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Friday, December 27, 2013

Accost of living

DECEMBER 27, 2013
Tunku 'Abidin Muhriz is founding president of
the Institute for Democracy and Economic Affairs (Ideas).
Dr Dzulkefly Ahmad at the DAP forum on 'GST - Cure or Addiction?'
at the KL-Selangor Chinese Assembly Hall, KL, October 16, 2013. — Picture by Choo Choy May
DEC 27 — When economists talk of Malaysia’s success story, referring to our wealth and development, they employ various indicators — GDP per capita, literacy rates, life expectancy — to conclude we have become a solid middle income country with a solid middle class. 

Our Gini coefficient indicates we continue to have high income inequality, but this is caused more by rent-seeker collaborations with the state, rather than a legacy of traditional aristocracy, who transitioned into the urban paradigm alongside millions of others. 

We can argue about how this was achieved, whether we did better or worse than we should have, or what the future should look like. These debates occur amongst these same millions, driving the evolution of our democracy where the foundations of a two-party system are in symbiosis with a civil society growing to accommodate moderates and extremists.

Even in my lifetime though, the image of typical urban life has changed. I remember foreign guests marvelling at how even small households would have live-in maids, but today, children from those households agonise about whether to invest in domestic help.

But I cannot recall a time when the cost of so many things would be rising in such a short time. When, in the space of weeks, it was announced that subsidies would be slashed, GST would kick in, assessment rates would double, electricity bills would rise, and highway tolls would increase, I remarked to friends in government how courageous the leadership must be to think it could withstand the inevitable public furore.

Actually, courage had nothing to do with it. Senior people in government departments had no idea what other ministries would be saying; they were caught off guard and equally critical of the situation. Everyone agreed that it was the height of stupidity to announce these so close together. Of course, there is stupidity in the responses too, with some commentators imagining an assault on one racial or class group. There are also voices from the governing party expressing concern on the basis of the electoral impact, as well as a possible public protest on New Year’s eve.

Among the opposition there is also irresponsible populism, boiling down to “these price hikes hurt the rakyat and must be stopped”. While legitimate reference is made to corruption and incompetence, alternative solutions to reducing the budget deficit, reversing capital outflows and cutting the size of government are lacking. 

As I have written before, I am conditionally on the government’s side when it comes to the removal of subsidies and the introduction of GST: specifically, if more is also done to battle corruption, that other forms of taxes are lowered and simplified, that the introduction of GST is gentle with extensive zero-rating, and that the environment for entrepreneurs and small businesses is liberalised. 

I recently wrote about the assessment rates issue, arguing that such decisions should be made by an elected mayor compelled to be more transparent. Still, this policy was particularly shambolic, belatedly reacting to public pressure rather than being thought through in the first place. It would have been smarter if the letters from DBKL explained that while the value of property is being reassessed, the percentage applied for the rate would be lower, and there would be rebates for resident owners, the disabled and retirees.

With the electricity hike, while the majority of household bills will allegedly be unaffected, manufacturers will likely pass their increased costs to customers. Also, there has been deliberately little explanation as to the core mechanism behind it all: the contracts signed with independent power producers (IPPs). It is clear even to those who negotiated the contracts that this model of privatisation without competition is woefully inefficient. But there is not a squeak about “transforming” this sector. 

Similarly with the highway tolls; it’s no use saying that the election manifesto technically said something else, or that no one is forced to use tolled roads. The reality is that non-tolled roads have hardly improved for decades and the extra petrol consumed makes up for the toll anyway. Again, better to increase transparency and competition in the bidding for future highways to incentivise better deals for the rakyat.

With public transport, a more strategic solution is necessary. I worked in three cities where I joined impoverished students alongside multi-millionaires in subterranean public transport almost every day, and the campaign to encourage similar widespread usage of the MRT should start now. 

I look at the next generation, who already assume that they must always own the latest tablet, and The Malay Mail Online report on lavish wedding spending just to keep up with the Joneses, and I can’t help but think that for the majority of urban households, their secret New Year’s Resolution will simply be to weather the assault on their pockets.

* This is the personal opinion of the columnist.

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