‘700% cost increase’: Malaysia puts export permit rule changes for fruits and veggies on hold
If enforced, the changes would incur much higher costs, up to a 700% increase, per truckload of fruit or vegetable exports across the border, the effects of which are likely to spill across to food and beverage companies that use such commodities in their products.
“The base cost for one lorry truckload of fruits and vegetables to Singapore was originally RM100 (US$24), but these new rules could increase costs by seven times, up to RM750 (US$183),” local traders told The Malaysian Insight.
The reason behind the potential cost increase lies in the reduced number of items allowed per export permit application under the new rules, decreasing five times from 50 to 10. Each truckload of export items would likely require multiple applications due to this, and as each application incurs an individual cost, this would lead to much higher costs per truckload.
Other fruit and vegetable exporters estimated monthly costs to increase by some RM40,000 (US$9,756) to a total of RM60,000 (US$14,634) just to secure export permits.
“We are not opposed to the Malaysian Quarantine and Inspection Service (MAQIS) increasing application fees, but there should at least be a transitional period,” exporter Chuah Zhong Sheng said to Zaobao.
“This raise in application fees should also be publicly announced, at least to retailers and other customers [including food companies] in Singapore who are purchasing our items, such that we will also be able to increase our selling prices to them [which we are unable to do right now].”
The rule changes were first announced in October 2019 via MAQIS’ new ePermit application system, which is very new and as yet not widely used by traders. The original announcement stated that this change would first be enforced for plant commodities.
“The aim of this change is to speed up the verification of information in the application as well as the checking of documents and physical (items) conducted at the gates,” said MAQIS Head Director Saiful Yazan Bin Alwi via a formal statement.
“This permit ‘auto-approval’ system will soon be spread to all commodities.”
As of December 2019, the enforcement of these new rules were put on hold after encountering much opposition, pending a probationary period for the current system and with a warning for all traders to take care not to ‘abuse’ the system.
“The implementation of the 10-item selection per permit limit will be delayed [to] March 31 2020. During this period, permit applications can be performed as usual without this selection limit per permit,” said Saiful Yazan.
“This postponement aims to give the Import/Export and Data Division taskforce time and space to research and validate that no abuse of the permits take place. If MAQIS finds that permit abuse still occurs, the previous directive will come into force once again.”
Significant impacts for Singapore
For Singapore, such a move would likely raise costs of imported fruits and vegetables in the country as mentioned by the exporters above, which would have significant impact on manufacturing costs for food and beverage companies in Singapore that use these in making products.
This number is expected to be significant, as Singapore produces very little of its own fruits and vegetables, and is highly dependent on imports, particularly from Malaysia.
Data from Singapore’s previous food authority Agri-Food & Veterinary Authority of Singapore (AVA) places Malaysia as the country’s top supplier of both fruits (over 373 tonnes per day) and vegetables (595 tonnes per day), whereas export.gov estimates net fresh fruit imports from Malaysia at US$73.9mn, some 14% of all total fruit imports.
When the changes are extended beyond plant commodities, as Saiful Yazan stated, the effects are likely to spread further to other food and beverage companies that deal with meat, fish, poultry and so on.
Will the changes still proceed?
Despite the probationary period, it appears likely that the rule changes will still take place moving forward, especially as the government does not see the effects as being quite as serious as protestors have made it out to be.
According to The Straits Times, Malaysian Deputy Minister of Agriculture and Agro-based Industries Sim Tze Tzin described the 700% increase as ‘exaggerated’ and stood by the 10-item rule.
“It's difficult to identify all 50 items per container and there appears to be an abuse of the current system,” he said.
“There is a need to change the system. This is to make sure there's honest reporting by traders and the government can facilitate trade easily.”
