IN KUALA LUMPUR
WHEN I walked into my favourite kopi tiam near my apartment yesterday, I found that my usual breakfast noodles and coffee had become more expensive by 60 sen.
Sugar is more expensive now? I asked. The cashier smiled; she didn’t know.
I guess Malaysians can expect more such shocks this year as the government’s efforts to reduce the fiscal deficit begin to hit the pockets. The deficit is now a high seven per cent, and the government has pledged to cut spending including food and fuel subsidies.
Malaysia subsidises a mind-boggling array of items, from sugar to cooking oil to rice to bread to petrol, electricity, water, and so on.
Sugar, which was subsidised to a tune of RM720 million last year, is the first to take the hit – it’s a soft target as it can be linked to a healthy living campaign. It has gone up by 20 sen a kilo.
White bread was also taken off the price control list at the same time. Petrol is expected to come off that list, to some extent, by the middle of this year.
What else? A new RM50 tax on each credit card has come into force. It prompted me to cancel one card, but in an increasingly cashless society, it’s impossible to surrender the other two pieces of plastic. And so, I will pay the government RM100 this year.
Next year, the Goods and Services Tax is supposed to kick in.
None of these are bad measures in themselves. The crazy amount of subsidies have encouraged waste and distorted the market to the extent that shortages and hoarding takes place all too frequently.
A tax on consumption and credit cards can theoretically encourage prudent spending. But put all of them together, along with the news that the Royal Malaysian Air Force has lost two jet engines worth RM100 million, the reaction is not going to be good.
It’s hard to win mass support if the people, especially the working class, seem to be taking the brunt of the austerity drive.