Effectiveness of State Trading Enterprises in Achieving Food Security: Case Studies from Bernas in Malaysia and Bulog in Indonesia

Fatimah Mohamed Arshad • Bustanul Arifin • Yeong Sheng Tey
Policy analysis Center for Indonesian Policy Studies • November 2019 Indonesia • Malaysia

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(English, 88 pages)


The issue of food security is of vital concern to many developing countries and various kinds of policy instruments have been employed to achieve stable food sources for growing demands. One of the most predominant policy instruments in both the developed and developing world involves centralised state trading through what are called State Trading Enterprises (STEs). State trading is more prevalent in the agriculture industry as countries utilise these entities as a means to achieve agricultural policy objectives such as stabilising domestic prices, eliminating marketing inefficiencies and ensuring the availability of food supplies (WTO, 1995). STEs are therefore often an integral aspect of a policy package implemented to address the challenges in achieving the food security objectives of a country. However, although these entities are recognised as an instrument for addressing market challenges, STEs have also been criticised for their distortion of trade and markets through the monopolistic power and government support. Therefore, it is necessary to assess the effectiveness of STEs at achieving the objective of food security, as well as consider the potential market distortions that arise with STEs and the common policies associated with them.

This report brings together insights from two STEs in Southeast Asia, namely Bernas in Malaysia and Bulog in Indonesia. Each study offers a historical perspective to the financial, economic and social contributions of the STEs, their effectiveness in achieving the domestic food security agenda and several policy suggestions to mitigate the issues within each country. This report will be broken down as follows: • The first part of this report introduces the case studies by looking into state trading enterprises, food security and the contextual backgrounds of Malaysia and Indonesia’s agricultural policies; • The second portion will present the country case studies that are designed to analyse how state trading enterprises and their associated food-related policies have affected the agriculture and food trade sectors in Malaysia and Indonesia; • Finally, the report will conclude with a summary of the country case study findings and the implications for agriculture and food trade policies in other developing countries.





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