Sugar Subsidies Trade Deficits And Alleged Duopoly

---

 


KINIGUIDE | For decades, Malaysia’s sugar industry has been strictly regulated under the 1961 Supply Control Act, which has also capped the commodity’s retail prices at RM2.85 (coarse) and RM2.95 (refined) per kg.
As a result, Malaysia’s sugar prices are among the lowest in Asean. In Thailand, 1kg of sugar is RM3.91, RM5.74 in Indonesia, RM7.34 in Singapore, and RM8.53 in the Philippines.
The actual market price for refined sugar in Malaysia is RM3.95 per kg, meaning that the government subsidises at least RM1 per kg, which costs an estimated RM42 million a month.
Annually, this costs about RM500 million in subsidies – a policy which has often raised eyebrows, given its strain on national finances and negative health effects.
ADSMalaysiakini attempts to understand the rationale behind these subsidies and explore if sugar production in Malaysia is an alleged “duopoly”.
Import permits and trade deficits
The same Supply Control Act that controls prices also mandates that local producers and refiners have the required permits to import and produce refined sugar.
These permits have concentrated sugar production to two main producers: MSM Malaysia Holdings Bhd (MSM), a subsidiary of Felda Global Ventures (FGV) Holdings, and Central Sugars Refinery Sdn Bhd (CSR), owned by Tradewinds (M) Bhd under Syed Mokhtar Albukhary.
Although both companies have denied claims of being a duopoly, they run the largest refinery plants nationwide, with a combined annual production capacity nearing three million tonnes.
MSM is also tasked with ensuring a monthly supply of 24,000 tonnes and maintaining the nation’s buffer stock of 32,000 tonnes to guarantee a consistent and reliable supply.
Domestic Trade and Cost of Living Minister Armizan Ali said the subsidies were needed as local manufacturers continue to face losses due to rising production costs.
In 2023, the ministry attempted to address the issue by giving import quotas to 43 firms totalling 557,080 metric tonnes. However, by Dec 12, 2023, only five percent of that sugar supply had been successfully imported.
According to Armizan, no one had been able to import, refine and sell sugar at the controlled price of RM2.85.
Domestic Trade and Cost of Living Minister Armizan AliHowever, Malaysiakini reported last week how several local companies have been selling sugar at RM2.70 per kg under the Rahmah Madani sales programme - without government aid, and they were still able to turn a profit.
While these low prices were allegedly only allowed for limited periods, ministry sources questioned why these products could not be sold openly below the subsidised price.
They further questioned why subsidies should be continued for the two major sugar producers if smaller companies are able to sell sugar at a much lower price.
ADSAnother ministry source argued that the subsidies contradict the government’s campaign to reduce sugar consumption.
Ongoing losses
Despite the subsidies, the country’s largest producers have also urged the government to review its measures.
MSM had called for raising coarse sugar prices to RM3.85 from RM2.85 per kg to offset losses caused by the difference between (market) prices and the government-set ceiling price.
In August, MSM reported a net loss of RM30 million in its second quarter. The company's acting CEO said Malaysia’s sugar industry is “expected to remain challenging,” due to increasing input costs and fluctuating global production.
In September, Felda chairperson Ahmad Shabery Cheek called for an end to import permits for refined sugar, as local production has exceeded domestic demand.
Felda chairperson Ahmad Shabery CheekHe called for more stringent pricing and stricter import controls, and highlighted the issue of dumping – where foreign sugar, often produced at much higher costs, is sold in Malaysia at the ceiling price of RM2.85.
The Felda chairperson said that current prices continue to pressure local producers, and that existing policies could lead to job losses and long-term economic damage.
In 2023, a Joint Sugar Industry cabinet committee was set up to address shortages and maintain price stability.
In August, MSM said that it remains engaged with the committee to finalise a sustainable pricing framework and implement import controls - measures it views as critical to national food security and long-term viability.
Contradictory policies
As the subsidies continued, the government implemented a sugar and sweetened beverage tax (SSB) of RM0.40 per litre in 2019 to discourage sugar consumption and reduce the risks of diabetes, obesity, and non-communicable diseases (NCDs).
A 2024 joint report by the Health Ministry and Unicef found that the SSB tax had generated RM198.6 million in revenue between January 2020 and May 2022 alone. It had also encouraged large retailers to provide healthier options.
However, the report added that overall consumption of such beverages was minimal and that gaps in enforcement made it hard to evaluate the SSB tax’s impact.
Last year’s National Health and Morbidity Survey found that 59 percent of Malaysian adults continue to consume more than one serving of SSB daily.
Roughly one in five Malaysian adults is also reported to be diabetic.
Are sugar subsidies sustainable?
This contradiction between the subsidies and the tax is why economists such as Muhammed Abdul Khalid have called the policy “irrational”.
“The government should abolish the subsidy, liberalise imports, and allow prices to float,” he urged.
However, Nik Ahmad Sufian Burhan of Universiti Putra Malaysia (UPM) said the subsidies were needed for the two main producers to ensure sufficient supply, particularly for rural areas that often face high logistics costs and low profit margins.
When sugar is sold below the usual retail value, such as under the Rahmah Madani scheme, they are often small-scale and temporary, he stressed.
Deputy Finance Minister Lim Hui Ying announced in Parliament on Nov 4 that the government is considering reforming subsidies for sugar, rice, and cooking oil.
The new RON95 subsidy rationalisation exercise will serve as a guide to a broader restructuring of all subsidies to ensure that aid is channelled to those who truly need them.
While the government has not suggested any concrete plans to revise the subsidy and modify retail sugar prices, many have rightfully questioned the sustainability of the policy.
Although cheap sugar is easy on consumers’ purse strings, its impact on local industries, government finances, and our long-term health, are far more costly.

---