Incompetence BN Government Failed to Improve our Economy

Patrick Lee

Poor families will experience greater hardship with hikes in the electricity tariff and the prices of essential items, says a research group.

 

 

PETALING JAYA: A research group has disputed the government’s contention that the electricity tariff hike and other price increases would not overburden the poor.Inflation was already making life more miserable to the poor even before the tariff hike, and things will get worse now, according to a statement released today by Political Studies for Change (KPRU). 

 

It said wage increases in Malaysia had not matched with inflation rates.

“According to the World Bank Report, the real average salary increase from 1994 to 2007 was only 2.6%,” it said. “The average salary increase since the 1997 economic crisis has only been 1.9%.

“The Consumer Price Index shot up to 3% in March 2011, and then to 3.2% in April, putting the inflation rate from January to April 2011 at 2.9%.”

KPRU said the recent 7.12% increase in electricity tariffs would worsen the situation, even though the government claimed it would not affect 75% of Malaysians.

It said the government “neglected to mention” that the hike would cause an increase in the prices of food and other essential items.

“Industrial food manufacturers use large amounts of electricity, and the costs are expected to be transferred to consumers,” the statement said.

KPRU acknowledged the 2011 Robert Walters Global Salary Survey, which said that Malaysian salaries had increased by 5% to 30% this year, but it said this was applicable only to people already in comfortable positions – information technology workers, accountants, financiers, bankers and other professionals.

“In 2010, only 3.76 million out of the more than 10 million Malaysian workforce could pay the personal income tax,” the group said.

KPRU expects multiple-figure percentage increases in the prices of essential items. It said poor households would face the brunt of the price hikes.

Price hikes top list of concerns

An online poll by FMT reveals that respondents are most concerned about escalating prices of essential items and least concerned about swapping refugees.

PETALING JAYA: The bread-and-butter issue of price hikes ranked above all other concerns such as the education system and race politics, according to an online poll by FMT.


The 10-day poll, which saw 3,786 respondents voting, closed at midnight yesterday.

A total of 1,913 or 51% of the respondents chose price hikes as their biggest concern while 1,002 or 26% picked “petty or race politicking”. Only 779 or 21% were worried about the standard of education.

Prices of essential items had been increased over the past several weeks as part of the government’s move to lessen the subsidy load, which is expected to double from RM10.32 billion to RM20.58 billion this year.

On May 4, the government announced that the price of RON97 fuel would be raised to RM2.90 – up 20 sen since the last increase in April. Five days later, the price of sugar went up by 20 sen to RM2.30 per kg, a 10% hike from the previous RM2.10 per kg.



Quelling concerns that the price of the more widely used RON95 petrol would also go up, the government last week announced that the prices for RON95, diesel and liquefied petroleum gas would be maintained for the time being.

On Monday, the government announced a 7% hike in electricity tariff beginning June. However, this would not affect about 75% of the population who utilised less than 300 kWh per month.

The refugee swap between the Malaysian and Australian governments seemed to be of little concern to readers. Only 1% or 48 respondents clicked on this.

Similarly, only 44 respondents or 1% said that they were concerned about errant motorists breaking traffic rules.

By Tarani Palani

Govt not Actively Checking the Spiralling House Prices

 I refer to recent reports on the National House Buyers Association (NHBA) expressing concern over the runaway prices of houses. Whilst  there is already a great deal of concern on the part of the average Malaysian on the significant increase in the food prices in recent months, there is even greater concern over the concern over the continuous rise in property prices in major cities and towns in the country.

The NHBA’s concern that the astronomical increase in house prices (both old and new) has virtually locked an entire generation of young adults out of the house buying market hits the bull’s eye. The reasons for the rapid increase are obvious: easy availability of bank loans with very low interest rates; easy payment schemes conceived by creative developers such as the 90:10 or 95:05 schemes where buyers need only pay up to 5pc or 10pc of the purchase price while banks take care of the rest with the developer until completion; and a low real property gains tax (RPGT) of only 5pc. In some cases, developers’ staff book properties in advance, and the property then changes hands to buyers for “fee”.

Many developers also raise the sale price of each phase of the properties they sell, with the excuse that the cost of labour and materials are rising rapidly. In a way, developers have contributed to the inflationary rise in the prices of properties and to their own bottom line. Whilst one cannot deny that labor and material costs will rise, the extent of the rise when translated into the value of the property cannot be justified. Developers may argue that they have holding and labor costs and other risks associated with the business, but look at the annual profit they reap from the sale of properties. More often than not, launches in cities are sold out within hours.

There is a definite need for relevant authorities to look into house prices vis a vis the cost of labor and materials. Soon with the anticipated introduction of the Goods and Service Tax, property prices will go even higher as developers have no choice but to transfer their cost to buyers.

Then there is the issue of speculation on property prices. Not too long ago, developers were clamouring for the government to reduce or exempt house buyers from the RPGT which used to range from 0-30pc depending on years of ownership as well as reduction in stamp duties. The developers’ argument is that due to the overhang of properties, they were unable to sell many of their properties and suffered losses.

The government of course listened and reduced the RPGT to 5pc for gains on properties sold within 5 years of purchase and 0pc for properties sold thereafter and in the process, gave away revenue which it ought to have collected. Well, today look at the effects of meeting the request of developers.

Whilst we don’t deny that there are pockets of unsold properties, many developers have made super profits from the sale of properties, as have buyers (or rather speculators). It is the genuine house buyers who are locked out in the process, firstly by developers charging a high sale price during the launch, and secondly, by speculators who book the property with little seed money and then sell it at a much higher price.

Banks have definitely contributed to the house price syndrome and there is no doubt a need for Bank Negara to quickly deal with this before it’s too late, although may developers and industry players would tell us there is no bubble in sight. Of course, when it happens, the blame game will start and it is the genuine house buyers who suffer.

I agree with the NKBA that the government should review the RPGT act and even the stamp act (like in Singapore and Hong Kong) to deal with speculators, and be well aware that it is losing a rich source of revenue annually. There are no doubt, many speculators in the market (what with easy financing available) who find it easy to make a profit especially those with connections with developers. Many of them have been buying and selling properties within a short period of time and the government should consider instituting legislation to curb this menace.

The previous 30pc RPGT rate should be brought back as soon as possible to tax all profits arising from the sale or transfer of ownership of property within a three-year time frame for purchased completion properties and new properties so as to discourage speculators, many of whom may not have the financial capacity to put in even a decent 20pc-30pc down payment for the purchase price; and Bank Negara should tighten the availability of credit especially to those buying a second or third house. Perhaps stamp duty should also be imposed on sellers who sell their properties within say two years of purchase.

The prices of properties must be monitored and checked by way of financial measures like level of loan versus buyer’s profile and number of properties purchased/sold, and fiscal measures to curb speculation and a quick profit.

So much for the government’s aim to increase the income of the general population and facilitate home ownership for first time buyers. Our children will find it hard to own a house in the future without forever being a debtor to banks.

Concerned Citizen.

Daily Express Sunday Forum

‘Malaysians have lost their purchasing power’

The ratio of income against the cost of goods in Malaysia is at an unhealthy level, notes a newly elected assemblyman in Sarawak.

KUCHING: Any increase in retail prices, no matter how small, is a heavy burden on the ordinary Malaysian who is already living on an overstretched budget, said newly elected assemblyman Wong King Wei.

Fresh off the ballot box, Wong is not alone in his views as more and more consumers are concerned over rising inflation and how far their salaries will go.


Bank Negara recently said inflation could double to 3.5% this year. Already it is 3%.

For the ordinary man on the street earning RM1,000, a 3.5% inflation would simply mean he would instantaneously see RM35 disappear from his pocket and with no purchases to account for.

And if the inflation rate raises to 5%, he would then lose RM50, which could, if used, translate to a provision list of rice, sugar, oil and onions to last a few days for a family.

Said Wong: “The government cannot keep lying about the situation… removing subsidies will affect the ordinary man everything from travel to eating out and marketing.

“We are not getting value for money spent. The ratio of income and the cost of goods for Malaysians is currently at a very unhealthy level.”

According to Wong, the DAP Padungan rep, the spiralling prices of consumer goods has made Malaysians lose their purchasing power.

“We’re lagging behind many countries now. Even people in Kuala Lumpur who used to have the highest purchasing power compared to other Malaysians are feeling the pinch.

“It’s all there in the 2010 Prices and Wages Report,” he said alluding to the Swiss financial conglomerate UBS AG’s revealing fact that Malaysians are lagging behind their global counterparts in terms of purchase power.

Citing South Korea, Wong said 40 years ago, the republic was on par economically with Malaysia, but today the citizens enjoyed a purchasing power which was 17% higher than Malaysians.

Corruption and cronyism

According to the report, the purchasing power of KL-ites was only 33.8% that of New Yorkers while Londoners have 42% purchase power.

The report noted that although the price of goods in these places were twice that of KL, the purchasing power in Kuala Lumpur was still more than twice lesser.

Blaming the weaker purchasing power on the gap between income earned and cost of goods, Wong said there was a ‘significant disparity’ in wages in Malaysia.

Compounding the situation is the fact that Malaysians had to deal with ‘corruption and cronyism.’

“The economic cake in the country is not evenly and fairly distributed…and this is because of corruption and cronyism.

“The real reason why the government is cutting back on subsidies is because it has no money.

“Last year the Auditor-General’s report noted that corruption, abuse of power and mismanagement had led to Malaysia losing an estimated RM28 billion over the course of the year.” he said

He said abolishing subsidies was the government’s way of diverting public attention from the real issue – corruption.

“The government has no money because of corruption.

“By eliminating cronyism and corruption, we can take a step in the right direction in raising purchasing power and lowering the rate of inflation.

“This will (in turn) ease the burden of the rakyat and raise their standard of living.” he told newsmen recently.