Najibnomics: Price adjustments not hikes, rationalization not cuts

Wong Choon Mei, Malaysia Chronicle

Even before the Malaysian masses have digested the impact of a slew of price hikes, experts are already warning of more increases, pointing out that Thursday’s ‘mild’ announcements were just a foretaste of the Najibnomics due to hit the country in the coming months.

“Malaysia will be facing a severe cash-flow squeeze very soon if it is not already experiencing this,” a research director at a large bank-backed brokerage told Malaysia Chronicle.

“There is not enough money to get projects moving and whatever is available is being channeled into wasteful areas that do not benefit the broader economy but just a small group of people. So they have to slash subsidies and we are looking at a series of cuts which will intensify three months from now at the latest. It is the fastest way for the authorities to raise cash.”

Adjustments not hike, rationalization not cuts

Indeed, Najib has been careful not to draw public anger. He increased by only 5sen per litre the price of RON95, an inferior grade that has now become the most popular because it is the most economical.

But that this was just a softener until the real increases roll in one after the other is apparent in the way that his minders have warned the mainstream press to use terms like upward price adjustment instead of price hikes and subsidy rationalization process instead of subsidy cuts.

“It is very disappointing that these sort tactics are used in this day and age. He must have a very poor opinion about the rackyat’s intelligence. The worst is that he cannot even give a good justification for the price hikes,” PKR strategic director Tian Chua told Malaysia Chronicle.

“Basically, he has chosen to burden the people to support the lavish spending by the government. If RM750 million is the sum that the government can raise from this exercise, don’t you think it is a waste of time. Why bother when he can just splash RM7 billion on two faulty submarines and RM4 billion on operating the PM’s Department for this year alone?

Government spending spree despite subsidy cuts

Indeed, Tian may have hit bull-eyes. Rampant corruption has become so entrenched in Malaysia that it has seriously demoralized the citizenry, and few even bother to speak up against the blatant wastage and leakage as a result of graft.

Nonetheless, when a minister said in a written response to a query from Taiping MP Nga Kor Ming that RM4 billion was set aside to finance operations in the Prime Minister’s Department for 2010, including setting up an office for former premier Abdullah Badawi, a wave of anger was stirred.

“It is supposed to be just a department. But its annual allocation is 10 times more than Penang's annual allocation from the federal government. Something is very, very wrong here,” said political analyst Khoo Kay Peng in his blog.

His words echoed those of Kor Ming’s. The Taiping MP too pointed out that RM4billion was at least 5 times the annual spending of the Perak state government.

Vicious cycle

Among financial firms that have published their preliminary analysis of the latest hike is government-lined MIDF, and even it expects a nother increase in petrol price soon, although its forecast might be too conservative.

“We expect fuel price to rise again, most probably in the first half of 2011, with another five sen increase,” it said.

Others were less polite. They tore into data provided by Nazri on Thursday that confirmed a sharp rise in staff count in the PM’s office from 21,045 in 2003 to 43,544 in 2010.

“That is just the PM’s Department. What about the rest of the civil service? Malaysia has the most bloated civil service compared to its population in Southeast Asia. And the reasons are political. In return for their jobs, government servants are expected to vote Umno and BN,” PAS treasurer-general Dr Hatta Ramli toldMalaysia Chronicle.

“But the problem is the reason for Umno to maintain this policy is more than just political. It is a vicious cycle. To stay in power, they have to borrow in the name of the country to maintain this huge population of civil servants. And when they stay in power, they continue their program of patronage and this is the source of the corruption that has overtaken our system and is keeping foreign investors away. They don’t have the confidence for any long term deals.”

Who's telling the truth

Apart from the five sen price increase for RON95 and diesel respectively, the government also put the higher-grade RON97 on a managed float that will be subject to price changes in the market.

LPG rose 10 sen to RM1.85 per kg, while sugar was also raised by 25sen to RM1.75 per kg. Cooking gas was also hiked by RM1 to RM18.50 for the 10kg cylinder, by RM1.20 to RM22.20 for the 12kg cylinder and by RM1.40 to RM25.90 for the 14kg cylinder

“Can RON95 can stay at RM1.85 and will subsequent hikes will be as gentle as the government has promised?” a chief economist at a local bank told Malaysia Chronicle.

“Just look at RON97 and you will know who is telling the truth. If there is a huge upswing in the global oil market, RON97 will have to jump sharply because it now tracks market price movements. If that happens, how can RON95 stay unchanged or changed by just a minute degree?”