Published: Sunday September 8, 2013 MYT 12:00:00 AM
Updated: Sunday September 8, 2013 MYT 3:02:00 PM
PRICES for RON95 and diesel which the Government claimed is heavily subsidised, has gone up by 20 sen a litre.
Readers of this column would know that I have been advocating for a gradual rationalisation of the huge subsidies. This may make me unpopular but I am sticking my head out as I believe that it is in the long-term interest of all Malaysians not to be dependent on government subsidies and handouts.
For once I agree with Chief Minister Tan Sri Abdul Taib Mahmud who said that the price increase was necessary because we needed to cut government subsidy to keep the country’s financial problems at bay.
Finally we have someone who has acknowledged that we are facing a fiscal issue.
The Government must also reduce abuses and inefficiency. The civil service must be more efficient and cost effective. Government procurements, award of contracts and alienation of state land must be transparent and above board.
I have also long advocated that we need to review our tax system — no, not by introducing GST. A big issue in our country is only 10% of the population pay income tax. This is simply because 90% of the population do not earn enough to pay it — highlighting my point, that is, the huge income disparity in our country.
But this cannot be the reason for introducing the GST. I am not at all convinced that GST is the answer as it is a “regressive tax”. It will have a more pronounced effect on lower-income earners, meaning that the tax consumes a much higher proportion of their incomes, compared to those earning large pay.
The rich will buy Rolexes in other countries as all GST allow refund for tourists while the poor will have to pay the tax for their locally bought Casios.
The Government must boost tax collection by going after tax evaders. Big corporations are experts at exploiting loopholes to avoid tax legally. This must be stopped.
The actual 20 sen increase in petrol price is manageable as the average Sarawakian motorist drives about 10,000km a year. With fuel consumption of 10-12km per litre it will cost two sen extra per km. That means an extra RM200 a year. (I am glad I bought a motorbike recently!)
Profiteering by businesses is what really hurts. The 10% increase in petrol price is used as an excuse to increase transport charges also by 10% even though fuel cost is not 100% of transportation cost.
Then because the price of sugar went up by 10 sen per kg, a cup of coffee also goes up by at least 10 sen. And how will the prices of houses be affected when legally the developers/contractors use industrial fuel only? Also, fried chicken will cost RM1 more because subsidised cooking gas goes up by RM1 per 14kg tank.
I’m really peeved. First of all, eateries are not supposed to use subsidised gas. Secondly, if a whole 14kg canister is used to grill a chicken steak, it will be more than well done!
Thus the Government must facilitate a strong consumer movement as it is the most effective way to minimise profiteering.
We cannot rely on the few enforcers of the Domestic Trade, Cooperatives and Consumerism Ministry to police prices. After all the performance of our enforcement agencies is embarrassing, to say the least. For example, how else can one explain the 1.8 million outstanding traffic summonses, 260,000 criminals roaming the streets, and at least half a million illegal immigrants?
The saddest part is we have a minister who claimed that the fuel price increase would benefit lower income earners because it would mean that the Government would have more money to increase its handouts such as the BR1M!
I would say whatever BRIM doled out, has been more than paid back by the increase in prices caused by the cut in petrol subsidy, which affects the lower income group so much more.
So please, defend the subsidy cut in a professional way, and from a fiscal standpoint, not through populist rhetorics.
The best way to mitigate the effects of subsidy rationalisation is to create decent jobs with decent wages. The minimum wage is a start but at RM800 a month in Sarawak, it is still below the poverty line.
It is perhaps opportune to look into the current debate in the United States on the move to increase the minimum wage from around US$9 to US$15 an hour.
Nick Hanauera, a successful businessman and investor, is challenging the conservative thinking that for countries and businesses to be successful, wages must be kept low. He disputed the notion that the wealthy are the job creators. Below is an excerpt of his speech.
“Traditionally, arguments for big minimum-wage increases come from labour unions and advocates for the poor. I make the case as a businessman and entrepreneur who sees our millions of low-paid workers as customers to be cultivated and not as costs to be cut.
“Here’s a bottom-line example: My investment portfolio includes Pacific Coast Feather Co, one of the largest US manufacturers of bed pillows. Like many other manufacturers, pillow-makers are struggling because of weak demand. The problem comes down to this — my annual earnings equal about 1,000 times the US median wage, but I don’t consume 1,000 times more pillows than the average American. Even the richest among us only need one or two to rest their heads at night.
“An economy such as ours that increasingly concentrates wealth in the top 1%, and where most workers must rely on stagnant or falling wages, isn’t a place to build much of a pillow business, or any other business for that matter.
“Raising the minimum wage to US$15 an hour would inject about US$450bil into the economy each year. That would give more purchasing power to millions of poor and lower-middle-class Americans, and would stimulate buying, production and hiring. Studies by the Economic Policy Institute show that a US$15 minimum wage would directly affect 51 million workers and indirectly benefit an additional 30 million. That’s 81 million people, or about 64% of the workforce, and their families who would be more able to buy cars, clothing and food from our nation’s businesses.
“This virtuous cycle effect is described in the research of economists David Card and Alan Krueger (the current chairman of the White House Council of Economic Advisers) showing that, contrary to conventional economic orthodoxy, increases in the minimum wage increase employment. In 60% of the states that raised the minimum wage during periods of high unemployment, job growth was faster than the national average.
“Some business people oppose an increase in the minimum wage as needless government interference in the workings of the market. In fact, a big increase would substantially reduce government intervention and dependency on public assistance programmes.”
It’s about time for us to embrace more pro-active economic principles in Malaysia.
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