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Journal of Sustainability Science and Management
Volume 17 Number 8, August 2022: 175-195
REGULATORY FRAMEWORK OF RICE FERTILISER SUBSIDY
MANAGEMENT TO ATTAIN SUSTAINABLE DEVELOPMENT GOALS:
MALAYSIA’S PERSPECTIVE
RUBIAH MOHD AMIN, HANIFF AHAMAT* AND MUHAMAD SAYUTI HASSAN
Faculty of Law, Universiti Kebangsaan Malaysia (UKM), 43600 UKM Bangi, Selangor, Malaysia.
*Corresponding author: haniff@ukm.edu.my
Submitted nal draft: 21 April 2022 Accepted: 19 June 2022
Introduction
Fertilisers are a plant protection product which
help to boost harvest and preserve high-value
crops such as paddy. The Global Food Security
Index 2020 conducted by the Economist
Intelligence Unit placed Malaysia at 43th out of
113 countries. Based on the study, Malaysia has
an advantage in terms of food affordability safety
net programmes but is less promising on food
security and policy commitments, nutritional
standard and sensitivity of natural resources
resilience such as exposure to fertiliser waste
management. Fertilisers with good practice
promote soil fertility. Fertilisers are subject
to food safety and nutritional standards in the
production of high quality and nutritious food.
Hence, proper fertilisation and adherence to
international standards should be monitored on
an ongoing basis.
However, commercial fertilisers have to be
differentiated from farm manure. Fertilisers are
substances that are designed to provide nutrients
to crop plants so that they can grow and have
their quality enhanced. Farm manure is fertiliser
made from animal waste, plant by-products
or vegetable compost. Hence, the handling of
such manure leads to the production of organic
fertilisers.
Agricultural subsidy is the government’s
method of helping farmers improve the
resilience of rice crops so that rice yields are
of quality and can meet the requirements of
further manufacturing processes. Accurate use
of paddy fertilisers depends on factors such
period of cultivation, fertilisation schedules and
the amount of land necessary for a paddy eld
or hill paddy. Paddy fertiliser subsidy is one
of the government’s assistance schemes under
its annual budget to address the economy’s
resilience. The paddy and rice sectors face
challenges in enhancing the nation’s food
security due to the mismanagement of funds
Abstract: This study identies the regulations concerning fertilisers produced for the
development of paddy and the rice industry. It looks into the issue of mismanagement
of the government’s fertiliser subsidy scheme from the legal perspective. It also focuses
on the roles played by manufacturers, distributors, sellers, service providers and farmers
when dealing with fertiliser, and whether such dealings are parallel to the law. The
mismanagement of the rice fertiliser subsidy puts the country’s nancial security at
risk and preventing farmers from successfully achieving food sovereignty through the
increase in productivity of rice yields as well as increase in income for paddy farmers’
survival. There are several regulations governing fertiliser subsidy and its management
such as the Control of Paddy and Rice Act 1994, Plant Quarantine Act 1976, Pesticide
Act 1974, Malaysian Quarantine and Inspection Services Act 2011 and Environmental
Quality Act 1974. However, most mismanagement cases involve big commercial farms,
which are associated with the fertiliser industry rather than the subsidy for fertiliser in the
government rice sector. The cases involved graft, fraud, bribery and smuggling of fertiliser.
This paper also reviews the roles of Farmers Association and Farmers Board in regulating
fertiliser subsidy.
Keywords: Food security regulatory mechanism, agricultural planting management and
rules, agricultural subsidy law and regulation.
http://doi.org/10.46754/jssm.2022.08.011
Rubiah Mohd Amin et al.
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Journal of Sustainability Science and Management Volume 17 Number 8, August 2022: 175-195
for fertiliser subsidy which results in farmers
having to bear some costs to participate in the
fertilisation programme or else they would have
to depend on supplies of fertilisers or fertiliser
inputs through ventures with landlords, contract
farmers and farming cooperative farmers.
Without the use of fertilisers, farmers face low
yields of paddy harvests.
Fertiliser assistance should not cover
every plant cultivated by farmers in Malaysia.
Fertilisers are also required by other agricultural
productions such as oil palm, rubber, vegetables,
fruits and owers (horticulture). Hence, fertiliser
assistance should be limited to the planting of
paddy. This article will only discuss paddy
fertiliser subsidy.
As a member of the World Trade
Organisation (WTO) and the Food and
Agriculture Organisation (FAO), Malaysia
is always willing to comply with obligations
related to subsidies in the production of national
food. Among them, the treaty “Agreement
Establishing a Food and Fertiliser Technology
Centre for the Asian and Pacic Region”
between FAO member states which established
guidelines on fertilisers in a sustainable
action plan (hence, drawing upon Sustainable
Development Goals), including regulations on
organic fertilisers. However, in Malaysia, the
Fertiliser Act has yet to be nalised which is
planned by the Ministry of Agriculture and
Food Industries since 2020 with the proposed
draft Fertiliser Bill to be debated in Parliament
soon.
Some Important Legal Denitions
According to Article 2 (1) of the FAO legislation
guide, “fertiliser” means a substance applied to
the ground for the purpose of bringing about a
chemical change in the soil to provide plants
with nutrition or contribute to their cultivation,
or a substance applied to a plant for the purpose
of providing it with nutrition.
The Department of Agriculture (DoA) is the
custodian of the Plant Quarantine Act 1976. The
act aims to improve and strengthen laws relating
to the control, prevention and eradication of
agricultural pests, noxious plants and plant
diseases and to broaden cooperation in reigning
over the movement of pests in international
trade and for anything related thereto.
The Director-General of Agriculture shall
be responsible for implementing and enforcing
the provisions of this act and shall have the
power to appoint inspecting ofcers whose
powers and duties are outlined in the text.
Diseased plants that might endanger other plants
shall be destroyed, removed or treated by the
owner. The director-general may also place any
land under isolation when any of the plants on
it are diseased. Provisions as to compensation
are specied in the Plant Quarantine Act 1976.
Furthermore, the act prohibits the importation
or possession of noxious plants and pests. Penal
provisions are given in the text.
The Plant Quarantine Regulations 1981
(amended 2005) underscores the registration of
permit for fertiliser as a plant protection product.
In order to stop the entry and spread of noxious
plants and pests into Malaysia, the regulations
outline the conditions that must be followed
for the importation of plants, plant products,
growing media or rooting compost, benecial
organisms, plant pests and carriers of plant pests.
Any plant must be brought into the country with
a phytosanitary certicate and a permit given
by the director. The regulations further outline
nes, the importation, eradication and control
of harmful pests as well as requirements for the
inspection, quarantine, treatment or destruction
of plants brought into a certain area. They
also outline the authority of plant quarantine
inspectors. For WTO commitment, concerning
the notication on phytosanitary certication
before it is issued, the consignment will
require inspection and if needed, be treated for
disinfestation against pests. If the consignment
is found to be satisfactory, a phytosanitary
certicate is issued immediately after inspection
or treatment, if required. Applications must
be led at least two working days prior to the
intended date of inspection on a form that can
be obtained from any Plant Quarantine ofce
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(Crop and Plant Quarantine Division of the
DoA). To satisfy the phytosanitary requirements
of the importing country, a certied true copy
of the import permit from the importing country
would be needed. It will be necessary to provide
the appropriate permissions for other restricted
goods such as coconut and plants protected
by the Convention on International Trade in
Endangered Species. Besides, the DoA which
is the custodian of the Pesticide Act 1974
has implemented the Pesticide (Labelling)
Regulations 1984. It is important to note
Section 2 of the Pesticide Act 1974 denes
“pesticide” as any substance that contains an
active ingredient or any preparation, mixture
or material that contains any one or more of
the active ingredients as one of its constituents
but does not include contaminated food. There
is a Control of Pesticide and Fertilizer Division
under the DoA which was not assigned to
handle matters related to fertilisers. However,
the enforcement functions of plant quarantine
were then merged with the establishment of the
Malaysian Quarantine and Inspection Services
(MAQIS) Act 2011.
In accordance with Section 2 of the 1952
Poison Act, “poison” refers to any substance listed
by name in the rst column of the Poison List,
as well as any preparation, solution, compound,
mixture or natural substance that is not an exempt
preparation or an item or preparation that is
temporarily listed in the Second Schedule. The
1952 Act governs the importation, ownership,
production, compounding, storage, conveyance,
sale and application of poisons. Fertilizers are
not poisonous but chemicals obtained through
fertiliser production that can turn into poisons
when not properly maintained. Poisons are
also used in the breeding of organisms to
dispose of diseased animals and for sanitation
but the production of organic fertilisers from
decomposed animal faeces can cause problems
to public health and the environment. In the
previous years, the DoA did not have proper
guidelines on the quality of organic fertilisers
to determine the terms and information on the
labels for use of such fertilisers. This would
lessen the confusion caused by the many
denitions of the term “organic” in relation to
organic fertilisers (Kala et al., 2011).
What is the Fertiliser Subsidy Scheme?
The Paddy Fertiliser Assistance Scheme is
a federal government programme that was
introduced in 1979 through the Ministry of
Agriculture and Agro-based Industry. Since
1991, state governments have also established a
similar scheme to assist poor farmers who did
not receive fertiliser subsidies from any federal
government agency. The programme aims to
reduce the input cost of paddy production,
modernise paddy crop activities, increase
paddy production, increase the income of paddy
growers and provide an incentive to paddy
farmers who cultivate paddy crops.
According to the Auditor General’s Report
Series 3 of 2018, the government spent RM4.19
billion from 2016 to 2018 on subsidy schemes
and incentives for farmers. Subsidies and
incentives to farmers have been provided since
1979 to reduce the cost of paddy cultivation.
Besides that, it also encourages farmers to
continue their paddy cultivation activities in an
effort to increase the production of local paddy
and rice. Paddy subsidies do not only have high
nancial implications for the government, but
also for the government’s policy of ensuring
the continuity of local rice supply and reducing
dependence on imported rice (LKAN 2, 2018).
For example, based on the Auditor
General’s Report Series 2 of 2012, the State
Development Ofce in Kelantan is responsible
for coordinating the fertiliser subsidy programme
with the assistance of the Land and Territory
Ofce. The report stated that there had been
signicant delays in the implementation of the
programme over the past 30 years and there has
been no recorded conviction in the prosecution
of corruption cases against the ofcers involved.
The subsidy of fertilisers exceeded the
eligibility and the provision of fertilisers not in
accordance with the rice crop seasons. In a 2017
case at the Sessions Court, the former director
of the Kelantan branch of the Paddy and Rice
Control agency was charged with receiving a
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bribe of RM3,500 to facilitate the obtaining of
a rice transfer permit. The charge against him
was brought under Section 17(a) the Malaysian
Anti-Corruption Commission Act (MACC)
2009 and can be punished under Section 24
of the same act. The legal violation was not
related to the Control of Paddy and Rice Act
1994 which regulates the paddy and rice-related
industries but related to the issues of governance
of fertiliser subsidy schemes (LKAN 2, 2012).
The Stakeholders Involved
The Malaysian rice industry has undergone
structure changes to increase its competitiveness
in a dynamic environment driven by political,
technological, economic and international trade
concerns. One of the sustainability standards for
crop plantations in agriculture includes good
agricultural practices such as soil development
using organic fertiliser so that the production
of rice will last longer. The fertiliser industry
in Malaysia is dependent on the supply of raw
materials imported from other countries.
The International Fertiliser Association
(IFA) has reported that the worth of the global
fertiliser industry in 2018 was US$60.1 billion
in terms of exports with Russia remaining
as one of the main players (IFA, 2018). In
Malaysia which is a member of IFA, there is
the Fertiliser Industry Association Malaysia
(FIAM) represents the industry. FIAM was
founded in 1987 with the goal of promoting and
developing the fertiliser industry in terms of
imports, manufacturing, production, processing
and distribution of fertilisers; cooperating with
and advising government authorities on matters
relating to the fertiliser industry, informing
members of existing or proposed legislation
and reports from government or scientic
committees that affect the fertiliser industry
and encouraging the responsible and effective
handling and usage of fertilisers (FIAM Annual
Report).
FIAM members can import either raw
materials or semi-nished fertiliser formulas
from IFA members. FIAM members must also
apply for all the licences required for the use
of the raw materials for the manufacturing,
packaging and distribution of the products. The
National Farmer Association (NAFAS) also is a
member of FIAM.
There are no rules within FIAM that
mandates the termination of membership if
they are unable to meet the standard of quality
fertiliser required for the development of the
industry. However, an industry joint committee
was established to ensure that players followed
the IFA Safety Handbook to keep up with the
SDGs and Sustainable Fertiliser Production
2030.
The stakeholders involved need to be
addressed in the context of the legislative history
of the fertiliser industry in Malaysia since the
rice industry has attracted much interest among
politicians, including parliamentarians as the
government has signied its desire to safeguard
the development of the rice industry as can be
seen from the following excerpts of a minister
statement:
“Industri baja adalah sangat penting
kepada sektor pertanian khususnya
kepada kaum petani. Sejak tahun
1973, beberapa kilang baja yang
dalam peringkat pengeluaran dan
yang membekalkan sebahagian besar
dari keperluan-keperluan dalam
negeri. Tiga dari syarikat-syarikat ini
iaitu The Chemical Co. of Malaysia,
Syarikat Federal Fertilizer Sdn. Bhd.
dan Wee Kheng Chiang mengeluarkan
baja “nitrogenous straight” dan baja-
baja komponen untuk sektor pertanian.
Selain itu, beberapa kilang-kilang
campuran adalah dalam peringkat
pengeluaran di merata negeri dan
membekalkan keperluan-keperluan
tempatan bagi baja-baja campuran.
Kesemua projek ini adalah kepunyaan
sektor swasta”.
“Permintaan tempatan bagi baja-baja
telah menunjukkan arah-aliran yang
bertambah dalam tahun-tahun lalu.
Untuk menampung penggunaan yang
bertambah ini, kerajaan baru-baru ini
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telah meluluskan dua lagi projek yang
ditaja oleh badan-badan kerajaan.
Projek-projek ini dalam beberapa
peringkat pelaksanaan dan apabila
dalam peringkat keluaran penuh kelak,
akan dapat menampung permintaan
tempatan yang bertambah itu.
Memandangkan kepada faktor-faktor
di atas, pihak kerajaan setakat ini tidak
membenarkan pengusaha-pengusaha
persendirian untuk mendirikan
kilang baja. Walau bagaimanapun,
sekiranya ada pengusaha-pengusaha
kilang baja untuk keperluan eksport,
pihak kerajaan sedia menimbangkan
mengeluarkan baja nitrogenous
straight dan baja-baja component
untuk sektor pertanian “nitrogenous
straight”. Mutu keluaran kilang-kilang
baja di dalam negara ini ialah mutu
yang diterima oleh pihak pertanian”.
“Logiknya apabila petani-petani
mengimport baja dari luar negeri,
logiknya ialah kerana baja kurang,
oleh sebab kuranglah maka kita telah
bersetuju menubuhkan dua buah
kilang lagi. Jadi sementara kurang,
terpaksalah diimport, ini menjadi
kebiasaan di dalam negara kita
ini. Kebimbangan yang disuarakan
ketika itu ialah campur tangan
dalam penubuhan kilang baja diikuti
penubuhan Lembaga Pertubuhan
Peladang untuk mengawal selia aktiviti
berkaitan kilang baja tempatan”.
(Musa Hitam, Primary Industries Minister)
The English translation of the speech is
as follows: “The fertiliser industry is very
important to the agriculture sector especially to
farmers. Since 1973, several fertiliser factories
have produced and supplied most of the domestic
requirements. Three of these companies are
the Chemical Company of Malaysia, Federal
Fertiliser Sdn. Bhd. and Wee Kheng Chiang’s
manufacture of nitrogenous straight fertilisers
and component fertilisers for the agricultural
sector. In addition, several mixed mills are in
the production stages in several states and they
are responsible for meeting the local needs for
mixed fertilizers. All these projects belong to the
private sector”.
“Local demand for fertilisers has shown an
increasing trend in recent years. To accommodate
this increase in usage, the government recently
approved two more projects sponsored by
government bodies. These projects are in
several stages of implementation and when
they are in full production, they will be able
to accommodate the increased local demand.
Given the above factors, the government has
so far not allowed private operators to set up
fertiliser factories. However, if there are fertiliser
manufacturers for export needs, the government
is ready to consider producing nitrogenous
straight fertilisers and fertiliser components for
the “nitrogenous straight” agricultural sector.
The quality of the products of fertiliser factories
in the country is the quality received by the
agricultural sector”.
“Farmers import fertilisers from abroad
because of a lack of fertiliser. Because of this,
we have agreed to set up two more factories. We
had to import fertilisers as farmers’ demands
could not be met, and this is becoming the
norm in our country. There were concerns
about interventions during the establishment of
fertiliser factories and the Farmers Organisation
Authority (FOA) to regulate activities related to
local fertiliser factories”.
Earlier, the Farmers Association Act 1967
was established prior to the setting up of the
Area Farmers’ Organisation. The distribution
of subsidies for the rice sector used to be
allocated upon the establishment of Kemubu
Agricultural Development Authority (KADA)
Act 1972 and Muda Agricultural Development
Authority (MADA) Act 1972. Following that, to
ensure proper management of farmers’ interests,
the government introduced the Farmers
Organisation Act 1973 and FOA Act 1973.
The FOA 1973 was formulated specically
to restructure farmers’ associations and
cooperatives based on agricultural needs.
Farmers’ associations were disbanded and
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Journal of Sustainability Science and Management Volume 17 Number 8, August 2022: 175-195
reregistered as farmers’ organisations under this
act, and agricultural cooperatives joined farmers’
organisations as member units. Currently, 119
farmer groups and 1,531 agricultural cooperatives
serve rural farming areas.
The FOA was established on 14 February
1973 through the enactment of FOA Act 1973.
The establishment of the authority is aimed
at shouldering the responsibility of helping
to improve the economy and social of agro-
communities under a body that plays a special
role. The duties of FPA as contained in Sections
4 (1) and 4 (3) of the FOA Act 1973 (Act 110)
are as follows:
i. To promote, strengthen, facilitate
and promote the economic and social
development of farmers’ organisations
ii. To register, control and supervise farmers’
organisations and provide for matters related
thereto
iii. To control and coordinate the implementation
of the above activities
iv. To ensure that the tasks are carried out
in a way that will advance government
policies, especially policies relating to the
restructuring of society
The existence of a three-tier farmers’
organisation structure considering the rules and
legislation of the farmers’ association is provided
for in Sections 3 (1), (2), (3) and Sections 18A,
18B and 18C of the Farmers’ Organisation Act
1973. The farmers’ organisation at the area level
is called the Area Farmers’ Organisation and the
State Farmers’ Organisation at the state level.
At the national level, it is called the National
Farmers’ Organisation.
The Legal Framework on Rice Fertiliser
Subsidies
Farmers’ Organisation Act 1973
The purpose of the Farmers’ Organisation Act
1973 is to regulate farmers’ organisations,
including their registration, regulation and
oversight, as well as things related thereto. The
act regulates the formation of area, state and
federal farmers’ organizations to operate and
carry out their business, and such organisations
shall be registered as per Part III.
The registrar shall be responsible not only
for the registration but also for managing and
regulating all farmers’ organisations. Article 6
denes the objectives of farmers’ organisations
which include among others: (a) Supplying
farmers with extension services and training
facilities, (b) Encouraging increased agricultural
diversication and commercialisation, (c)
Making farm supplies and daily essentials
accessible and (d) Offering nancial facilities
and services.
Part IV of the Act denes the requirements
to be met by members and member-units.
Section 17 provides for the settlement of
disputes that may arise among members or
farmers’ organisations. In accordance with
Part VI, the registrar is empowered to perform
inspections with respect to the accounts and
property of any farmers’ organisation. Under
Section 31, non-compliance can result in a ne
of up to RM1,000 and for repeat offenders, an
additional ne of RM50 for each day the offence
is allowed to continue.
The Act was implemented through the
Farmers’ Organisation Regulations 1983 and its
amended version of 1999. The regulations are
divided into the following parts: Preliminary (I),
Formation of Area Farmers’ Organisation (II),
Formation of State Farmers’ Organisation (III),
Formation of National Farmers’ Organisation
(IV), Members, member-units, representatives
and directors (V), General meeting, election,
assumptions of ofce and dismissal (VI), Finance
(VII), Dissolution (VIII) and Miscellaneous
(IX).
The procedure for the formation of the
organisations includes: (a) Formation of the
committees, (b) Adoption of the constitution,
(c) Application for the registration and (d)
Nomination, powers and termination of the pro-
tem committee.
Furthermore, the regulations establish the
rules of procedure of the organisations, the
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nomination, privileges and duties of members,
and suspension and cessation of membership.
As far as nancial provisions are concerned,
Part VII regulates, among other matters,
the investment of funds, the share-holding
arrangement, the liability of members and the
accounts to be kept. Final provisions concern
the liquidation procedure following dissolution
or cancellation of registration. The registrar
also issued the standard operating procedures as
guidelines.
Farmers’ Organisation Authority (FOA) Act 1973
The function of the Authority (FOA) Act 1973
is to incorporate the FOA and to provide for
matters connected therewith. The act is divided
into the following parts: Preliminary (I), The
Authority (II), Divisions, ofcers and servants
(III), Finance (IV), Other powers of the authority
(V) and General (VI). The authority shall have
the following responsibilities: (a) To encourage
and carry out farmers’ organizations’ economic
and social development, (b) To register, control
and oversee farmers’ organisations, (c) To
plan and carry out agricultural development in
the so-called “Farmers’ Development Areas”,
established by notication of the Minister in the
Ofcial Gazette for purposes of this act and (d)
To control and coordinate the performance of the
activities for the achievement of the objectives.
Furthermore, the act provides for the
establishment of the Farmers’ Advisory Council,
whose functions generally serve as the minister’s
adviser on issues relating to the growth of
farmers’ organizations. Financial provisions
concern the following: (a) Formation of a fund
that the authority will manage and oversee, (b)
Authorisation of expenses and preparation of
estimates, (c) Accounts and audit, (d) Power
to borrow sums required by the authority for
the fullment of its obligations and duties, (e)
Power to make loans, (f) Investment of the assets
of the authority and (g) Compulsory acquisition
of land, as the authority may deem necessary for
the purposes of this act.
However, there is no solid legislation
purposely for fertilisers, and the government
has yet to table such legislation in Parliament
(Ministry of Agriculture and Food Industries,
2021). This idea has been discussed for many
years as the amount of fertiliser consumption
by major crops was high such as oil palm at
4.410 million metric tonnes, rice at 420 million
metric tonnes and rubber at 150 million metric
tonnes. This business segmentation is 3.160
million metric (50%) by private plantation
companies, 1.250 million metric tonnes (23%)
by government agencies, 763 million metric
tonnes (14%) by smallholders and farmers and
272 million metric tonnes (5%) by government
subsidies for a total of 5.45 million metric tonnes
of transactions (FIAM, 2015). Malaysia has a
gross import of US$902 million (1.47% market
share) and gross export of US$633 million
(1.03% market share) of world fertilisers valued
at US$61.3 billion such as nitrogen, ammonium
sulphate, rock phosphate, muriate of potash,
compound fertilisers and mineral fertilisers
(Atlas, 2018).
Malaysia as a member of the FOA became
part of the agreement establishing a Food and
Fertiliser Technology Centre for the Asian
and Pacic Region. The Contracting Parties
of Asian and Pacic countries created a Food
and Fertiliser Technology Centre for the Asia
and Pacic Region in 1969 in Taipei, which
is an effort to encourage the use of fertilisers
and contemporary farming techniques to boost
agricultural food output. The major goals of
such a centre are to encourage, exchange and
disseminate technical knowledge and experience
on agricultural food production among member
countries, with special attention to the use
of chemical fertilisers and the adoption of
contemporary farming practises. Additionally,
the centre will offer suggestions for raising food
production. This is an opportunity to ensure the
compliance of this standard in the food system.
applying the concept of food sovereignty
to farmers in increasing their income from
reducing input costs such as developing organic
fertilisers, while at the same time increasing the
soil fertility and yield of the paddy.
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Law and Enforcement Issues
Cases that are disseminated through the media
regarding the absence of data on corruption
of rice fertiliser subsidy schemes by farmers
are not prosecuted under the Control of Paddy
and Rice Act 1994, the Malaysian Quarantine
and Inspection Act 2011 or the Farmers’
Organisation Act 1973 and the Farmers’
Organisation Authority Act 19731 but should be
under the MACC Act 2009, the Contracts Act
19502 and the Control of Supplies Act 1961.
In most cases, there are weaknesses in
solving the problems of smuggling government-
subsidised fertilisers and fraud, or failure to
comply with fertiliser supply contracts due to
poor quality of fertilisers, and delays in ensuring
the distribution of fertilisers under contracts
to farmers. Often there are irregularities due
to corruption in the distribution of fertiliser
schemes, as well as the sale of fertilisers without
a valid permit and subsidised fertilisers being
sold in the market by irresponsible parties.
Fertilisers are included under the list of
controlled supplies in Schedule 1 of the Control
of Supplies Regulations 1974, PU(A) 103/1974.
Regulations 2 (1) states:
4. Any process or processes whatsoever,
including the collecting of any substance,
whereby any product or substance capable of
being used as a fertiliser is produced, derived
or collected, regardless whether such product or
substance is a straight fertiliser or a compound of
two or more substances and regardless whether
such product or substance is a product or a by-
product of such process or processes.
Enforcement of regulation on the
production and distribution of fertilisers as
controlled goods listed in Schedule 1 of the
Control of Supplies Act 1961 is not a priority for
stakeholders, including the relevant authorities
and civil societies, especially those representing
consumer and environmental interests. Although
prosecutions have been conducted, statistics
only highlight offences for fertiliser cases mixed
with other controlled goods.
In PP KDPNHEP vs. Syarikat Unigrow
Agriculture Sdn. Bhd. (Muar Sessions Court
2018), the company’s director was ned
RM150,000 by the Sessions Court after being
found guilty of selling government-subsidised
fertilisers without a valid wholesale licence
issued by the Malaysian Supply Controller. The
case was prosecuted under Section 16 of the
Control of Supplies Act 1961 and punishable
under Section 22 (2) of the same act and liable
to a ne not more than RM2 million upon
conviction. The company’s director who had
a Certify Schedule Goods Control License
was ned RM80,000 for supplying chemical
fertilisers to three other companies with no valid
wholesale licence. The directors of the company
were charged under Section 22 (1) of the same
act which provides for imprisonment of up to
three years or a ne not exceeding RM1 million
or both.
In 2019, there were 835 cases of seizures
under the Control of Supplies Act 1961 valued
at RM38,237,973. However, it did not involve
only fertilisers and there has been no data
ltering, specically for fertilizers.
Irregularities occurring in fertiliser subsidy
schemes can be classied as a form of crime
committed by any individual involved directly
or indirectly. This commercial crime has a much
greater impact when compared to conventional
crimes such as robbery, stealing, extortion and
fraud as it can adversely affect the nancial
performance of commercial organisations.
For example, the mismanagement of the
Federal Government Paddy Fertiliser Subsidy
Scheme funds in November 2017 led to the
detention of an Area Farmers’ Organisation
project manager in Melaka, who led false
claims amounting to RM2.54 million involving
1 Prosecution is under both the Farmers’ Organisation Act 1973 and the Farmers’ Organisation Authority Act 1973 read
together.
2 Though the Contracts Act 1950 is a private law statute, prosecution has taken place in pursuant
to the 1950 act.
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56,700 bags of fertilisers that were never
approved by the Area Farmers’ Organisation
committee meeting. Fertilisers that should have
been claimed by the organisation were diverted
and believed to be sold for personal gains.
The MACC Act 2009 allows for the
prosecution of people found to be guilty of
crimes involving corruption. In the context of
the distribution of fertiliser subsidy schemes, the
parties involved can be charged with criminal
property abuse by the MACC. Generally, the
offenders involved in the abuse of fertiliser
subsidy schemes can be prosecuted and
convicted of criminal property abuse and breach
of trust under the Penal Code (Asmar et al.,
2021).
Section 403 of the Penal Code covers
offences of fraudulently abusing property. Those
convicted can be sentenced up to ve years in
prison, strokes of the whip and can be ned.
While for offences of breach of trust, Section
406 of the Penal Code provides for a prison
sentence of up to 10 years, strokes of the whip
and nes (Asmar et al., 2021).
In the case of Mohd Ariff Abdul Rahman
vs. PP CLJ 1 [2020] 703, the issue was whether
there was sufcient evidence to support
the conclusion that abuse of authority was
committed when money was obtained as a
result of or in conjunction with corruption under
Section 41 (1) the MACC Act 2009.
It was noted that as the chief secretary of the
Ministry of Agriculture and Agro-based Industry
is appointed as board director of Padiberas
Nasional Bhd. (BERNAS) while the deputy
chief secretary (development) of the ministry
is appointed as director -general of the Paddy
and Rice Act 1994, the latter has more power
to manage the authorisation quota for the rice
sector agenda. This is an example of intervention
coming from political and special interest
groups, leading to the capture of regulation.
Following the change of government in 2018,
members of political parties were appointed to
the board of NAFAS and as chairman of FOA,
not from the votes of members of Area and State
Farmers’ Organisations and this arguably went
against the regulations of the association.
Prosecutions of cases are heard at the
Sessions Court level and most of the cases ended
up with payment of compound, while the goods
such as seized fertilisers which are perishable,
need to be disposed of within a certain period
of time. Therefore, the reported cases need to
be adjusted in terms of proling individual
perpetrators and so that the companies involved
do not repeat them. Some cases are also
prosecuted under the Control of Supplies Act
1961 by the enforcement arm of the Ministry
of Domestic Trade and Consumer Affairs.
However, it is uncertain how prosecution under
the 1961 act has been carried out so far. The
situation is assumed to be as follows:
• Cases prosecuted under the MACC Act
2009 by the enforcement of MACC and
others (such as the Penal Code)3
• Cases prosecuted under the Control of
Supplies Act 1961 by the Enforcement
Division of the Ministry of Domestic Trade
and Consumer Affairs and others (such as
the Royal Malaysian Customs)4
• Cases prosecuted under the MAQIS Act
2011 and Control of Supplies Act 1961
through enforcement by MAQIS5
• Cases prosecuted under the Control of Paddy
and Rice Act 1994 by the enforcement of
the rice industry division (IPB, MAFI) and
MAQIS6
3 Angelina Sinyang (21 November 2019). Ahli Perniagaan Menipu Dijatuhi Hukuman Penjara
90 Tahun 44 Sebatan. Nurulsham Shamsudin (12 January 2021). Didakwa Minta, Terima
Rasuah Berhubung Tender Baja (Kosmo).
4 Hamzah Osman (28 September 2018). Baja Subsidi RM350,000 Dirampas (NSTP).
5 Zulianty Zulkii (23 July 2019). KPDNHEP Rampas 2,644 Baja Subsidi.
6 Muhaamad Has Nawawi (March 2019). Baja, Benih Subsidi Dirampas (Harian Metro).
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Although the Ministry of Domestic
Trade and Consumer Affairs reported on the
prosecution, the statistics on the number of
fertiliser-related cases were not made publicly
known (the Ministry of Domestic Trade and
Consumer Affairs, 2019). MAQIS also did not
reveal the statistics on the number of cases
involving fertilisers, unlike products such as
plants, sh and meat as can be seen in Table 1.
Why is the MAQIS Act 2011 not used
in cases involving seizures or conscations?
MAQIS controls the country’s borders but
questions may arise as to whether such power
extends beyond the border, whether at seaports,
land border crossings or airports. By right,
MAQIS should be able to conscate goods that
are located at premises or in vehicles within
the territory of Malaysia, but due to manpower
shortage, it did not conduct inspections beyond
border areas. Containers carrying merchandise
regulated by the MAQIS Act 2011 without
permit can be seized and investigated in
accordance with Section 11 (1) of the act.
If convicted, the person carrying it can be
punishable under Section 11 (3) of the same act,
where he will be liable to a maximum ne of
RM100,000, a maximum six-year jail sentence
or both.
The RM79 million collections of nes are
not in line with the enforcement action because
the number of prosecutions under the MAQIS
Act 2011 is small compared to the number of
those accused but not found guilty or released.
Furthermore, the prosecution record does not
include cases involving fertilisers, despite
the high number of cases of fertiliser scheme
mismanagement being reported in the media7.
The integrated enforcement of laws
relevant to the rice fertiliser subsidy scheme
includes the Ministry of Domestic Trade
and Consumer Affairs), Malaysian Maritime
Enforcement Agency, Royal Malaysia Police,
Royal Malaysian Customs Department, Border
Security Agency, the MACC, the Malaysian
Armed Forces, MAQIS, the Department of
Veterinary Services, DoA and the Department of
Fisheries and the powers conferred are for the
purpose of seizing, detaining and prosecuting
including under the Penal Code. Nevertheless,
there is a need to understand why the underlying
laws of an order are not only subsidiary laws that
should regulate the development of industries
such as fertilisers.
The issue of the signicance of the fertiliser
subsidy aid scheme within the agricultural sector,
which is a highly important issue and involves
the engagement of different parties, is directly
related to corruption. It is quite surprising
why some parties still fail to comply with the
regulations of fertiliser-related laws, whereas
the compound charges, nes and convictions
are lower than the legal actions and convictions
of the MACC Act 2009 and its impact on the
perpetrators. Despite the ability to solve the
issue of smuggling of government-subsidised
fertiliser, fraud or mismanagement of the sale
of fertilisers being unsatisfactory, there is a high
number of ndings of guilt in corruption cases
in the fertiliser distribution scheme.
Table 1: 2019 MAQIS enforcement
Action Seizure Compound Prosecution Released
No Entry,
Forfeit
Rights
Number of cases 1,007 582 18 562 380
Value (RM) 116,567,637 4,030,268 202,000 103,441,946 5,908,005
Source: Ministry of Agriculture and Agro-based Industry Annual Report, 2019
7 Dziyaul Afnan Abdul Rahman (April 2019). AKSEM Lumpuhkan Sindiket Jual Baja Subsidi.
Berita Harian; Ruwaida Md. Zain (November 2020). Baja Mineral Tanpa Permit Dirampas. Berita
Harian.
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Rice Fertiliser Subsidy Scheme Management
Ecosystem
In the developing world, rice is one of the most
signicant cereal crops. At least 33 nations
consider it to be a staple food, 15 of which are
in Asia and the Pacic. Millions of smallholder
farmers rely on rice agro-ecosystems for their
livelihoods and these systems have the ability to
benet local communities and the general public
by maintaining rice harvests. Farm yields can be
increased by using chemical inputs that provide
farmers with fertiliser and disease control. This
interest has been of relevance to governments in
providing subsidised fertilisers and chemicals
under two government subsidy schemes, namely
The Federal Government Paddy Fertiliser
Subsidy Scheme and the Paddy Production
Incentive Scheme. The two schemes can be seen
in Table 2.
Farming has an impact on the environment
but debates on the issue are largely conducted
by the scientic community, balanced with
economic factors to boost farm yields. But
most of the discussions are not concerned about
legislation and regulations with regard to the
health and safety of the chemical inputs from
fertiliser use.
The Rice Industry Division of Ministry of
Agriculture and Food Industries plays a role in
formulating and establishing the basis for the
development of the country’s paddy and rice
industry. The division is also responsible for the
implementation of the development of the rice
industry and regulating the production, supply
and production chain of rice and rice products.
MADA was established under the MADA
Act 1972 to develop, encourage, assist and
undertake socio-economic development projects
in the Muda Area. MADA is responsible
for planning and undertaking agricultural
development activities, including infrastructure
and irrigation, which have been approved for the
states of Kedah and Perlis. KADA is an agency
established under the KADA Act 1972 and the
authority is responsible for undertaking socio-
economic development projects in the Kemubu
Area. KADA provides agriculture services
and irrigation infrastructure to guarantee rice
Table 2: Rice fertilizer schemes
Year Program Condition
1979 Federal Government Paddy
Fertiliser Subsidy Scheme
Urea 46%
Rate: 4 bags (20 kg/bag)
Compound fertiliser 17.5:15.5:10 - (Malaysia except
Terengganu & Kelantan)
Rate: 12 bags (20 kg/bag)
1981 Paddy Price Subsidy
Scheme
RM360/metric tonne nett sold to registered miller
2007 Certied Paddy Seed
Incentive
Rate: RM1.03/kg (certied seed)
Cost at miller RM48.60/20 kg
Subsidy - RM20.60/20 kg
Farmers’ rate (Miller price) - RM28/20 kg
2008 Paddy Production Incentive
Scheme
Additional NPK - 6 bags/hectare (150 kg)
Pesticide - Coupon RM200/hectare/season
Kapur - 3 m/hectare/once in 3 years (RM970)
Fertiliser - RM100/hectare
Bio-fertiliser - 1 bottle/hectare
2015 Fertiliser and Pesticide for
Hill Paddy
Compound fertiliser 15:12.5:17.5 - 1 mg
Urea
Weeds pesticide
Source: LKAN 2, 2018
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production to meet the national rice needs.
Meanwhile, the Integrated Agricultural
Development Area (IADA) is the agency under
the direct control of the Paddy and Rice Industry
Division of the Ministry of Agriculture and Food
Industries, which is responsible for coordinating
project involving and development of paddy
and rice. IADA is responsible for the areas other
than Muda and Kemubu.
There are also the Farmers’ Organisation Act
1973 and the FAO Act 1973 which established
farmers associations and the FAO, respectively.
FAO is the agency responsible for monitoring
and managing the payment of fertilisers and
pesticides subsidies to suppliers on behalf of the
Ministry of Agriculture and Food Industries. The
Farmers’ Association Act 1967 was established
in 1967 prior to the Farmers’ Organisation Act
1973.
The fertilizer scheme payments are made by
FAO based on claims for payment applications
received from suppliers and conrmation of
progress of the implementation of work by
FAO ofcers. Area Farmers’ Organisations were
established under the Farmers’ Organisation Act
1973. Among the functions of the Area Farmers’
Organisation is to manage the registration of
farmers who are eligible to receive subsidies and
incentives for paddy crops. At the state level,
it is the State Farmers’ Association and at the
national level, it is NAFAS.
The Area Farmers’ Organisation will be
appointed by FAO to oversee the management
of the rice fertiliser subsidies scheme by
NAFAS8 and its suppliers which are companies
acting as stockists to order, receive, store,
control, distribute and safeguard the integrity
of the subsidy and also provide incentives to
the storing farmers9. The NAFAS supplier is
a company appointed to supply fertilisers to
farmers (LKAN 2, 2018).
Suppliers have to provide fertilisers and
ensure adequate transportation according to
the orders received. Suppliers also perform
the following functions namely transfer of
technology programmes to farmers and Area
Farmers’ Organisation members which include
appointing transport companies, providing
contracts of service including fertilizer delivery
duties and delivering fertilizers to PPK based on
orders (LKAN 2, 2018).
BERNAS is the company responsible
for the processing, importing, warehousing,
distribution and marketing of rice. Besides
that, the company is also responsible for paying
the Rice Price Subsidised Scheme to paddy
farmers who send rice to factories registered
under BERNAS. BERNAS is one of NAFAS’s
suppliers (LKAN 2, 2018).
The Ministry of Agriculture and Food
Industries has spent RM1.8 billion annually
on inputs that are subsidised and incentivised,
which are aimed at increasing the production
of local rice or rice products. Five types of
subsidies and incentives were given to farmers
to ease the cost incurred and support the income
generated by farmers (LKAN 2, 2018).
However, according to the Auditor
General’s Report from 2016-2018, it was
found that the ministry failed to achieve the
productivity target of producing 5 metric tonnes
of rice despite overpaid claims of the Federal
Government Paddy Fertiliser Subsidy Scheme
valued at RM178.3 million (LKAN 2, 2018).
Fertiliser Subsidy Scheme Management
Inadequacies
The management of the grant scheme has been
argued to be prone to implementation problems
of not being executed prudently, efciently
and effectively. Incurred expenses and claims
exceed the value of the contract. The Ministry
8 NAFAS is a corporate entity that mirrors Area Farmers’ Organisations as the latter is an area-level farmers’ association.
9 Storing farmers are farmers who warehouse the fertilisers with or without bearing the cost of warehousing. Farmers have
to bear the cost of warehouse if they have to depend on rented premises or stores while waiting for the fertilisers to be used
in accordance with cultivation or planting schedules.
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of Agriculture and Food Industries does not
maintain subsidy or incentive registrations.
This is a problem when there are no checks
and balances in the authorisation of the list
made under the FOA without a representative
from the applicant farmer as mentioned under
the FOA 1973. The ministry relies entirely on
the database of farmers in the ePadi system
developed by NAFAS suppliers. There is
another system called iPadi, developed by
KADA which is also used by MADA which
still uses a manual registration book of farmers
for Kelantan, Kedah, Perak and Perlis. When
the ministry decides on the payment of the
subsidies involving FAO and Area Farmers’
Organisations, questions may arise as to how
the data were conrmed and authenticated for
the purpose of carrying out the rules of the FOA
Act 1973 and the Farmers’ Organisations Act
1973, which may lead to wrongdoings (LKAN
2, 2018).
There are cases involving farmers who
have died still receiving subsidies or incentives.
There are data aws in the ePadi or incentive
system, where some important information, such
as identity card number, was non-existent and
incomplete. The farmer identity card information
for 7,894 to 10,034 subsidy recipients for the
years 2016 to 2018 is incomplete, involving
a total grant of RM108.08 million (LKAN 2,
2018).
Subsequently, the distribution of fertilisers
was also not in accordance with the prescribed
ratio, as well as the late distribution and supply
of fertilisers and pesticides not following the
prescribed specications. Furthermore, the claim
for nes against delays in processing fertilisers
did not follow the specications10 in 2016 and
2017, as they were only made in July 2019.
Mismanaged distribution of fertilisers exceeding
the land area with a total amount of RM59.44
million in 2016 to 2018 also occurred due to the
differences in the fertiliser calculation method.
These were offences under the regulations,
reported as fraud by dishonest ofcers in charge,
which could also result in reports being made
under the Rules and Code of Conduct of Civil
Servants relating to disciplinary actions (LKAN
2, 2018).
The issue of surplus fertilisers should not
arise as the distribution process depends on
the area of land and the amount of fertiliser
required is according to the prescribed schedule.
However, because of land inheritance, including
those involving faraid cases under syariah law,
some of the names of the deceased have yet to
be changed. It was noticed that 3,210 to 7,061
deceased farmers still received subsidies and
incentives per season, amounting to RM57.92
million. In addition, identity card numbers
for 1,427 to 2,421 recipients of subsidies and
incentives amounting to RM28.85 million do
not exist (LKAN 2, 2018).
The registration of genuine paddy farmers
and production records is more viable for the
claims of subsidy and incentives. Under the
Farmers’ Organisation Act 1973, the registrar
must comply with the latest updated records
from each organisation member and it must
tally with a list of members endorsed during the
organisation’s annual meeting.
It was reported that the fertiliser companies’
claims for 2016 and 2017 against the supply
of the Federal Government Paddy Fertiliser
Subsidy Scheme exceeded the contract value
of RM178.23 million. The claims for the Paddy
Production Incentive Scheme and Pesticides
Pest Control Scheme) for 2016 also exceeded the
contract value of RM17.58 million in violation
of the Government Contract Act 1949 (LKAN
2, 2018).
There was a delay in delivery of fertiliser by
NAFAS suppliers between 14 days to 278 days.
Fines for late supply of fertilisers and supplies
that did not meet the specications amounted to
RM192.96 million for 2016 and 2017 but were
only claimed in July 2019. At the time of the
release of the Auditor General’s Report Series
2, 2018, the nes have not yet been paid. This
is the case involving the contractor in Agromate
10 Specications here refer to fertilizers quantity and quality information proposed for the farmers.
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(M) Sdn. Bhd. v. Felcra Niaga Sdn. Bhd., [2020]
1 LNS 1910 and Agromate (M) Sdn. Bhd. v. KTS
Trading Sdn. Bhd. [2017] 1 LNS 1707], where
the victims were farmers whose aid got delayed.
A review on the breach of contract on delayed
delivery of fertilisers and non-compliant
fertilizer species found that there was a delay in
fertiliser delivery by the supplier. It is also found
that the supply of fertiliser does not comply with
the specications required for the supply.
The SDG Dimension and Rice Fertiliser
Distribution in Malaysia
All United Nations member states adopted the
Sustainable Development Goals (SDGs) also
referred to as the Global Goals, through the
General Assembly resolution on Transforming
our World: The 2030 Agenda for Sustainable
Development which was adopted on 25
September 2015. The SDGs are an international
call to action to end poverty, protect the
environment and guarantee that everyone lives
in peace and prosperity by the year 2030 (United
Nations Development Programme [UNDP]
Malaysia, 2021). The SDGs came after the
Millennium Development Goals (MDGs) which
expired in 2015. The SDGs are encapsulated in
the following goals:
1. No poverty
2. Zero hunger
3. Good health and well-being
4. Quality education
5. Gender equality
6. Clean water and sanitation
7. Affordable and clean energy
8. Decent work and economic growth
9. Industry, innovation and infrastructure
10. Reducing inequality
11. Sustainable cities and communities
12. Responsible consumption and production
13. Climate action
14. Life below water
15. Life on land
16. Peace, justice and strong institutions
17. Partnerships for the goals
The management of rice fertiliser subsidy
in Malaysia directly relates at least to Goals
1 (No poverty), 2 (Zero hunger), 8 (Decent
work and economic growth), 10 (Reducing
inequality), 12 (Responsible consumption and
production), 13 (Climate action), 14 (Life below
water), 15 (Life on land), 16 (Peace, justice and
strong institutions) and 17 (Partnerships for the
goals). Such relationships suit rice production
which is associated with agricultural and rural
communities, particularly in the context of a
developing country. In fact, the UNDP Strategic
Plan (2018 0 2021) includes the following:
Eradicating poverty, structural transformations
and building resilience. However, it is also
important to look at what has been put on the
plate for Malaysian rice fertiliser subsidies vis-
à-vis SDGs. Malaysia will launch the National
Agrofood Policy 2.0 (2021-2030) (NAP 2.0),
safeguarding national food security (The Sun,
2021). The NAP 2.0 will contribute to Malaysia’s
ambitions, particularly environmental
sustainability in the agrofood industry, in
support of the SDGs over the course of a decade
(The Sun, 2021). Through the NAP 2.0 as well,
the Malaysian government undertakes efforts
to ensure the sustainability of the food system
is assessed by both domestic and international
indicators (The Sun, 2021). The international
indicators include the SDGs.
With regard to the future development
of rice fertiliser distribution in Malaysia, the
provision of existing fertiliser assistance to
farmers under the Federal Government Paddy
Fertiliser Subsidy Scheme is based on three
bulk formulas such as land size, soil level and
geographical location. The grant depended on
land requirements based on zones in Peninsular
Malaysia, Kelantan and Terengganu, as well
as Sabah and Sarawak. In addition, the DoA
is implementing a Specic Location Nutrient
Management (SSNM) programme or known
as soil proling. SSNM is fertilisation routine
formulated according to the actual needs of
rice crops and soil fertility prole specically.
SSNM is one of the main focuses of the reforms
as 40% of paddy production factors are related
to nutrient management (fertilisation).
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Increasing Regulatory Pressure due to the
COVID-19 Pandemic
The fertiliser sector is subject to new supply-
related laws in various jurisdictions at the
regional, national and sub-national levels.
Due to environmental and safety concerns,
policymakers are enacting additional rules on
fertilisers, product and plant certications,
and tailings management. At this moment, the
registration of fertiliser is placed under the Plant
Quarantine Act 1976. The Crop Protection and
Plant Quarantine Division of the DoA issues
import permits, export licences and certicates
under the Plant Quarantine Act 1976, Customs
(Prohibition of Import or Export) Order 2008
and International Trade of Endangered Species
Act 2008. Import and export permits are issued
online. With regard to import permits, which
underline border controls, enforcement falls
under the jurisdiction MAQIS, which works
closely with other enforcement agencies such
as the Royal Malaysia Customs Department,
Ministry of Domestic Trade and Consumer
Affairs and, Ministry of Home Affairs.
Food and agriculture are essential sectors, in
which production and transportation continued
during lockdowns during the COVID-19
pandemic. Moreover, bulk shipping which is the
main transport mode for agricultural goods has
been far less affected by restrictions than other
forms of transport. Strong and proactive public
and private collaboration efforts throughout
the world have anticipated potential trade and
supply chain problems (IFA, 2020).
Major jurisdictions have moved quickly to
promote their agriculture and fertiliser sectors
in addition to classifying these industries as
important. The focus on environmental issues
associated with fertilisers has increased and
a number of governments are introducing
measures to reduce emissions related to
agriculture. Increased crop prices, a more
favourable relationship between crop and
fertiliser prices, the weakening of domestic
currencies in major agricultural exporting
nations, as well as favourable weather in
important consuming nations are all factors that
will contribute to increased fertiliser demand
in 2020. As a precaution against anticipated
delivery delays or nancial challenges, some
farmers may have also bought fertilisers sooner
than usual.
Despite the expansion in fertiliser use
worldwide, some nations are having trouble and
may see a reduction in fertiliser consumption.
Additionally, the pandemic has impacted several
particular industries like biofuel crops, fruits
and vegetables. This is due to the need for
movement of paddy elds workers to follow the
regulations for manual fertilising works.
Towards Sustainability in Malaysian Rice
Fertiliser Subsidies
For the fertiliser industry, sustainability also
goes well beyond application. To deal with the
1% of greenhouse gas (GHG) emissions that
come from fertiliser production and reduce the
overall environmental footprint of fertiliser
production, manufacturers are working hard to
increase energy efciency, reduce emissions,
cut water consumption and increase water
recycling. The industry is also committed to
ensuring safety and security at their production
sites and beyond. To achieve this, producers are
constantly updating their production methods,
adopting best-available technologies and even
pioneering new innovations (IFA, 2020).
The DoA is keen towards the biofertiliser
industry market penetration. Locally made or
imported biofertilisers are readily available
in the nation. The sale of locally produced
biofertiliser does not require permission. The
marketing of imported fertilisers and goods
requires import permission. For the marketing
and import of microbiological products, two
types of permissions are necessary: (i) Import
permit in term for bulk consignment importation
for marketing and (ii) Permit to import sample
for the associated authority analysis (small
consignment up to 2 kg or 2 litres). An off-
module (non-electronic) application can be used
to get a permit to import samples.
For the following reasons, off-module
application may be used: (i) Department/
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government agencies, (ii) Participants in
exhibitions, (iii) Owners of personal materials
and samples (personal effects), (iv) Researchers
and students and (vi) Newly imported items.
Applicants must include a verication letter
from the organiser or any associated party with
this application. Fill out the off-module import
permit application form (EP-4A form) and
submit it to the Crop Protection and Quarantine
Section of the DoA, together with a bank
draft, postal order or money order with RM15
payable to the Director-General of Agriculture.
The authority will reject any EP-4A form that
is incomplete. Application for the permit must
be made 30 days prior to the importation of
samples of microbiological products.
The information requested in the EP-4A
form include: (1) Importer name and address,
(2) Contact number of fax number, (3) Exporter
name and address, (4) Fertilizer and product
commercial name, (5) Raw material blends
with fertiliser or product (e.g., animal dung,
sugarcane waste, paddy husk and others), (6)
Microorganism (bacteria, fungus and others
scientic name) blends with fertiliser/product,
(must enclose certied letter from manufacturer
if the fertiliser does not contain any
microorganism), (7) Lab procedure or protocol
in the process of microorganism existence in
the fertiliser/product, (8) Declaration from the
responsible authority (government authority)
that the fertiliser/product does not contain
any ingredient that can cause harmful effects
to any plant, livestock, sh, human and the
environment, (9) NPK contents (such as
nitrogen 8%, phosphorus 10%, postassium 7%
if applicable), (10) Mineral contents (such as
manganese, iron if applicable), (11) Others (if
applicable), (12) Manufacturing process of
fertiliser or product (owchart to be enclosed),
(13) Fertiliser/product form (solid substance/
liquid/granule), (14) Country of manufacturer,
(15) Other countries using this fertiliser or
product, (16) Purpose for using the fertiliser/
product (e.g., root growth), (17) Fertilizer
or product effect on plants, (18) Fertilizer or
product effect on livestock and (19) Fertilizer or
product effect on humans and the environment.
The maximum amount of organic fertiliser,
microorganisms and products containing
microorganism that can be imported for the
rst time is 2 litres, 2 kg or 5 units per sample
(test tubes per ampoules) for analytical reasons.
The only entrance point for importing samples
is the Kuala Lumpur International Airport.
By employing the aforementioned procedure,
applicants must pay RM340 as the analysis
charge for the samples. During the application
process, ve sets of biofertiliser and biopesticide
samples must be provided, each weighing 250 g
(powder/solid) or 250 ml (liquid).
To verify that the item would not threaten
plants, sh, cattle, humans or the environment
analysis will be done by four government
departments, including the DoA, Department
of Fisheries, Department of Veterinary Services
and Institute of Medical Research. The
Committee for Microorganisms Importation
shall be given the analysis ndings of the
products. The group which is made up of
ofcials from 17 govrnment organisations will
assess the importation risk and the safety of the
products. The release of the Permit to Import
Plants, Soil, Rooting Compost, Growing Media,
Benecial Organism and Organic Fertiliser will
authorise the import of the product if there is
no opposition from the committee members.
If there is opposition, the permission will be
halted and the importer will be asked for further
details on the products, or the committee will
ask the importer to provide fresh samples (ve
sets) for a second analysis. RM340 cost must be
covered by the importer. The products’ second
analysis ndings will once more be provided to
the Committee for Microorganisms Importation.
The permission will be issued if the committee
members accept the ndings without raising any
issues. However, the permission application will
be turned down if there are any objections.
Overall, the management of MAQIS
Agricultural Consignment Import Control
Activities was less effective. The implementation
of visual/physical examination is low and
the inspection charges are not imposed on
consignments other than sh. In addition,
enforcement powers under the MAQIS Act
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2011, poorly conducted screening tests and
time-consuming laboratory result reports have
made it difcult for MAQIS to ensure the
imported agricultural consignments are safe
and of quality. In this case, as the Ministry of
Agriculture and Food Industry which has the
power to manage fertiliser cases must comply
with reporting requirements under the Fertiliser
Bill. The MAQIS Act 2011 does not impose
inspection charges on consignments other than
sh, resulting in reduced government revenue.
According to audit estimates, a total of RM1.59
million of vegetables and fruits are not subject to
inspection charges in accordance with Section 9
(c) of the MAQIS Act 2011 at border entrances.
It is crucial for fertiliser raw materials to be
subject to quarantines to enable pest or disease
testing to be conducted so as to ensure no risks
arise from a lack of safety for local conditions.
The Auditor General’s Report Series 3, 2018
has required MAQIS to formulate a standard
operating procedure (sampling) for taking and
sending samples to the laboratory for screening.
The MAQIS Act 2011 authorises the authority
to issue permits, licences or import and export
certicates for agricultural consignments.
Since Malaysia requires an import or
export licence for all goods, it is necessary
to apply for a permit to import fertilisers in
substantial quantities for commercial use. The
application for the permission must be submitted
electronically (ePermit) via a designated vendor,
Dagang Net Technologies Sdn. Bhd. (DNT). For
ePermit access, importers, exporters, forwarding
brokers and anyone, including foreigners must
be registered with Dagang Net. The registration
form can be collected through DNT branches
nationwide or downloaded from http://epermit.
dagangnet.com. There is a RM500 corporate
registration cost and a RM200 fee for small-
and medium-scale enterprises. For each ePermit
renewal, RM200 is charged. Samples are
required for the permit application under the
Crop and Plant Quarantine Division of the DoA
for any import of organic fertilisers, biofertilisers,
biopesticides, microorganisms and anything
containing microorganisms (the committee). The
applicant must notify the committee to start the
online application once the ePermit application
has been registered with DNT. To apply for an
import or export permit online using the ePermit
Deposit Form EP-1, the applicant must open a
deposit account. A deposit account can be opened
with as little as RM150. The committee staff will
go to the warehouse where the products will be
kept before the bulk shipment of biofertilisers
and biopesticides arrives. The staff will approve
the import permission if they are pleased with the
storage warehouse’s condition. The Committee
for Microorganisms Importation will be shown
the results once the committees staff members
have collected samples from three successive bulk
consignments of the product that have arrived.
The import authorisation will be cancelled if the
analysis data displayed contains any error.
The application and approval of the
permit will be processed and approved by
MAQIS before registration under the Customs
Information System. Subsequently, the Royal
Malaysian Customs Department will make a
certicate against the permit in the Customs
Information System and then display it in
the ePermit System. Improvement of the said
systems may help in getting earlier responses
from the government to gain public trust.
These regulators keep an eye on industry-
related laws and regulations as they are put into
effect. Most laws and regulations play a direct
part in and are centred on the supply chain’s
upstream, midstream and retail production
components. The National Agro-Food Policy
(NAFP) 2011-2020 which outlines strategies for
the expansion of the paddy and rice industries
through strengthening the supply chain, is
therefore the key policy. A new NAFP 2.0 for
2021-2030 was published online in November
2021 and the 12th Malaysia Plan was ofcially
launched on 27 September 2021. It was hoped
that the Fertilizer Bill would be tabled in
Parliament soon.
It was noticed that DoA and the Ministry of
Agriculture and Food Industries have conducted
stakeholder engagements to encourage contract
farming facilities between the public sector and
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industry players on the agreement for planting
paddy with the Malaysian Good Agricultural
Practices (MyGAP) certication. Sustainable
agriculture is replacing conventional agriculture
as the dominant model for the global agricultural
sector. Good agricultural practises have
been developed as a guide for implementing
sustainable agriculture, which recognises the
value of the economy, environment and society
in generating high-quality, wholesome food.
MyGAP is in a compliance with the Malaysian
Standard (MS) 1784:2016 on Good Agricultural
Practice Crop Commodities (Second Revision)
used for crop sector modules (Nurul Izzati et al.,
2020). The Malaysian Standard for Biofertilizers
is also in the fth draft for endorsement by the
Department of Standard Malaysia. Further, the
Food Act 1983 and Environmental Quality Act
1974 can be relevant for future development of
organic fertilisers from food waste.
In addition, laws like the Road Transport
Act 1987, Factories and Machinery Act 1967,
Civil Aviation Regulations 2016 (concerning
unmanned vehicles like drone technology to
spray fertilisers on rice elds) and Biosafety
Act 2007 may benet from periodic reviews to
ensure that the legal and regulatory frameworks
remain relevant. This is because of the rapid
progress in technology, farm mechanisation,
biotechnology and aerial monitoring. This is
crucial in light of the recent development of
precision paddy farming which will require
legislation pertaining to aviation and data
protection. Precision paddy farming uses ground
data sensors, aerial surveillance (drones and
satellites) and big data (Sarene et al., 2018).
Laws such as the Factories and Machinery
Act 1967 can also be considered with regard to
local fertiliser production standards. Moreover,
the compliance with occupational safety and
health standards, and company regulations
can safeguard the interest of fertiliser factory
management and workers because the actions
involved in the fertilizer production operation
determines the operating costs and input costs
of fertilisers that are said to be expensive in the
market.
Malaysia should study the experiences of
the European Union in the fertiliser industry. In
the European Union, for instance, agricultural
law is frequently referred to as a separate sector
that functions mainly independently from other
rules governing the internal market. Recent
legislative, political and judicial developments
have pushed for the implementation of policy
considerations outlined outside of the treaties’
sections on agriculture. In contrast to these
changes, agricultural law is now or has recently
been integrated into the “regular” internal
market law. It implies that there is evidence
showing that the unique treatment of agriculture
under European Union laws has been severely
undermined with regard to the free movement
law. Agriculture is still considered to be a special
sector in the conventional sense under European
Union competition law. Lessons should not
only be learnt from an advanced economy like
the European Union. Thailand is an example of
a developing country that is close to Malaysia
which has greater yields of food and agricultural
products, including rice. The rice and rice inputs
distribution system and laws can be studied,
such as the rice pledging scheme implemented
during Yingluck Shinawatra’s tenure as prime
minister which can be analysed further in the
context of a failing populist policy that was
supposed to support farmers but ended up being
riddled by corruption.
Conclusion and Recommendations
In conclusion, it is a must for fertiliser
manufacturers, retailers or even the farmers
to comply with legal provisions. It was noted
that the Plant Quarantine Act 1976, with the
requirements of Plant Quarantine Regulations
1981, provides for import the fertilizers and the
materials to produce fertilisers. The fertilisers’
retailer activities shall be registered with the
government. The list of suppliers must be
published for records and tracing by the public.
The management of fertiliser transaction
should be supervised closely. Otherwise, some
party may mismanage the distribution for
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personal gains. In addition, chemical waste
generated from improper usage and storage of
fertilisers can lead to health problems. Involved
parties must collaborate in combating the issue
of improper handling of fertilizers.
It is recommended that the laws and
regulations as the medium of protection should
be brief in their details. The government needs
to be aware of registration which in turn needs to
be properly notied and the standard operating
procedures for farmers who need fertilizers to
increase production. The applications of fertiliser
technologies such as RiceFERT already apply
for local produce rice farming. RiceFERT was
developed by Malaysian Agricultural Research
and Development Institute researchers as a
decision support system for the recommendation
of paddy fertiliser rates according to specic
locations. Through specic fertilising location
recommendations, soil nutrient status databases
can be developed to guide soil fertilisation
and rehabilitation in specic locations. This
fertiliser recommendation system will provide
the required fertilizer rate according to the soil
fertility zone and can reduce fertilisers from
being supplied in excess (Theeba et al., 2020).
It was hoped that more engaging parties will
be involved in testing for the usage of these
procedures at the farmer level.
In February 2021, the Ministry of
Agriculture and Food Industries intended to
introduce specic laws on seeds and fertilisers
to regulate those planting materials. The
rationale of the draft for the Fertiliser Act is to
make sure that the fertiliser content is properly
monitored before the nished products are
marketed. This will allow the government to
decide which fertilisers are appropriate for
sale and what actions to take if production
and distribution do not follow the appropriate
regulations. The government was concerned
about safeguarding the rights of farmers and
smallholders against violations that might take
place along with discrepancies in the cost and
credibility of fertilisers purchased. In the event
that market participants failed to comply with
the new regulations, it was suggested that the
government may generate additional revenue
through new registration, tariffs and penalty
charges. The act would need new procedures
and rules that would impose restrictions or
risk upsetting the current exible system of
importing raw materials as well as producing,
storing and distributing fertilisers among local
producers and importers. A mechanism such
as the establishment the Board of Fertilisers
or monitoring entities is required to ensure
both parties benet. The draft however needs
further clarication and stakeholder engagement
sessions and has yet to be nalised.
It is also recommended the transaction
involving distribution chain agencies be
supervised and scrutinised. Changing the
management in response to illegal activities and
dishonest ofcers in benets the nation. The
fertiliser data sheet safety should be recorded
accordingly for auditory and regulatory
compliance purposes. It is suggested that
strict laws and regulations be put in place
governing the use and supply of fertilisers.
Effective penalties and nes should be applied.
Additionally, cooperation between producers,
sellers and farmers is required to uphold the
law and prevent improper management of the
fertiliser industry. In order to utilise the natural
plantation system without relying on imported
fertiliser substances, more research needs be
done. Through these collaborative efforts,
environmental and water disasters due to
fertiliser reactions can be avoided.
Some countries have introduced taxes on
fertilisers to encourage innovation and cost-
effective pollution reductions, and established
incentives for companies and consumers to
change their behaviour towards less-polluting
goods or chemicals. In addition to regulatory
frameworks and standards on chemical and
hazardous contents, taxes on fertilisers have
been implemented as part of a larger policy
framework for the sustainable use of pesticides
and fertilisers in agriculture (United Nations
Environment Programme, 2020).
Rubiah Mohd Amin et al.
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Acknowledgements
The authors would like to thank the Faculty
of Law, Universiti Kebangsaan Malaysia for
funding the preparation and publication of
this paper. This paper is part of a dissertation
that was submitted as partial fullment to
meet requirements for the degree of Doctor of
Philosophy at Universiti Kebangsaan Malaysia.
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