WORLD TRADE  
ORGANIZATION  G/STR/N/7/MYS 
7 July 2010 
 (10-3720) 
Working Party on 
State Trading Enterprises Original:   English 
 
 
 
STATE TRADING 
 
Notification Pursuant to Article XVII: 4(a) of the GATT 1994 and Paragraph 1  
of the Understanding onthe In terpretation of Article XVII  
 
MALAYSIA 
   The following communication, dated 30 June 2010,  is being circulated at the request of the 
Delegation of Malaysia.   
 
_______________ 
 
  I am pleased to submit herewith Malaysia's no tification pursuant to Article XVII:4(a) of the 
GATT 1994 and paragraph 1 of th e Understanding on the Interpretation of Article XVII. G/STR/N/7/MYS 
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  I. Enumeration of state trading enterprises
 
 
 The previous state trading enterprise, the Nati onal Paddy and Rice Board (hereinafter referred 
to as NPRB) was corporatized on 7 July 1994 and later privatised on 12 January 1996.  Following this corporatization exercise, the Board was dissolved and all its regulatory functions and activities were 
transferred to the Ministry of Agriculture.  The commercial and non-commercial activities, on the 
other hand, were taken over by the Padiberas Nasional Berhad (Bernas), a new public limited 
company limited by shares registered under the Companies Act 1965.  Government via MOF inc. hold one Special Rights Redeemable Preference Share in Bernas.    
 The commercial activities of Bernas include i) paddy seed production, ii) paddy farming, iii) 
paddy procurement and rice processing, iv) distributio n and trading of rice and its by products and v) 
rice importation.     The non-commercial activities (performed on behalf of Government) include:   
 
i) To conserve, maintain and manage  the National Paddy/Rice Stockpile; 
ii) To undertake the purchase of paddy from pa ddy farmers at the Guaranteed Minimum 
Price (GMP) as determined by Government from time to time; 
iii) To act as the Buyer of Last Resort for paddy farmers; 
iv) To undertake the management of the disbur sement  of subsidies to paddy farmers 
under the Paddy Price Subsidy Scheme; 
v) To undertake the management of th e Bumiputera Rice Millers Schemes. 
  In consideration of the non-commercial activ ities undertaken on behalf of the Government, 
BERNAS was given the right to import rice into Malaysia (previously undertaken by NPRB) 
 
II. Reason and purpose for introducing and maintaining state trading enterprises
 
 
 The privatization of the National Paddy and Rice Board was carried out under the country's 
privatization programme with the objective of reduc ing the Government's involvement in commercial 
activities.  Under the programme, Bernas was formed to take over the non-commercial and 
commercial activities of the defunc t National Paddy and Rice Board. 
  Bernas operates strictly as a business concern ex cept for the arrangement to carry out the non-
commercial activities on behalf of the Government as listed above. 
 
 As consideration for its agreement to perform  the above non-commercial activities on behalf 
of the Government, Bernas has been given the right to import rice for the country.   The importation of rice as part of the food secu rity arrangement of the country is closely 
linked to the rice stockpile operations as well as Mala ysia import rice to supplement the deficit of the 
local production. This arrangement is to ensure suffi cient supply and fair and stable price of rice to 
consumers. 
  As a company, Bernas has no statutory power or au thority.  On the contrary it is subjected to 
the same laws and rules as other rice millers and traders in the country.  G/STR/N/7/MYS 
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  III. Description of the functioning of the state trading enterprises  
 
(a) Commercial Activities of Bernas  
 (i) Paddy seed production 
 
 BERNAS worked closely with the local seed producer to process paddy into seed and later 
certified by the Department of Agriculture before BERNAS sell it to the domestic market.  BERNAS 
compete with the other seed producer to procure paddy from the local seed growers based on the market price.   
 
(ii) Paddy farming   BERNAS involvement in paddy farming is through co-operation with the local farming 
community.  BERNAS operates its own paddy land in Gedong Sarawak. 
 
(iii) Paddy procuremen t and rice processing
 
  Bernas procures paddy from farmers and mills ri ce as a business operation.  It competes 
with 220 other active private rice millers in the procur ement of paddy and marketing of its milled rice.  
In 2000, Bernas purchases about 50 per cent of the ma rketable surplus paddy annually (inclusive of 
purchase under the bumiputera millers schemes).  The proc ured paddy is then dried, mill and stored at 
the mills.    (iv) Distribution and trading of rice and its by products  
 Bernas distributes its local and imported rice by way of first-hand sales to wholesalers.  
For 2000, BERNAS supply approximately 45 per cent of the rice demand in Malaysia.  About 32 per 
cent of the local rice comes from BERNAS own ri ce mill and the remaining 78 per cent comes from 
private and bumiputera mills.  Imported rice is available to more than 1,200 licensed wholesalers in Malaysia.    
 Trading of rice is determined by the demand from the market. Rice by product such as broken 
rice, bran and brewers is normally sold to the verm icelli producers and feedmill around the country.   
 (v) Rice importation
 
 
 Through its privatization agreement, Bernas is  the only company permitted to import rice for 
the country.  The distribution of the imported rice in the country by Bernas is almost entirely at first-hand sales, i.e. the imported rice is sold ex-Bern as warehouse to wholesalers who in turn distribute 
rice directly to retailers.  Bernas does not compete to  distribute rice directly to retailers.  There are 
more than 1,200 licensed rice wholesalers in the country.    
 Basically, rice is imported to supplement domestic production and food security purposes.  
The two main criteria used for determining the an nual quantity to be imported are the annual rice 
deficit in the country and the rice stockpile require ment/food security.  The deficit is determined by 
the shortfall of production over the estimated nationa l consumption and requirement.  The quantity is 
also determined by the level of rice stockholding in the stockpile.   
 
 Rice imports are also based on commercial a nd marketing considerations.  The type, grade 
and quality of rice that is imported is determined by domestic market preferences and needs.  Import 
sources are chosen on the basis of commercial consid erations namely quality, price, availability and 
demand.  Bernas procures the rice through internationa l traders and exporters in  the relevant exporting G/STR/N/7/MYS 
Page 4  
 
  countries mostly by way of quotations or tenders.  Fo r strategic reasons Bernas has also diversified its 
sources of supply in order to reduce its over-depen dence only on a single source which might make 
supply vulnerable during period of supply difficulty or  crisis.  Thailand, Vietnam and Pakistan are the 
major rice suppliers for Malaysia.    
 Under the Rice Order (Control of Grades and Prices) 1992, rice marketed in Malaysia is 
classified according to three major grades, i.e. supe r grade, premium grade and standard grade.  The 
maximum prices of the lower grades, i.e. premium grade and standard grade, are fixed by law.  For super grade imported and local does not have a ceili ng price and price levels are determined by the 
market forces, except, for local super 15 per cent broken, consumer ceiling price is regulated by 
Government. 
  Rice imported into Malaysia in line with mark et preferences and needs fall under the super 
grade.  The pricing strategy adopted by Bernas is  determined by quality and target markets.  The 
quality of the imported rice is mostly of a higher qu ality compared to the local super grade and as 
such it is priced higher than the local super grades and is targeted mainly at the upper segment of the 
market. i.e. more affluent consumer.     Bernas do not buy rice on long-term contracts.  BERNAS either buy rice on spot or short term 
contract depending on the international market and supply conditions.  Rice contracts are normally 
for 3-6 months period. 
 
(b) Non-Commercial Activities of Bern as (on behalf of the Government
) 
 (i) Management of the rice stockpile
 
 
 Bernas manages the stockpile as a food reserve to meet contingency needs as well as ensure a 
sufficient and stable supply of rice into the market at all times.    (ii) Disbursement of paddy subsidy
 
  Bernas manages and administers the disbursement of the paddy subsidy payments to farmers. 
 
(iii) Buyer of Last Resort at Guaranteed Minimum Price   Bernas undertakes to procure paddy from farmers in  the event that other private mills refuse 
to buy paddy from farmers.  BERNAS will ensure  that farmers will receive minimum guaranteed 
price for their paddy. 
 (iv) Management of the Bumiputera Rice Millers Schemes   BERNAS will provide financial assistance to  bumiputera millers to procure paddy from the 
farmers.  G/STR/N/7/MYS 
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  IV. Statistical information  
 
1. Rice supply and demand situation in Malaysia  (1998 - 2000) 
 
  (thousand metric tons) 
 
2. Annual rice imports into Malaysia  (1998 - 2000) 
 
Country of Origin and grade 1998 1999 2000 
Thailand  
Fragrant 93,602.30 54,387.30 95,910.00 
Glutinous 32,100.00 30,470.00 26,439.00 
Others 500.00 29,961.00 8,899.00 
TWR 235,200.00 167,352.00 152,808.00 
Vietnam  
Fragrant 107.50 - 42.00 
Glutinous 19,199.64 2,000.00 210.00 
Others - 1,575.00 - 
VWR 143,544.75 119,630.00 138,119.95 
China  
CWR 90,232.05 158,155.60 119,334.98 
Others    
Pakistan  
Basmathi 3,649. 95 6,907.32 15,609.86 
White Rice    
Others 9,854.80 41,837.00 28,526.20 
India  
Basmathi - 28.70 1,643.20 
White Rice    
Others 24,966.70 441.00 9,021.00 
Australia  
Fragrant - - 3,088.80 
Others 5.00 311.03 780.35 
Myanmar  
Fragrant 21.00 144.84 83.93 
White Rice    
Others - 40.00 2,598.84 
Indonesia  
Others - - - 
Cambodia  
Others - - 1,200.00 
US 
Others 1,441.15 806.01 610.30 
Uruguay  
Others - - - 
Bangladesh  
Others - - - 
Argentina  
Others - - 21.61 
                                                      
1 Per capita consumption estimated at 1998 (86 kg./p erson), 1999 (85kg/person) & 2000 (85kg/person).  
Source:  Department of Agriculture;  Paddy Statistic of Malaysia 2003.   
2 Source by:  Department of Agriculture;  Paddy Statistic of Malaysia 2003.    1998 1999 2000 
Demand  
Annual rice requirement1  
1,912  
1,926  
1,978 
Supply  
National rice production2 
Actual imports  
1,257 
654  
 1,345 
614   
1,382 
605 
Total supply 1,911 1,959 1,987 G/STR/N/7/MYS 
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  Country of Origin and grade 1998 1999 2000 
Italy  
Others    
Japan  
Others - - - 
Chinese Taipei  
Others    
TOTAL (MT) 654,425 614,047 604,947 
VALUE (US$) 189,757, 608 143,620,025 164,687,067 
 
3. Rice supply/traded by group  
 
Traded/supply by 1998 1999 2000 
BERNAS3 872 891 898 
Others4 1,040 1,035 1,080 
Total demand 1,912 1,926 1,978 
 
4. Rice export  
  No exports have taken place.  BERNAS only deals with rice import (subject always to the 
approval of the Government on the quantity to be imported).    V. Reason why no foreign trade has taken pla ce (if this is the case) in products affected
 
 
 Malaysia is a net importer of rice.  There is no rice surplus available for export.    
VI. Additional Information
 
  Nil.   
   
__________  
                                                     
 
3 Actual first hand sales by BERNAS.   
4 Balance of the demand is being fulfilled by others and this may include subsistence farming and 
border trading.