“The Hit Group”

Idris Jala is a person I respect, even though I do not necessarily agree with his views, especially in the past year or so.

I have written an article praising him some time back: Success story of a Bumi CEO.

He is also one of the few that warns that Malaysia can be a bankrupt country in a few years time, if we do not do away with subsidies. Indirectly, by saying so, he actually hinted that wastages and leakages may lead this country to bankruptcy, hence there was so much of reaction against him then..

Today, he was quoted to say that the economy can absorb an official inflation of 5%.

In the Malaysian context, a 3% inflation is already very high, since i have a feeling, and a lot of people agree with me, that the CPI does not really reflect market prices.   Whenever there is a 3% increase in CPi, you can be sure that many things go up more than 3%.  Food prices, house prices and rentals, electricity tariff, transport costs and entertainment costs (Astro for example) are among some of the things that have gone up a lot. A lot of other things have gone up too.

An example is that medicine prices have gone up;  even colds medications have gone up 300% in the past year, because of the Ministry’s directive to restrict import  , sales and production of a component called pseudoephedrine , and thus there was an artificial shortage of colds medicine containing pseudoephedrine in the market, and thus prices went up almost 3 times. It is a drug that can be abused of course, just like any other drugs, but because of the abuse of a small group of patrons at certain night spots, the ministry imposed restriction of import and production of a drug that is being used by so many others..

This is a mentality that sounds similar to that of banning file sharing sites. Just because some info in these sites infringes on copyright, there is a blanket block of these sites… The correct things to do is to inform these sites of those materials that infringes on copyright and ask that these materials be deleted, as many sites have done in the past.

The correct things to do,  with regards to colds medication, is to have strict law enforcement, and not by restricting a medicine which is used by so many for relief of colds and nose blocks. Nab the culprits that abuse the drugs by all means and let others who need them have access .

Now, back to inflation and the economy!

The 7% rise in electricity tariff is said to affect only a quarter of users.  But many of these quarter of users actually run the retail businesses and manufacturing businesses, and hence these increase will be translated as increase costs for goods and services.

I realise that all the increases actually hit at the same  group, which I would like to called ” The Hit Group”,  more than anyone else. This is also the middle income group.

While the rich has plenty of reserve to cushion them of any ugly  inflation, and the poor are sometimes helped by some of the government programs, it is this group that are worst hit in any inflation situation.

This group is among the one million who pay income tax to support the other 26 millions. Majority of this group stay  in urban areas, and are also the group that is hit by increase in electricity tariff. This group, because of its work nature, is also the group hit most by increased hawker-food prices since because of the nature of their work, they have to eat a meal outside..

This group is also among those who subscribe to  internet, astro and hence are hit by increase in Astro fees (I concede that Astro  can actually be done without). This group is also worse hit by house prices or rentals, and rising bank interest and petrol price increment.

This group, unfortunately is also the group that does not qualify to apply for a low cost home, or study loan for children.

Now, back to Idris Jala’s figure of 5% inflation that we are going to face.  The econmy can withstand this 5% increase, says Idris. Our experience tells us that a 5% increase in inflation rate means that most things will go up more than 5%. Many things will go up more than 10– 20%

If things go up more than 5%,   I doubt that this middle income group can withstand anymore .  As I have mentioned in another article ” when belts cannot be tightened anymore”, their belts have already be pulled to the limit and cannot be tightened anymore.

I suspect Idris is trying to prepare the populace for another subsidy cut.

What this group of people hopes is that the government be more understandable of their woes. Have more incentive and tax break for this group, too.

Money can actually be found if there is less wastages and leakages. There is really no need to squeeze this group any tighter..