THE POLITICAL ECONOMY OF AGRICULTURAL PRICING POLICY: MALAYSIA

Since 1960 Malaysia has become a highly efficient producer of natural rubber, thanks to its agricultural and trade policies. The primary purpose of these policies has been to maintain political and economic balance. Consequently, Malaysia’s leaders have concentrated on modifying agricultural pricing policies in degrees (for example, by adjusting to fluctuating world prices) rather than in kind, and they have endeavored to keep the producer price of rice stable and thus maintain the real purchasing power of the country’s politically powerful paddy farmers; help rubber and palm oil farmers improve productivity; set taxes on rubber and palm oil levels that provide funds for public investment; maintain an economy with fairly low or no tariffs on imported consumer goods and with very low or no tariffs on imported inputs; and contribute significant amounts of the revenues obtained from export of oil to the agricultural sector. The policies used to achieve these goals from 1960 to 1983, and their impact on Malaysian agriculture, are the subjects of this chapter.