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IN KUALA LUMPUR - MALAYSIA is prepared to offer palm oil in exchange for rice to any rice-exporting country in a bid to stabilise domestic supply.
But some analysts are worried the plan could affect the Asian commodity and currency markets.
Plantation Industries and Commodities Minister Peter Chin told Dow Jones Newswires in an interview on Wednesday that Malaysia is ready to offer palm oil to any exporting country 'that is ready to give us rice of suitable quality'.
'Our country needs to buy rice and we have a commodity that more rice-exporting countries would need so it would be logical,' he said.
Malaysia is the world's second-largest producer of palm oil after Indonesia, and imports nearly 27 per cent of its rice needs annually. It hopes to cut rice imports to 14 per cent by 2010.
The proposal may lead to swops with rice-exporting countries such as India, which is one of the world's largest palm oil importers by volume.
Datuk Chin will be visiting India later this month to attend a palm oil conference.
But commodities experts are worried that similar deals would be unsettling to orderly markets if other raw materials, such as rubber or rare metals, even energy, were moved around in a series of large off-market deals with no formal pricing.
Mr Kenji Kobayashi, a commodities analyst at Kanetsu Asset Management, said: 'What is worrying is that these barter deals, which should only be for truly terrible situations like the Iraq oil-for-food programme, are going to increase in size and number from here.
'We are now seeing all the hidden mistrust in the markets being expressed through barter,' he was quoted as saying on The Australian Business website.
Other observers said that the decision to barter also reflected volatile currency markets and the recent decline of the US dollar, from which poorer developing nations have been eager to insulate themselves
Malaysia on Tuesday managed to buy 200,000 tonnes of Thai rice in an emergency purchase, paying 10 per cent more than it had offered on Monday. It is in talks to secure another 300,000 tonnes, a Thai official said.
Reports previously said that Malaysia had just enough rice for 15 days but the government has refuted this, saying it has enough reserves for three months.
This week, the government announced that it would spend some RM725 million (S$305 million) to subsidise imported rice.
The Federation of Malaysian Consumers Association's secretary-general Muhammad Sha'ani Abdullah stressed to The Straits Times the importance of self-sufficiency.
'The previous government's stance was that we can buy the rice cheaper from overseas because to produce it would be more expensive. But this did not take into account what would happen if the exporting country faces a shortage,' he said.
'This should be a lesson to us.'
ADDITIONAL INFORMATION FROM ASSOCIATED PRESS, REUTERS, THE STAR/ASIA NEWS NETWORK
hazlinh@sph.com.sg
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