to RM250,000 and a loan term of up to 7 years (BSN Malaysia, 2021). Meanwhile, the Malaysian Central Bank (BNM) has declared a six-month moratorium on bank loan repayments that will begin in April 2020. Discounts on electricity bills have also been implemented by the government and Tenaga Nasional Berhad for the commercial, manufacturing, agricultural, and household sectors which both are beneficial to SMEs (Shaharudin, 2020).

More Volunteer Teams

Movement restrictions have affected the food supply transport from the production side to consumers. Organizations can build up some official teams to get the permission from government that transport food and necessities to the rural areas. For example, Setia Bakti Anak, a team of around 30 volunteers donated about 4.5 tons of food and personal protective equipment such as rice, sardines, powdered milk and face masks (Azni and Batrisya,2020). All of these all being well organized before sending into rural areas (Grunebaum, 2020). Besides, there is a team of volunteers called Semporna Heroes is coordinating transportation with AirAsia to get vital things gathered from West Malaysia to Semporna. They intend to expand their outreach beyond the town as the situation has worsened in many other districts. Moreover, despite a mountain of obstacles, the Happy Bank Crew continues to assist poor communities in Sabah. The team concentrated on delivering food assistance to people and their disadvantaged families who struggle to make ends meet on a daily basis (Azni and Batrisya, 2020).

Purchase Limitation

The government can impose the purchase limit under the Supply Control Act 1961 which is a limit on the quantity available per customer’s purchase on necessities to ensure people get the adequate quantity for needs (Aziz, 2020). For instance, Tesco has eliminated all multi-buy deals and imposed a store-wide cap on these products per customer across all product lines (Southey, 2020). Besides, consumers should prepare a shopping list before purchasing their necessities so that they can finish the food before the valid date and prevent food waste. Government can vibrate the notice that encourages people to stay at home by online purchasing through social media which reduces the amount of people’s panic buying in the market and control the quantity of purchasing effectively.

Conclusion

Covid-19 pandemic has seriously impacted the Malaysian economy especially the food supply chain that resulted in food shortage. People will become ill and malnutrition as a result of the food shortage. People should take their responsibility that having the realization of food shortages in society by reducing food waste. Moreover, the government should determine to look for a long-term solution such as giving subsidies to the agricultural sector to increase productivity. Therefore, all parties should collaborate to solve this issue as soon as possible in the future. To conclude this report, a quote from Amit Ray on unity: The world needs large positive energy to combat negative forces. Return to your inner beginning and generate your positive energy for the benefit of humanity.

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