Friday, November 14, 2008

M'sia to lower food prices

M'sia to lower food prices
By Carolyn Hong, Malaysia Bureau Chief
Workers at an Indian Muslim restaurant in Petaling Jaya preparing roti canai and teh tarik. A notice draws attention to price cuts for certain items. -- PHOTO: THE STAR/ASIA NEWS NETWORK

KUALA LUMPUR - OVER the last two weeks, Malaysia's Domestic Trade and Consumer Affairs Minister Shahrir Samad has been busy visiting nasi kandar restaurants and hypermarkets.

His goal? To persuade them to reduce their prices as the government comes under pressure for its handling of the sudden and stark rollback of fuel price subsidies in June.

Deputy Prime Minister Najib Razak joined the campaign yesterday at a Putrajaya hypermarket, where he urged retailers to ensure their price cuts were genuine. 'This year is an exceptional year for us because the inflation rate shot up. But next year, we will return to the inflation rate that is more normal in our country - around 3 to 4 per cent,' he said.

The rate is now over 8 per cent.

The government does not usually go from shop to shop to persuade retailers to slash prices but it has been stung by criticism over its handling of the fuel price hike in Malaysia when global oil prices soared.

The sudden and steep hike in fuel prices in June had led to sharp increases in prices of food and other items as retailers passed on the increase in transport costs to consumers. Fuel prices are controlled by the government, which provides a hefty subsidy to keep prices among the lowest in the region, but most food prices are not.

In early June, the government abruptly rolled back the subsidies to allow petrol prices to jump by 40 per cent in one fell swoop. It had no choice.

But critics, including former premier Mahathir Mohamad, had said the move would burden the people. Tun Dr Mahathir pointed out that the government could afford to roll back subsidies gradually as its revenue had soared from two of its biggest exports - oil and commodities.

The critics' warning proved prescient as global oil prices tanked from September. While the government quickly lowered fuel prices, food prices were slower to drop. Inflation has remained high.

Teacher R. Vasantha told The Straits Times the price of milk had shot up 20 per cent in the last few months. Her grocery bill has not dropped substantially lately.

'It's always sticky downwards. Retailers find people become used to higher prices, and are reluctant to lower them if business is not affected,' said opposition MP Tony Pua, who was economic adviser to the Democratic Action Party.

The government has scrambled to address a problem that could become a major headache. A September survey by the Merdeka Centre showed half the respondents cited economic concerns as their biggest worry. Over 40 per cent cited inflation as a specific cause. Almost 80 per cent were dissatisfied with the government's handling of the issue.

The inconsistent policy on fuel subsidies has cost the government RM5 billion (S$2.1 billion) in rebates to car owners. As it had pledged to pay the rebate until March next year, it cannot backtrack even though petrol prices have fallen.

The government's campaign has seen some successes. About 4,500 Indian and Indian Muslim restaurants this week dropped prices by 10 to 20 sen for items like roti canai, teh tarik and nasi kandar. Several hypermarket chains have also started to slash prices of certain items.