Tuesday, April 29, 2008
Bernama: Consumers Share Blame For Price Hikes
| April 29, 2008 09:48 AM |
Consumers Share Blame For Price Hikes
GOING UP… The price of rice in Malaysia was recently reported to have jumped between 10 and 20 percent. Pix: Mohd Faizal Hassan
KUALA LUMPUR, April 29 (Bernama) -- For Malaysians, nothing is more worrying than the escalation in price for consumer goods and services.
Maybe the government's decision not to award the RM2,000 honorarium for civil servants, as demanded by Cuepacs, was right after all. If given, the honorarium would give the 'green light' for unscrupulous traders to jack up the prices of goods and services.
RICE ISSUE
At the moment, Malaysian consumers are feeling uneasy over the global price increase of rice due to the shortage of the commodity, an issue that they consider as 'hot'.
The shortage was the result of the world's major rice producers like China, Egypt, Vietnam and India limiting their export of the commodity to ensure sufficient supply for their own consumption.
Locally, the price of rice was recently reported to have jumped between 10 and 20 percent.
However this had yet to cause panic buying among consumers. Maybe they are confident with the repeated assurance offered by the authorities that the nation's rice stocks are in adequate supply.
Malaysia imports between 700,000 and 800,000 tonnes a year apart from the 1.1 tonnes that it produces annually.
Thailand is the major exporter of rice to Malaysia at between 50 and 60 percent annually. The remaining rice imports are from China, Vietnam, Myanmar, India and Pakistan.
FOMCA's CHECKS
The spiralling price of rice appears to be non-ending.
That was the conclusion by the Federation of Malaysian Consumers Associations (FOMCA), based on its own research and price surveillance on food items, in various cities and towns nationwide.
Escalating oil prices, reported at US$120 (RM376) per barrel as of last April 23, has led to the price increase of almost all consumer goods.
As FOMCA's chief executive officer, Muhammad Sha'ani Abdullah told Bernama here recently, the price hike of essential goods and services over the last two years had been a major concern for consumers.
He said the middle and lower income groups have been bearing the brunt of the price increase's onslaught. Many are feeling insecure over the future situation and they are highly concerned on how to sustain their families and livelihood.
"Our consumers are still reeling and adjusting to the 30 sen fuel hike in 2006 and many are bracing for a national fuel price increase in the near future," he said.
According to Muhammad Sha'ani, who is also FOMCA's secretary-general, the fuel price hike would act as a primary catalyst for inflation, spawning further increases of daily essentials.
"The socio-economic repercussions are severe, as we have witnessed and experienced before. Profiteering is rampant as unscrupulous traders continue to exploit consumers.
"Traders and corporate bodies are using this as a golden excuse to raise the prices of their products and services. Those who are not willing to share the burden of this increase will pass the extra cost to others, be it suppliers or retailers and eventually to consumers," he explained.
PROFITEERING
According to Muhammad Sha'ani, whenever the price of any major commodity like fuel, toll, electricity and water, rises, the imminent aftermath will be a price hike in all consumer goods and services.
"Although some price increases are justified as a result of direct impact such as transportation due to fuel hike, most price hikes are mere profiteering by traders.
"Those unscrupulous traders are taking the opportunity to raise prices to their liking.
"Such blatant unethical trading is one of the major problems impacting our socio-economy and is impeding to our progress," said Muhammad Sha'ani.
He also commented the fact that middlemen play a crucial role in the food chain as they determine the price and supply of food products that are available in the market today.
"Middlemen are always in a favourable and profitable position as they tend to generate large profit margin from both parties, namely producers and consumers," he said.
He said, some of these middlemen even act as cartels and buy at a low prices from the farmers and sell the same produce/products an exorbitant prices to end users.
"Their excuse is that handling and marketing costs contribute significantly to the price increase of these food items," he said.
OTHER CONTRIBUTING FACTORS
According to Muhammad Sha'ani, there are other dominating factors that play significant roles in the price hike of daily consumables.
"In 2005, the country's food import bill was recorded at RM17.793 billion while the food export bill only amounted to RM10.674 billion, translating into a deficit of RM7.119 billion in the Balance of Trade in Food Stuff (BOTFS).
"For more than a decade, Malaysia has been relying heavily on imports to satisfy the growing demand for food. Countries such as United States, Australia, New Zealand, China, Thailand and Indonesia dominate the food market share of the country," he said.
Malaysia imports dairy products from New Zealand while vegetables and fruits mainly originate from Australia and the United States.
Malaysia is also a net importer of seafood products, mainly from Thailand and Indonesia.
"The nation's inability to produce enough food to cater for the national demand continues to inflate the food import bill, which inevitably leads to the increase in food prices," he explained further.
EXCESSIVE SPENDING
The excessive spending habit of some consumers, according to Muhammad Sha'ani, also contributes to the price hike.
He said, as more foreign goods make their way into the Malaysian market at very competitive prices, modern-day consumers are spurred to spend more lavishly.
"Consumers today tend to overspend, and the large middle class society is splashing their money lavishly on new technologies and personal accessories in the name of fashion and convenience.
Middle income consumers have also brought a new dimension in purchasing food items.
"They spend a long time shopping for their groceries at supermarkets and hypermarkets, as these large retailers offer a wide range of sophisticated food products.
"The consumers are free to see, feel and pick perishable food items before purchasing them. The additional charges unavoidably contribute to the price increase of food products," explained Muhammad Sha'ani.
THE CREDIT CULTURE
The rampant promotion of credit cards, home loans and hire purchase facilities by financial institutions has worsened the situation.
Muhammad Sha'ani said the financial sector is relentlessly encouraging consumers into a life of easy credit, dragging them deeper into life-long debts, with attractive offers ranging from free gifts to low interests and easy payment schemes.
"The credit culture is fast creeping in our society. Young working adults immediately succumb to a life of debts with car loans, housing loans and credit card bills," he said.
He said the lifestyle of 'own now, pay later' is pushing people into debt traps and bankruptcy.
"While the cost of living is rising at an alarming rate, most banks are heavily promoting its loans and credit cards.
"Unwarily, consumers are piling up their debts to the point that some people even have to resort to taking up personal loans just to clear their credit card debts," he said.
-- BERNAMA
