Subsidies up by RM10 billion because of KR1M

The flogging of KR1M doesn't appear to be abating as a research think-tank criticised it further for its negative implications on the economy.

PETALING JAYA: Government subsidies are up by RM10 billion because of Kedai Rakyat 1Malaysia (KR1M) and the Menu Rakyat 1Malaysia concepts.

An independent research think-tank has calculated that both programmes have inflated an already massive government subsidy bill by RM10 billion. Total subsidies this year now stand at RM33 billion.

The Research for Social Advancement (Refsa) revealed this in a recent focus paper on Budget 2012 and further warned that the negative impact of KR1M would extend deeper into the country’s socio-economy.

These predictions won’t bode well for KR1M which came under attack by Pakatan Rakyat last week for stocking low-quality goods and failing to meet its promise of up to 50% discount in prices.

But the real irony is that KR1M was meant to soften the blow of Putrajaya’s cuts to a subsidy bill that would otherwise have doubled to RM21 billion this year.

Refsa’s executive director, Teh Chi-Chang bluntly labelled it a “bad policy” for unnecessarily distorting market forces and giving one retailer an unfair competitive advantage over the rest. KR1M is operated by retail giant, Mydin.

“The government shouldn’t even be involved in the retail business due to the conflict of interest among its triple roles of regulator, public goods provider and businessman,” he pointed out.

“If KR1M works as intended, and goods are indeed sold much cheaper than elsewhere, it will lead to other retailers going out of business, people being rendered jobless and the need for more KR1M outlets.”

In light of the recent exposure of KR1M’s prices however, Teh said that the most pressing question now is what became of the RM40 million allocated to KR1M.

Follow the Selangor model

He also noted that even if KR1M worked as planned only a slice of the population would benefit from the low prices and that too, for a brief period of time.

“It is not sustainable in the long run and then the rest of the citizens will lose out because government money spent on KR1M means less funds for other sectors like education, health care and security.”

Teh recommended that the KR1M outlets be closed down immediately and suggested that the government consider Selangor’s ‘Jom Shopping’ model if it truly wants to help the poor get cheap products.

“All that needs to be done is to identify the poor families and give them shopping vouchers to spend twice a month at hypermarkets.

“Right now the government is expanding its broad-based subsidies and 1Malaysia has become a convenient facade to continue keeping Malaysians addicted to those subsidies,” he said.