5-11-2023 (KUALA LUMPUR) In the vibrant Larkin wet market in Johor Bahru, the rhythmic clang of cleavers fills the air as poultry seller Hasri Muhammad Nasir expertly divides a chicken into eight portions. Amid the lively market atmosphere, Hasri, with a blood-stained glove and a warm smile, offers a discounted rate of RM20 for a purchase originally priced at RM20.70, empathizing with the challenges faced by Malaysians during tough economic times.
The backdrop to this scene is Malaysia’s recent decision to lift price controls on chickens from November 1, part of an initiative to reduce government expenditure on subsidies. Prime Minister Anwar Ibrahim, in his recent Budget speech, highlighted that the government had spent RM3.8 billion on chicken and egg subsidies since February 2022, necessitating a shift from blanket subsidies to targeted ones.
However, as the price ceiling of RM9.40 per kilogram for standard chicken was removed, concerns began to surface. According to local vendors like Hasri, the prices of chicken initially dropped below the ceiling but quickly surged, reaching the government-set limit by November 17. Small traders and business owners across the country have voiced their worries about the impact of this policy shift on the cost of living.
In an exclusive interview with CNA, Malaysia’s Deputy Minister of Domestic Trade and Cost of Living, Fuziah Salleh, explained the government’s plan to move from blanket subsidies to targeted ones. She disclosed that of the RM81 billion allocated for subsidies in 2023, RM42 billion would be directed towards fuel, RM7 billion for chicken and eggs, and RM2.4 billion for cooking oil, with the remaining funds allocated to electricity, other food items, and aid programs.
Fuziah elaborated on the impending introduction of the PADU system in January, designed to facilitate targeted subsidy distribution based on factors such as combined income, household size, locality, and commuting distances. She emphasized the need for consumers to empower themselves and acknowledged the challenges of controlling prices in a free-market economy.
While the government contends that the shift is crucial to address leakage and wastage issues in the current subsidy program, critics argue that it could exacerbate the cost of living situation. Business owners like Tan Ah Hui, a fresh chicken seller in Johor Bahru, shared how the removal of subsidies and the subsequent price increase have affected small stallholders, compelling some to raise prices significantly.
The impact extends beyond chicken prices, affecting various sectors. Ameer Ali Mydin, founder of Mydin Hypermarket, pointed out that while the Consumer Price Index (CPI) may indicate low inflation, it masks the true inflationary numbers of non-subsidized items, which have reportedly risen by 3-5%.
Economist Dr. Yeah Kim Leng highlighted that persistent food inflation, exacerbated by factors such as bad weather, labor shortages, and the depreciating ringgit, poses challenges to the food sector. The poor performance of the ringgit, the worst-performing currency in the region in 2023, has led to increased costs for businesses relying on imported raw materials.
Farm Fresh, a local fresh milk company, reported incremental costs due to the removal of subsidies for electricity tariffs, coupled with increased labor costs and the depreciating ringgit. These factors forced them to raise product prices by around 10-12%.
As Malaysians grapple with the rising cost of living, concerns are voiced about the potential political costs for the government. Citizens like pensioner Zulkifli Abu Bakar express their dissatisfaction, urging the government to do more to assist the lower-income population. The fear among some is that without price controls, the market could become more uncertain, impacting businesses and potentially affecting the political landscape.
While some business owners support the government’s decision, viewing it as beneficial for the long term, the prevailing sentiment among Malaysians is skepticism. Poultry seller Hasri, in closing up his shop, emphasized the urgency for the government to address food inflation, a concern that resonates deeply with many Malaysians facing economic challenges.
