Panic buying sparks cooking oil rationing | Connect Asia

Panic buying sparks cooking oil rationing

Panic buying sparks cooking oil rationing

Posted 9 January 2008, 12:31 AEST

Malaysian retailers have been forced to ration cooking oil purchases after the government introduced restrictions to curb a shortage.

It's believed the shortage was brought about by a rumour of a price hike that caused the panic buying of cooking oil, while authorities are blaming it on hoarding of supplies.

SAWLANI: Malaysia may be the world's leading producer of palm oil, but you wouldn't know that by walking into a local supermarket where shelves that used to stock a variety of cooking oil brands are all but empty.

The country has been gripped by an acute shortage of household cooking oil caused by panic buying in the wake of price hike rumours.

Over the past week, retailers have not been able to replenish supply during a period of excessive demand.

Authorities are also blaming the shortage on hoarding as retailers are known to deliberately hold back stock in anticipation of increasing demand, leading to higher prices during the holidays.

But Malaysia's deputy Prime Minister, Datuk Seri Najib Razak, assured his country that there was no shortage and urged Malaysians not to resort to panic buying and hoarding.

RAZAK: Actually if we don't indulge in panic buying and there is no hoarding, there will be adequate supply of cooking oil. There's only a shortage when there is excessive demand.

SAWLANI: But are panic buying and hoarding the whole story? Khoo Kay Peng is the executive director of the Kuala Lumpur based Socio Economic Development and Research Institute, SEDAR.

KHOO: Cooking oil in Malaysia is heavily subsidised and for that reason you have smuggling activities over the borders, especially to Thailand, to Indonesia and that is causing a lot of problems for us as well.

SAWLANI: To combat the recent shortage, Malaysia's domestic Trade and Consumer Affairs Ministry announced restrictions on the purchase of cooking oil. From Monday onwards, each buyer would only be allowed to purchase a five kilogram packet of oil from retailers. But Khoo Kay Peng from Sedar disagrees with the measure and says that businesses which are reliant upon large quantities of cooking oil will face problems in daily operations.

KHOO: It doesn't make sense. I mean once you have a limit for people to buy, and then you are confirming indeed the fact that you do not have enough cooking oil in the market and that would encourage people to get their relatives, to get their children, to go out and buy more cooking oil and keep it as stock. So this is not a situation that we want to encourage. This industry especially eateries, the restaurants are facing an acute shortage, because some of them may require cooking oil up to 20-30 kg a day, especially those in the fast food industry.

SAWLANI: For Malaysians, this isn't the first time they have experienced acute shortages of daily consumer goods. The country had previously fallen in short supply of sugar, diesel and flour for the same reasons.

Khoo Kay Peng blames the shortages on excessive government subsidies on such goods. He says the government needs to consider reducing subsidies and allow market demand and supply to determine prices.

KHOO: When you find commodities they are subsidised, you tend to have this kind of problem. But I think what the government should logically do if you look at the annual budget is that you slowly review subsidies given to these products. I think there is a need for market mechanism to deepening the demand and supply. So when you have that mechanism in place, there will not be a problem of hoarding, smuggling or even people buying in excess, hoping that they can keep it when stocks are out. So I think there is a necessity.

SAWLANI: Meanwhile Consumer associations are calling for more drastic measures, the president of the Consumer Association of Subang and Shah Alam, Datuk Dr. Jacob George has called on authorities to invoke the controversial Internal Security Act which permits imprisonment without trial, to discourage hoarding of such goods.

GEORGE: We have to make sure that those who are indulging in that, because as far as I'm concerned, that is an act against the interests of the government or in the nation. If there are companies doing that, if there are individuals doing that, we should take immediate action, even the Internal Security Act, against them because they're destroying the economy. We cannot allow that.

SAWLANI: As the rationing is expected to last a minimum of two weeks, Khoo Kay Peng from Sedar fears that without permanent and sustainable measures in place, Malaysians will continue to face similar shortages in the future.

KHOO: This is an unfortunate thing. I think the government is going back to the old measures, like boosting up border control during this time. And I don't think the government is putting up any sustainable measure to stop these things from happening again. Given another two to three months, market activities will go back to normal again. So I think what the government needs to do like I said earlier is that there is a need for a new socio-economic policy. I think the government has to look at the subsidy element effectively.

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