Sugar price per kilogram in Malaysia in 1989 was RM1.20, according to the Food and Agriculture Organization of the United Nations (FAO).

Sugar price per kilogram in Malaysia today is RM1.45.

If sugar were the only commodity in the world for Malaysia, it would suggest that average annual inflation rate for the past 20 years was no more than 1%.

Based on consumer price index obtained from the International Monetary Fund (IMF), average annual inflation rate for Malaysia within the same time period was slightly above 3%. It is probably safe to assume that salary, over the same period grew at the same rate, with mobility of a person with respect to the so-called corporate ladder fixed.

If every assumption stands, it is clear that sugar has been growing cheaper in real price terms. Since it is subsidized, it has been growing artificially cheaper in real price terms.

I wonder what is the total size of sugar subsidy bill for the past 20 years. According to various articles in The Star, last year’s bill stood at RM720 million. It has to be in the realm of billions. How about in present value? In terms of opportunity cost?

It should be a mind-busting figure.

What a wasteful policy.

3 Responses to “[2130] Of sugar prices today and 20 years ago”

  1. on 15 Dec 2009 at 15:55 Bob

    I’ve always believed in a non-subsidised environment, and letting the market forces determine the actual price of commodities, instead of molly-coddling the people.
    The money can definitely be channeled towards better use.

  2. […] that these two policies suffer grave weaknesses — two examples are smuggling and shortage; also opportunity cost — when juxtaposed alongside free market environment, import quota in no way addresses those […]

  3. […] I wrote two years ago that between 1989 and 2009, sugar price in Malaysia had increased on average less than 1% yearly within that period. To be slightly more precise, it rose on average by about 0.8% per year. In 1989, sugar was priced at RM1.20 per kg while in 2009, RM1.45 per kg. […]

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