Commentary Economics Uncategorized

Strumming the right chords on cost of living

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TheMole
Written by TheMole

By Salahuddin Hisham

A special officer in the Prime Minister’s Office recently outlined on television on the rise in the cost of living, attributing it mainly to the high cost of doing business.

According to Isham Jalil, the cost of living took a significant rise between 2008 and 2011 due to the rise in rental and property prices in Selangor and Penang.

He said that after winning the two states, the opposition practically abandoned low cost housing programmes, provided low rental small business premises and raised licence fee for businesses.

The federal government too may have made the mistake of introducing the minimum wage policy that caused a rise in the cost of doing business by raising the fixed cost of salary and wages.

For a long period of time, the Human Resource Ministry was under pressure to introduce minimum wage to the plantation industry. However, the plantation owners had a strong lobby in government. Came in a new Human Resource Minister and he took opportunity in the high income economy policy to get the minimum wage policy through for his plantation worker voters.

While it suited the owner dominated plantation industry, it is not for other sectors which have a more efficient market mechanism.

Off course, the public had long been saddled with the rise in energy and transportation cost from the privatisation drive throughout the mid-1980s till the end of the 90s.

Celebrities

So the rise in cost of living is not solely attributed to the GST as campaigned by a few celebrities, to unfairly blame the government in their Facebook and Twitter postings. These personalities with a huge following though may not be knowledgeable in economics.

Sheila Majid wrongly blamed the problem on the weakening ringgit without realising at that point that it had appreciated.

Nevertheless, they are voicing the sentiments of the common folks and the less sophisticated fans may believe them.

The government this should heed their concerns and make an effort to explain to the public that it is not as simple as that. Ruling party politicians should not be sulking but instead go to work in their constituencies

Sheila has yet to respond to the invitation by Minister in the PM’s Department Datuk Abdul Rahman Dahlan but it may not weaken her message. The government side supporters seem to only make disparaging remarks and criticise the lavish lifestyle of celebrities.

As for as the GST, the government disputed the claims and rebutted that it is lower than the previous SST system. However, the problem is not solely with the system but the failed implementation by Customs.

After two years of  preparations and overseas study tours, they still fail to explain the rebate policy on wholesalers and intermediary businesses and consequently, consumers end up being saddled with multiple layers of GST.

Nevertheless, it is a typical experience in all countries introducing the GST or more commonly called VAT. Malaysia was no different and over time, the situation should stabilise and prices should find a fair level.

Prime Minister Datuk Seri Najib Razak also inherited burdensome subsidies that would have taken any other country to the brink of bankruptcy. And the tax system has leakages everywhere.

Najib made the hard, unpopular but necessary decisions to introduced reforms to the tax system and public finances.

These are problems and constraints not easily understood by the common folks, and even the tertiary educated artistes. He should be commended for than being scorn at. Some members of the public are aware of the problems faced by government but refuse to understand.

Consumerism

The rise in the cost of living can be addressed with effort and innovation by the business community to reform the activity and supply chain. Instead of cost plus pricing, certain retailers took the initiative to cut out distributor and middle man to source product directly from fisherman and farmers.

On the part of consumers, they need to have greater awareness of consumerism and apply their purchasing power to penalise profiteers. Instead of grouping together to share information on how to  cut cost and combat profiteer, there is tendency on the Malaysian public to blame on government.

There are segments of the complaining public that tend to be price inelastic. They grumbled but still pay for whatever price imposed.

At times, their sense of priority is lost. One celebrity claim to keep their food budget below RM500 per month but rear expensive pet and spent a thousand on Louis Vuitton leather sandals.   

The government can control the price of certain basic product but they cannot control everything. It is a free market.

The worse thing to do is for government to directly involve in retailing and wholesale industry. Civil servants are bad businessmen. It will never be efficient and price competitive. There is also the concern on leakage and abuses.

Government should curb illegal smuggling of subsidized product and be more forceful to take action against opportunistic businesses. Still, government alone could not fight against the rampant belligerent disrespect for the law and consumers.

The public must get organised, get involved and whole heartedly support such efforts. Artistes could raise public consciousness by involving a public interest role to carry this message. Strum the guitar and sing songs to get the message through.

That is unless they are being political and cloning more Abby Abadi from the last general elections. Then it is a different story.

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TheMole

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