Drastic intervention to tackle price hike?

Prime Minister Datuk Seri Najib Razak has warned that the government would intervene if the existing price mechanism continues operating as in the past, allowing indiscriminate price increases.

While the government can keep the price of essential items at reasonable levels using the price control mechanism, the fact remains that some traders, wholesalers and distributors are taking advantage when there is a hike to maximise their profits.

Should the government intervene to put a stop to this? If government needs to intervene, what sort of action or intervention could they adopt?

TAKING UP SUNDRY AND MIDDLEMAN ROLES

Gerakan Deputy President Dr Cheah Soon Hai believes that the government has every right to intervene if it is for the benefit of the public.

"With its tremendous financial power and resources, obviously there are many ways that government can come in to lessen the burden on ordinary folks.

"Government is hesitant to adopt any drastic measures, as we are operating a free market economy and they have to take into consideration the losses in economic efficiency as a result of their intervention. However, this does not mean that they won't do it," he said when contacted by Bernama.

Government has indirectly intervened through the Kedai Rakyat 1Malaysia (KR1M) outlets, Federal Agricultural Marketing Authority (FAMA) and some community cooperatives, which are offering much lower prices on their product and goods.

However, the nature of their involvement is very much limited and controlled to ensure they do not harm local businesses.

This explains why it would not be a problem for their role to be expanded, should the government decide to increase its intervention in the market.

AGAINST INTERVENTION

But some traders and "middleman" representatives are against such intervention, as they argue that enforcement by the Ministry of Domestic Trade, Cooperatives and Consumerism is enough to take action against unscrupulous traders.

In fact, enforcement efforts by government agencies have significant impacts on traders.

"As an example, those found breaking the law (Price Control and Anti-Profiteering Act 2011) have been fined without being given a warning. This is enough to scare them. In fact, I received many complaints from traders that the enforcements are too strict on them," said president of Malaysia Singapore Coffee Shop Proprietors' General Association Ho Su Mong.

Some also argued that drastic intervention has tremendous effects on small business and traders, including traditional grocery shops, which are already facing pressure from rising costs and competition from hypermarkets.

"They felt they are being victimised. Many believe they are being singled out, although manufacturers, transporters, importers and wholesalers are also involved," said president of Federation of Hawkers and Small Traders Association President Datuk Lee Teong Chwee.

ECONOMIC DEFICIENCIES

Some businessmen cautioned the government from taking such actions.

They argued that the very reason government wants to push subsidy rationalisations is to reduce interventions that can create economic deficiencies.

Yet government intervention, such as providing subsidies, costs RM40 billion, nearly matching the total development budget of RM49 billion, while the largest portion went to fuel subsidies. In 2013, RM24.8 billion was allocated for fuel subsidies.

The sugar subsidy of 34 sen per kilogramme was abolished in October last year.

As the result, a subsidies rationalisation exercise was carried out by gradually removing a blanket form of subsidies, replacing them with more targeted assistance, such as BR1M.

"What is the point of reducing subsidies, yet following up on that by another intervention through another method? This is just back to square one," said a representative of a major business group who did not wish to be identified.

Instead, he said that the government needs to look into the economic root of the issue by opening some sectors for competition, such as utilities, rice and sugar, to lower prices.

Nonetheless, some kind of intervention is good, such as initiatives to provide low-priced items to consumers through 57 KR1M, costing only RM87 million throughout the country. It also benefits the population at large.

While the debate is continuing on subsidies, various efforts to lower the cost of goods and services has already begun.

Early this month, a year-long campaign, called "Jimat Belanja Dapur", with FAMA as the core agency, began and is aimed at lowering prices of 21 grocery items up to 20 per cent at pasar tani nationwide.

They also lowered the price of fish at all 585 pasar tani, with the cooperation of the National Fishermen's Association of Malaysia