The Impact of Fertilizer Subsidy on Malaysia Paddy/Rice Industry Using a System Dynamics Approach

The Malaysian paddy and rice industry has always been given special treatment based on the strategic importance of rice as a staple food commodity. This study attempts to simulate the impacts of changes in government intervention policy, namely the fertilizer subsidy on the Malaysian paddy and rice industry using system dynamics model. Simulation result indicates that fertilizer subsidy does give a significant impact to the paddy and rice industry. Fertilizer subsidy increases the yield obtained and hence increase paddy production. The removal of fertilizer subsidy decreased the paddy production and consequently, decrease the self sufficiency level (SSL). With the removal of fertilizer subsidy the importation of rice seem inevitable due to the reduction in productions. Meantime the growth in population will further put a pressure to the government to increase importation and to find alternative policies to sustain production and to increase yield.