Facing up to rising prices

It is the first day at school. The usual crowd and commotion can only be expected as parents gather at schools to accompany the first time schoolers and settle any payment due.

Over the past few days, shopping complexes have been packed with parents getting new school uniforms, shoes, stationaries and various schooling paraphenalia for their children.

Grumbling can be heard of the rising cost. Parents with many children can be heard moaning of the accumulated bill this year. "Some item still not bought but RM2,000 already spent," lamented a parent is with 5 schooling kids yesterday. And, last year's uniform can still be worn. 

Rising cost is a real concern and pressure on public daily life. So when Deputy Minister of International Trade and Industry, Dato Ahmad Maslan tried to encourage online business but humour it as second job to meet rising prises, no one was laughing.

The public is already in a foul mood with his promises on GST that turned out wrong. Nothing is really wrong with getting another job. 

Extra job

Lets not be naive about second job.

Lots of teachers do tuition classes on the side and at times, to the detriment of their occupational responsibility. Many professionals use the access from their job to moonlight. It is an Asian ethos to work hard.

If mak and arwah bapak had not got various income from the sides, they could have given away our younger siblings.

Even then when cost was still low, no GST, and government could afford to subsidise goods to maintain low labour economy, raising eight children with proper education was no easy task. Not for two government servants on meagre income to survive then. 

At one time, father used to run a private school in Singapore and mother taught at a primary school in Jalan Abdul Rahman Andak, Johor Baru. By noon, father would fetch her in his bike to cross back to Singapore for her to do a second job to teach. 

On several occasions, they did petty businesses like selling cloth, kain pelikat, batik, munchies and popsicles, cakes and cookies, Pontian coconuts to Singapore, etc. When father was government Imam, he part-timed as magazine distributor, and teaching kelas dewasa to weekend ugama classes for kids. 

During bad times, we had done embarassing to mention pursuits in order to survive.  Basically, we've been there, done that.

Unless one has access to other source of income, there is no other choice than to be frugal in one spending.

One Facebooker was complaining of his tight budget but when it was disclosed he spend almost half his money on private transportation, astro and handphone bill, he came under pressure for poorly managing his financial affair.

Some Malaysians are unrealistic in their spending. Despite being VSS-ed, they are still maintaining the same lifestyle and not keeping a tight leash on the use of their compensation.

In the midst of complain on rising prices, airport system got jamned by the  huge number of passengers during the school holidays. On every weekends, shopping complexes in the urban areas are packed with shoppers. More pact during major sales and promotion.  

Poverty

Off course, our heartfelt sympathy to the poor in facing the reopening of school and struggling daily to meet ends meet.

Rationally, one wonder how some Malaysians, primarily low income Malays had to struggle to live in their own homeland. The Indon came as labourers some 25 years ago and could now become sub-contractors and own home repair and renovation business. Some are already home owners.  

Poverty can arise for many reasons and usually unexpected. To accuse the poor of lazy, it would be inappropriate. Job opportunities in the rural areas, more so in the interiors of Sabah and Sarawak, are limited. However, hard work could still get them through.

The latest Department of Statistics figure as at December 23rd place the workforce figure at 14.4 million of which foreign workers stand at 2.2 million. There are 12.2 million gainfully employed Malaysians and unemployment is at a low 3.1%. Najib mentioned at UMNO GA that abject poverty is virually nil. 

A recent media report put the number of foreign workers at 4.2 million. Job is not scare so foreigners are required to fulfill the vacancies. The national population is 30 million. They are filling up in sectors where locals are not interested any more. Some 70% of plantation workers are foreign workers 

The argument that there is no reason for locals to still live in poverty is quite valid. It does not exist at the macro level. Only insensitive to say it openly.  

Policy

For quite sometime, government have been talking about moving up the economic ladder into knowledge economy, skill-based employment over labour intensive production economy, and moving up the competitive edge in technology.

Come Dato Najib as Prime Minister, he acknowledged the national predicament of the middle income trap. The country cannot sustain an economy still based on cheap labour and cost of living heavily subsidised.

Salary and wages have gone up and Malaysia cannot compete with our neighbours likes of Vietnam, Thailand, Cambodia etc. It was Dato Idris Jala that alarmed the nation with his statement many years ago that Malaysia is doomed towards bankrupt should it remain with the high level of subsidy.

Energy is subsidised. The power generators are subsidies and takes up the bulk of energy subsidy. Food, fuel, transport and a long list of items adds up to take up 20% of government budget.  

This blog used to argue that subsidy was one way the rakyat could benefit from the wealth of the nation. However, it has its limits and it is the financial limitation. The argument then was that public finance should be spent more efficiently.

The new thinking was social welfare program has to be focused and not for all.  

During the fast pace days to build public and industrial infrastructure, salary and wages was kept low. It served to cover for the shortfall in technology in order to attract multinational companies to set-up factories in Malaysia.

Unions were government friendly and understood the economic strategy taken. There was even a lid on salary and wages of certain industries. For instance, Bank Negara Malaysia approval is required to determine Bank's salary scheme, bonuses and top position appointment.  

Unfortunately, that sort of practices are not sustainable. Malaysia kept losing its graduates and skill executives abroad. This blogger remembered encountering a post Gaddafi Libyan that said this country is wealthy but the people are poor. He said the salary and wages are too low.

So the policy for high income model. The intention was to move away from the low income past so that the higher income can absorb the higher cost of goods and services. Higher income attracts better skilled worker and generate a more productive and efficient economy.   

A finding by one NGO claim that proportion of salary and wages component in this country is too low vis-a-vis private sector revenue. They claim employers are making too high profit margin at expense of salary and wages. 
   
Instead of moving up the learning curve to bring about more automation, apply better management and all to generate a higher revenue per staff, employers and capitalist are generally still stuck in the old ways and resort to hire foreign workers for cheap.

The complain against hiring locals was because they demand higher pay, do not work as hard as foreigners and are rather indisciplined. The availability of permit to get foreign labour makes them lazy and are reluctant to hire and managed local workers more effectively.

All these contribute to the restlessness on the rising prices. Every time public complain of rising prices, some politicians would make statement of plan to form a fact finding committee. What are EPU, PEMANDU, KPDNKK and other government outfits doing?  

GST 

One reason being heavily blamed on government for the increase in prices was GST.

Good and Services Tax for valued added into the product and services. For a nation of 12.2 million of employed Malaysians, only 1.8 million paid tax. This is another element of the economy that need reform. 

In the past, there is always Petronas.

They contribute about 65-70% of tax revenue to the government. In any failed project or financial scandal, Petronas is always there to bailout. Now that it is known that the lower oil prices denied the government some RM30 billion of revenue, a firm decision had to be made. It is a big dent in public finance that cannot be ignored.

The opposition and it's supporter, allies and sympathiser can only politicise the problem. They accuse Najib government for being spendthrift and implicate the Missus to get the desired public anger and hate. Expenditure and borrowing have been on the rise under Najib.

A favourite political argument is too much corruption. Malaysians forgot of how they were tricked by the Opposition's Buku Jingga. Behind the political cliche, they proposed a steep rise in spending but could only offer cutting corruption to fill the budget shortfall.

It is ridiculous to do a budget by assuming that spending could be cut by 20% and the saved money used to cover the shortfall in spending. Why the roundabout when they could start with a lower expenditure figure?

The reason is politics.

If GST had not been implemented, Malaysian government's public finance would be in disarray. A severely deficit government cannot afford to do any social and welfare program for the people. Thus the need for GST. 

GST is the fairest tax regime in the world. There is no issue of avoiding taxes and spending public will all contribute to the nation coffer. 

It should have started at a lower 4% but at 6%, the Malaysian GST is comparatively low. By right, personal income tax should be brought lower, so that there are more disposable income. The rich pay  taxes through their spending of higher end goods. While the poor pay significantly less GST since most basic goods are GST free.

The problem with GST was the reality in the first few months did not meet the public expectation. Retailers and wholesalers are reluctant to wait for the rebate later but choose to charge the extra 6% on consumers. Consumer was paying almost as high as 12% higher.

One can put the blame on Custom Department's inability to educate the retailers. It is heard that they themselves do not understand it enough. On April 1st, when GST commence, it is heard Customs Department switched off their IT system for fear of the unknown.

The Information Ministry too failed to educate and disseminate the right and honest information. Even in developed countries, prices rise for the first few months of GST implementation. It takes three years for system to stabilise and work smoothly. 

Apart from the deficit from Petronas, paying taxes is a public responsibility of all season. The Boston Tea Party was about demanding representation for paying tax. Malaysians are getting representation but only 1.8 million and Petronas are contributing to the nation.

Even the fakir and poor have to pay their fitrah despite receiving contribution from Baitul Mal. Recently, oil rich Saudi Arabia have begin to implement GST. So why are certain former UMNO leaders playing politics and refuse to understand the problem?  

Transition 

The need for tax is not only on spending for goods. There is the other part and for years been ignored. That is the services sector. For instance, stamp duties and legal agreement have by-passed our tax system by stamping it abroad and raising money for Singapore government for deals in Malaysia.

There is more area for government to raise revenue. That should be the focus. That way any reduced revenue or deficit in certain item will not lead to the rakyat having to bear a higher GST rate in the foreseeable future.

Rising prices can be seen as transitional but government have to show earnestness in making its policy work. The free flow of foreign labour permit should not be allowed to continue.  

The one way for government to address rising prices is to make the high income model work.

Minister in charge of EPU, Dato Wahid Omar spoke recently on the target to increase monthly income. The government must be firm on employers and formulate laws to enforce on employers to respect the minimum wage.

More effort have to be done on unethical business practise that have culminated into incidents like Low Yatt and Kota Raya.

Police and corruption buster, MACC need to be given the authority and supporting law to stop these practices including the involvement of money laundering, smuggling, and gangsterism and criminal elements in retailing.

The headline in the paper today is on the leakage and smuggling of LPG. After the leakage and smuggling of fuel that eventually lead to removal of subsidy of fuel, such abuse by criminals will eventually make the public suffer. Public tend to shut a blind eye and just mind their own business.

Something also need be done on monopolistic business practises. Government and business sector need to break control on supply chain by the few. It leads to higher prices for consumers and counter to the free market practises advocated by businessmen and their trade organisation.

But, why are they silent?

-Another Brick in the Wall