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Wednesday, January 8, 2014

Price hikes and the non-social-friendly economists — Lee Ee May

JANUARY 7, 2014

JAN 7 — A fund manager lamented to me last week that in the investment industry, they saw GST as an absolute necessity for the health of the Malaysian economy. It isn’t a surprise then to see reports of economists agreeing to the need of price hikes and for the Malaysian public to simply accept it.

But from a truly capitalistic mindset and thinking where profit reigns first, the social aspect will always get left behind. These economists and investment analysts were simply looking at things from a mere profit making stance to protect their financial portfolios and as usual, truly understanding the issue from a social and political aspect is not considered at all.

So it is not a surprise then why they would suggest that GST and reduction of subsidies would be the most effective and needed way to heal our economy. And I would agree, but only solely from the perspective of investors who look for the easiest and quickest way for profits to be made, and not from a long term stability aspect with a more social-friendly economy in view.

From an investment house’s point of view, to ask the government to impose GST would be easier and simply more professionally legit than to ask them to cut down on corruption, allow open competitive tender of government contracts, reduce the civil service and to trim down on excesses and wastage. As the fastest fix to the economy is what investment houses and banks solely look for to ensure their portfolios are kept robust, increasing revenue base would be the swiftest, easiest if not laziest option to solve the problem of our spiralling deficit and outflow of capital.

More strongly, they do not view things from a social aspect which remains equally if not more important. What must be made clear is Malaysians are not opposed to the reduction of subsidies or the introduction of GST per se but more so the reason as to why these measures were introduced.

Why did our deficit skyrocket in the first place so much so that the need for GST was so pressing all of a sudden? Malaysians are certainly not opposed to GST and subsidy reduction if we had seen that the money that caused the deficit was spent in a right and prudent manner and would lead to more development and growth in the long run. However, we have seen the money being used more for unnecessary operational expenditure as well as being leaked out in all forms of wastages and corruption.

The government has shown that it is a failure as stewards of the country’s money. Therefore, for the Malaysian public to agree to a GST with the current excessive spending and unrestrained shopaholic habits of the government is akin to letting them have full access to a blank cheque. It is almost like a parent who decides to continuously hand over money unendingly to a child who spends it lavishly and excessively without restraint, and who does not understand the meaning of responsibility, stewardship and discipline.

By opposing the price hikes, what the Malaysian public is doing is not to ask for more disposable income in our own pockets, but to discipline the government and force them to be more prudent in their spending, that our country simply does not have the cash to overspend on excesses and wastages. And by not handing them the blank cheque easily, it is our measure of pushing the government to take the more painful but nevertheless rightful measure of cost cutting to deal with the balance sheet.

In a private company with mounting debts and no easy access to new funds, the company would be forced to perform strict and painful cost cutting measures and enact discipline. Likewise, the government has to first and foremost do the same. For stakeholders to simply hand over more funds to the company without asking for first and foremost, a strict revamp of company expenditure and improvement on it is mere foolishness. Likewise here, Malaysians are doing the same.

If we continue to easily hand over the blank cheque to the government, then they will simply not have the incentive to cut down on cost and take the rightful measures such as introducing open tender, reducing our bloated civil service, cutting down on unnecessary expenditure and clamming down hard on corruption.

In the long term, Malaysians want a responsible government who would use the country’s finances for long term development of the country that would lead to a healthier, stable and more social-friendly economy, and not a quick bandage. As long as the government has the easy access to new funds and income, they will have no painful incentive to clamp down hard on their excesses. And until the government is ready and mature enough to show it has stewardship over the country’s finances, will Malaysians be openly agreeable to the GST.

Economists from the private sector fail to see that because they desire the quickest and easiest way to heal the deficit and therefore will not understand the social and more long-term stance of the people who oppose the hikes and new taxes. Malaysians want a more long term solution to the issue that will ensure that funds we hand over to the government will be used for the benefit of all Malaysians. 

* This is the personal opinion of the writer or publication and does not necessarily represent the views of The Malay Mail Online.

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