Producer Subsidies in the Dairy Industry in Peninsular Malaysia

It is noted that a number of presently developing countries, in an attempt to offset the unfavourable internal terms of trade facing their agricultural sector, have recently increased subsidies to this sector. A useful aid to the measurement of subsidies is the Producer Subsidy Equivalent (PSE); this conceptually simple “tool” possesses the merit of being easily computed and easily comprehended by policy‐makers. In this article the results of a study of PSEs for the dairy industry in Peninsular Malaysia are presented and analysed. Overall, it is observed that the dairy industry is heavily subsidised, with the parastatal ranch sector more so than the smallholder sector. Doubt is also expressed as to whether the infant‐industry argument is a valid one in Malaysian conditions.