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Tuesday, June 22, 2010

BN government burden public but subsidize croonies

Surviving the coming hard times
TUE, 22 JUN 2010 06:00

By Stanley Koh

COMMENT It turns out that the government you voted in will not hold your hand to see you through hard times. Instead, it will make sure to add to your suffering because that is the easiest way it can avoid going bankrupt.

Barisan Nasional has apparently decided that the time has come to remove or cut subsidies — the kind of subsidies that poor people depend on, not the kind enjoyed by big corporations and monopolistic suppliers of utilities and infrastructural support.

So what is the use of a government that will eagerly shake your hand during election time but will not hesitate to pull the rug from under your feet when it needs to save itself?

Few believe that the removal of subsidies on essential food items and fuels can save the Malaysian government from possible bankruptcy. If it does go bankrupt, it will be because it has failed to cleanse a corrupt system.

It is better for Malaysians to be rich and to control a bankrupt government than to be poor and controlled by a corrupt government. Many countries have rich citizens with bankrupt governments.

You do not need an economist to tell you that RM100 in Malaysia today does not buy as much as it did last year.

In what we may call the Malaysian Misery Index, we can see that food prices have been spiralling upwards for years. For example, fresh tenggiri, which was RM13.23 a kilo in 1997, now costs RM40 a kilo. A roasted duck cost RM13.47 in 1997, but is now at least RM38. And Malaysians have become used to the doubling in price of some food items during festive seasons.

Most Malaysians do not expect the situation to improve. Food prices will continue to go up and there is little hope that they will come down again.

Two years ago, the BN government announced that it had set up a US$1.25 billion fund to increase food production and that it was targeting 100% self-sufficiency in rice consumption. What has happened to the fund and the target?

Nevertheless, the escalation in food prices is only one of the financial worries of most Malaysians. Other worries include the general cost of living, salary changes and debts.

Double whammy

When the GST (goods and services tax) is fully implemented in 2011, it will be a double whammy for poor and middle-income households, pensioners, the unemployed and single parents.

Some have argued that imposing GST on Malaysian does not make much economic sense when only 6.8% of the population are taxpayers and a large majority earn low incomes. Furthermore, it is acknowledged that most of us are paying hidden taxes in highway tolls and electricity tariffs.

Indeed, the future looks bleak.

Yet, quite a number of us are gullible enough to think that the government will protect consumers. Are we not being stupid? Isn't it better to be wiser and brace for tougher times ahead?

Instead of believing the promises of a government that has a dismal performance record, we should believe the law of inflation, which says, “Whatever goes up will go up some more.”

Ronald Reagan once described inflation as a violent mugger, a threatening armed robber and a deadly hit man. In the Malaysian context, that is an apt description not of inflation, but of the BN government’s behaviour and policies.

Unlike grey hair or extra pounds, inflation, Malaysian-style, does not sneak in gradually. One of the outstanding characteristic of our government is that it can cause inflation to explode overnight, such as when an official makes a snappy and stupid policy decision on pricing.

So how do we fight the inflation of food prices?

Economists generally agree that the average Malaysian household spends about 75% of its income on food. Food price hikes will therefore have an adverse impact upon disposable income and force us to make a lifestyle change.

To fight inflation

Here are some of the things we can do:

Stop eating at expensive restaurants.
Boycott traders, hypermarkets and hawker stalls that charge unreasonable prices.
Shop intelligently for value and do not be too impressed by branding.
Work out a budget before buying. Look out for special sales.
Prevent wastage by not buying more than you can eat.
Tell friends and acquaintances about shops that charge excessively.
Avoid buying expensive beverages or foodstuff and find alternatives for nutritional value.
Boycott chained markets and fast-food joints. They are monopolised by a few large companies and can therefore raise prices at whim.
When inflation reached a six-year high at the end of 2005, even the price of the humble bean sprout went up by 10 sen a kilo. Reason: A gunnysack of beans went up from RM75 to RM135.

Today, even death is becoming exorbitant. The cost of cremation is expected to rise soon from RM100 to anything between RM200 and RM300.

Perhaps economist Milton Friedman was right when he said, “If you put the federal government in charge of the Sahara desert, in five years there will be a shortage of sand.”

Malaysians do not take the official Consumer Price Index (CPI) seriously. They know it does not accurately reflect price rises in essential foodstuffs.

Many suspect that the government uses it as an instrument to deceive the public into thinking that things are hunky-dory when they are not. The government develops statistics so that the inflation-weary public would direct its hostility towards businesses, and not blame official mismanagement.

The average household consumption expenditure over the last 20 years has increased by 181.8%. In 1973, it was RM412. By 1993-94, it had gone up to RM1,161. In 1999, it touched RM1,631.

According to Prof Lim Teck Ghee, real household income has been growing, but at the snail-pace rate of 0.9% per year. More than half of the population are in the low-income category.

Today, a family of five spends 50% to 60% of household income on food compared with 20% in 1998 and 15% in 1988.

Not long ago, there was official acknowledgement that 95% of families are finding it hard to cope with the rise in food prices.

In fact, the biggest failure of the Ninth Malaysia Plan is that it did not help Malaysians improve their quality of living. Inflation, whether it is imported or locally generated, raises the cost of living and lowers the quality of living.

When five out of 10 Malaysians are prone to mental problems and other disorders due to the pressures involved in trying to support their families, it is time for the government to wake up.

'Why not change the government?'

In 2006, when Najib Tun Razak was Deputy Prime Minister, he asked Malaysians to change their lifestyle in the face of the rising cost of living.

A blogger by the name of Chong wrote in response: “Perhaps, the prime minister should have done some simple calculations himself. People like us basically have no lifestyle, just merely surviving with our earnings. So how are we going to change (our lifestyle)?

“Inflation has gone up 4.5% (and above) and the government is pushing the cost of living higher by increasing electricity tariffs, but our income remains the same.”

Others felt it would be easier to change the government than to change a non-existent lifestyle.

“Instead of listening to Najib asking us to change,” one critic remarked, “why not we change the government at the next general election?”

To me, that makes a lot of sense. Any government that is willing to build air-conditioned toilets around a city at more than RM100,000 each has no business planning a national economy.

When such a government decides to cut subsidies, many of us will wonder whether the so-called “savings” will instead go towards more majestic arches, fanciful lampposts, refurbishments of VIP residences, luxurious government bungalows and fruitless overseas trips by ministers.

Any government that stands accused of having wasted RM320 billion in 20 years — through corruption, wastage and mismanagement — definitely does not deserve to be re-elected.

Stanley Koh was the head of research unit at MCA. He now writes for FreeMalaysiaToday.

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