Thursday, September 8, 2005

"Stemming The Price Rise"

Inflationary Pressures Building Up Fast

The government has announced four steps to ease the public's burden brought on by escalating prices of consumer goods. the steps are:

  1. Not to increase the price of fuel until the end of this year;
  2. Defering any toll increase for this year and next year;
  3. Reduce road tax by 25% (commercial vehicles) to 80% (school buses); &
  4. Increasing aids to senior citizen, disadvantaged children and the poor.

Why did the offer of such niceties? Because:

  1. The Consumer Price Index for the first 6 months of 2005 increased by 2.8%.
  2. In July the CPI increased by 3%.
This had reduced the people’s purchasing power. The government measures are to contain inflation and counter the effects of rising global oil prices.

The move is laudable as it may help in easing inflationary pressures that had beeen building up over the last two year. This quick action is seen necessary to mitigate against the increasing frustrations and disappointments of the communities over the lack of economic priming activities and development projects to sustain the nation's industrial growth which over the past two years had slowed down effectively and in some areas, particularly the construction industry, which has contracted. The reality can be seen in that many Bumiputra contractors are starving for jobs, and many more contractors have projects that are in their tail-end and would be jobless soon unless the government does some pump priming actions to overcome the poignant situation.

However, a closer look at the sweeteners offered, it isn't that sweetening.

Firstly, the promise is that there will be no fuel-price increase until end of the year. We are now in September, which means that the government is giving a three months grace period of sustain current fuel-price and the promise ends thereafter. At such we can expect fuel price increase by January 2006.

Secondly, the promise of no toll increase this year and next year do not affect all the concessionaires except the Penang Bridge operator (UEM). All the road operators were not expected to increase their tolls until 2007. At such, there is in reality, a promise which is not expected to take place at all. The only beneficiary is those who use the Penang bridge.

The third initiative of lowering the road tax is seen as the only realistic benefits the public had benefitted.

The fourth initiative of increase aids to old people and under-privilege children and poor cannot be construed as an new initiative to ease the public's burden. This initiative is suppose to be built into the system of government, irrespective. It is paramount duty of the government to provide aids to senior citizens and the under-privileges and should not be publicise as if it was some new goodies. It bemocks the system administration.

In essence this quick action is seen to alleviate any possible form of revolution or uprising and tensions within the bumiputra communities out of frustrations over the new regime’s inability to generate economic activities, particularly the lack of projects coupled with rising cost of living without the parallel rise of income. The current economic outlook seem to be treading towards deflation.