15 August 2012: Pay hikes for government servants, bonuses, one-off vouchers and generous pay-outs are causing the prices of goods spiralling out of control, affecting the poor and the middle-income groups in the country.
Each time the government announces a pay hike or bonus for the civil servants prices of essential and non-essential items will go up by not less than 10 to 25 percent.
We are poor
“The 1kg powder milk that cost about RM18 about 6 years ago now costs more than RM40,”
said a 41-year-old self-employed living in the outskirts of Kuala Lumpur. “We are poor and we cannot afford to buy milk and have to just resort to sugar for our drinks,” he added.
But then even the price of sugar has gone up by almost 80 percent since Sugar King Kuok left the local sugar scene. The Kuok group was then unhappy with developments taking place at Tradewinds (M) Bhd, at the time when a proposed acquisition of Padiberas Nasional Bhd (Bernas) was likely to result in Tradewinds having an unreasonable amount of debt.
“Prices of almost all items in the market have gone up since Najib took over as prime minister,” quipped another self-employed father of four school-going children. “We are left with no choice when businessmen push up the prices of essential items,” he added.
Most laymen may not be aware that businessmen will never do business at a loss. They must always aim for a high profit margin. They are aware that most consumers only love to spend.
When prices are hiked the poor will end up buying less and those with money will spend more. The poor become poorer and the rich become richer. And in this setup even the middle-income earners are affected.
The RM200 book vouchers for students
Lately, about 1.2 million local students pursuing secondary and tertiary education were given book vouchers worth RM200 each and these vouchers were redeemable at participating bookstores for purchases of academic books, journals and other materials.
These vouchers were supposedly not exchangeable for cash and bookstore operators could only claim their money from a bank upon producing the vouchers.
But book vouchers for students have actually helped booksellers make money. Most students gave the excuse that they did not need the books and had their vouchers exchanged for cash, and of course for less than the value of their voucher.
So a bookseller could make at least RM50 a voucher and a student takes home RM150 or less in cash. No books are purchased in the transaction. Their economic nous here is simple: Only cash is involved. Both booksellers and students are happy as there is not much hassle involved.
The RM500 BR1M for those earning less than RM3000 a month
BRIM (Bantuan Rakyat 1Malaysia) was one of the “promises” made by the BN (Barisan Nasional) government to reduce the financial burden of the people. A sum of RM500 was paid to every household earning less than RM3000 a month, as provided for under Budget 2012, with the government spending more than RM2bil to distribute the payment to 4.7 million households.
In a random survey on those who received the BR1M the majority spent all the money within one week of receiving it and they are looking forward for more. The survey showed that the money was used, among others, to pay off debts, buy new clothes and furniture and only a small portion was spent on food items. They just forget about the idea of savings.
After spending the money they had no other avenue to look for more. Their economic nous here is again simple: It’s not hard-earned money so why not just spend it.
The RM500 could not generate more money for the poor as most of them spent the amount within a week of receiving it. The money was practically for spending and not savings or to be used for some small business ventures that could generate a little additional income from the principal amount.
The RM540 vouchers for taxi-drivers
Taxi drivers were given a subsidy voucher for new tyres under the TR1M (Taxi Rakyat 1 Malaysia programme) just recently.
Under the TR1M programme, taxi drivers – about 67 000 of them – throughout the country received a tyre subsidy voucher worth 520 ringgit each to replace four tyres within a two-year period.
The people perceive this as another political move to lure taxi drivers into voting for BN in the next general election. This exercise by the government has actually made the price of tyres go up throughout the country.
The price of types has shot up by not less than 20 percent within the last past few months. A type that used to cost RM140 each instantly went up to between RM150 to RM160, anticipating taxi drivers to come for the tyres in droves to buy them.
And the consequence of this price hike has actually affected the non-taxi owners who have now to pay more for tyres. As for the taxi drivers, their economic nous is also simple: instead of waiting to buy the tyres many of them went for quick money.
They exchanged their vouchers for cash and of course they do not mind if the cash amount they receive is much lower than the value of the voucher.
They do not mind losing RM100 and the businessmen making RM100, all by not selling tyres but just by exchanging vouchers for cash. The government is in a way helping businessmen.
The economic wisdom here is simple: It is easy money for taxi drivers and also easy business for businessmen. Only money exchange hands and no products are involved. This is how BN degenerates the economy and make ordinary vehicle owners pay more for tyres.
The pay hike and bonuses for civil servants
This year the civil servants were given a salary adjustment of between 7 and 13 percent under the SSM (Malaysian Remuneration System) which was reintroduced with “improvements”.
RM6 billion was set aside to finance the new salary adjustments mooted under its recently-revamped civil service remuneration scheme. This amount was good enough to cause not less than another15 to 20 percent price rise on essential and non-essential items in the market.
Having a bloated civil service, every 3 taxpayers today are supporting 2 civil servants in the country. Malaysia has the highest ratio of civil servants in the world – 1.3 million to a population of about 26 million.
The perception of the people is that the pay increase and bonuses were given to civil servants to lure them into voting BN in the coming general election. But this flow of money has affected the poor most. It may have benefitted the government servants in the short-run but the effects on prices of items in the market have affected the others – those unemployed, self-employed and those with low income.
Populist economic policy
To the businessmen the economic sagacity here is not that complex: Since there will be an increase in buying with more money in the consumers’ hand they just have to increase the prices of items sold.
A middle-income government servant living in the outskirts of Kuala Lumpur had this to say: “A kilo of tenggiri fish cannot be bought for less than RM30 today and even a kilo of kembong fish that used to cost between RM8 to RM10 a kilo a year ago now has shot up to between RM12 to RM15 a kilo.”
It has been obvious that prices of milk products and nutritional drinks have shot up by 20 to 30 percent and vegetables by 15 percent within the past few months. The people are paying more for rice, sugar, flour and eggs. The poor will have to buy less with little money in their hand.
Biscuits, soft drinks and stuff have gone up by not less than 15 percent. The prices of meat and chicken have gone up by not less than 15 percent. Prices of almost all kitchen items have shot up by at least 20 percent. That has caused an overall price rise on food prices at about 15 to 25 percent within these two years. Again the poor – the majority – are the ones who are now suffering most.
The value of ringgit in terms of buying power has been reduced by at least 25 percent since Najib took over as prime minister. Despite all the euphoria and fierce acronyms used by him to lull the people using the mainstream media the economy is going down to the drains.
The majority of Malaysians are affected by his short-term or politicised and populist economic policy. The government, unfortunately, has no concrete ideas on how to bring down the prices of food items and other essentials in the long-run or generate incomes to help the poor and the middle-income groups.
1Malaysia Privilege Card for all
It gives the impression that 1Malaysia Privilege Card that was recently introduced by the governemt would “benefit” every Malaysian eventually. All Malaysians will eventually get the 1Malaysia Privilege Card (1MPrivilege) and enjoy discounts when shopping in participating outlets with discounts up to 25 percent or more.
According to reports, the card would be offered to the 1.4 million civil servants under phase two and, later, to all Malaysians under phase three. The first phase was just launched to “benefit” members of the armed forces and the police.
It seems that 1MPrivilege is an initiative under the National Blue Ocean Strategy mooted by Najib to lessen the people’s financial burden. To the consumers, this is another political gimmick. This card – just like the “infamous” credit cards – will only encourage more spending and price rise of merchandise.
Economists will tell that businessmen will not reduce their profit margins. Their main aim in business is to always find ways to increase their profit margin. They will always put up a false front in the pricing of items sold.
What they have to do is to increase the price, let say, by not less than 25 percent and then give a discount of 25 percent. This is how ordinary business works.
Businessmen at times hike the price by more than 100 percent and then display a sign showing “mega” discounts of between 20 to 70 percent. A survey in a city megamall showed – to quote an example – Adidas sports shoes imported from Indonesia were sold at not less than RM180 per pair when the cost price was only RM20 a pair when imported in bulk.
And of course the shoes were selling at a baffling “special” discount price – labelled as “Super Sale”. This is how consumers get cheated.
Languishing in poverty
By making some pay less with the 1MPrivilege the government is eventually making consumers pay more, and those who do not enjoy the discount will have to pay more than the pre-hiked price. To give a discount of 25 percent on goods businessmen must first increase the prices of these goods by more than 25 percent.
Only woozy businessmen would sell at a loss price of 25 percent to please the people or the government. Businessmen are in fact the end-winners with the IMPrivilege and not the consumers.
So we see price rise of essential and non-essential commodities throughout the country. Costs of rentals, houses and properties have all gone up. The rich can still afford to survive but the poor have to keep on languishing in poverty.
They are the capitalist businessmen and of course the UMNO politicians who are benefiting from all these “Janji Ditepati (Promised Fulfilled)” gimmicks. The high income groups are no doubt happy as they have more cash at their disposal but the 60 percent Malaysians who earn less than RM1000 a month are suffering the most under the present regime.
The high cost of living is sending more Malaysians into the ranks of the poor. But this is what economy is all about under Najib’s transformation programmes – free spending, inflation, budget deficits and with no economic productivity.
Written by Moaz Nair