WORLD TRADE  
ORGANIZATION  G/STR/N/4/MYS 
7 July 2010 
 (10-3715) 
Working Party on State Trading Enterprises Original:   English 
  
 
STATE TRADING 
 
Notification Pursuant to Article XV II:4(a) of the GATT andParagraph 1 
 
of the Understanding on the 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. 
 
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.    
 Among others the commercial and non-comme rcial activities of BERNAS include:  
  The commercial activities:   
i) Paddy seed production; 
ii) Paddy farming; 
iii) Paddy procurement and rice processing; 
iv) Distribution and trading of rice and its by products;  and  
v) Rice importation. 
 
 The non-commercial activities (perform ed on behalf of Government):   
 
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; G/STR/N/4/MYS 
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  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 suff icient 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.    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 244 other active private rice millers in the procur ement of paddy and marketing of its milled rice.  
Bernas purchases about 46 per cent of the marketable surplus paddy in 1997 (inclusive of purchase 
under the bumiputera millers schemes).  The procured padd y 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 1997, BERNAS supply approximately 42 per cent of the rice demand in Malaysia.  About 29 per  G/STR/N/4/MYS 
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  cent of the local rice comes from BERNAS own ri ce mill and the remaining 71 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 ve rmicelli 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.   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 
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 ceiling price and price levels are determined by the 
market forces, except for local super 15% broken, co nsumer 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.   G/STR/N/4/MYS 
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  (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 th at 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.  IV. Statistical information
 
 
1. Rice supply and demand situation in Malaysia  (1995 - 1997) 
 
 (thousand metric tons) 
 1995 1996 1997 
Demand    
Annual Rice Require ment 1,798 2,015 2,013 
Supply    
National Rice Production 1,373 1,439 1,368 
Actual Import 437 562 644 
Total Supply 1,810 2,001 2,012 
 
2. Annual rice imports into Malaysia  (1995 - 1997) 
 
Country of Origin and grade 1995 1996 1997 
Thailand  
Fragrant 114,088 101,525 168,329 
Glutinous 53,379 38,420 57,400 
Others - 9,975 3,541 
TWR 94,352 319,216 227,396 
Vietnam  
Fragrant - - 2,000 
Glutinous - - 300 
Others - 2,500 3,000 
VWR 168,327 80,835 169,933 
Pakistan  
Basmathi 6,000 7,690 8,053 
White Rice   - 
Others - - - 
India  
Basmathi - 315 2,699 
White Rice   - 
Others - 105 - 
Indonesia  
Others - 120 - 
US 
Others 1,104 1,282 1,484 
Japan  
Others - - 20 
TOTAL (MT) 437,249 561,984 644,156 
VALUE (US$) 137,194, 417 197,083,506 241,749,366 
  G/STR/N/4/MYS 
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  3. Rice supply/traded by group  
 
Traded/supply by 1995 1996 1997 
BERNAS1 738 760 851 
Others2 1,060 1,255 1,162 
Total demand 1,798 2,015 2,013 
 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 place (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.    
 
 
__________  
                                                     
 
1 Actual first hand sales by BERNAS.   
2 Balance of the demand is being fulfilled by others and this may include subsistence farming (own 
consumption) and border trading (smuggling).