Inflation days

Days of cheap food and affordable transportation are no longer here. Instead, prices of goods and services have jumped by leaps and bounds. It is only in reminiscent that our pork noodles used to be RM3 and teh tarik 80 sen, and we pay less than a ringgit for a bus ride. Today, we have to accept the reality that the value of our money has shrunk and we can no longer afford as many things as we used to. Unless of course, you have millions of ringgit in your bank account and every month, you receive a figure-pay. Even then, that 5-Series does not look so affordable as before; not when you have to fork out RM2.70 per litre of oil.

Together with the announcement of the energy price increases, the authority also declared windfall taxes on two groups - the independent power producers and planters. A colleague called it a popularity move because it made to see that they were acknowledging the burden of the rakyat and therefore, punishing the corporates that are getting huge profits. However, a deeper thought into the matter, the taxes might not be beneficial to the people. As a matter of fact, it could be counter productivity as the companies, which had done well thanks to higher market prices, would have to cut back on expansion plans or pay less dividend since a huge chunk of their profits would now be taxed.

Businesses that are making huge profits would naturally want to take advantage of the positive environment to expand and make even bigger earnings. Expansion leads to creation of jobs or the need for more expertise, or upgrading of employment roles. By curbing their profits would not encourage companies to leverage on the capital and pump it back into economy. A colleague observed that the major gains now could also sort of even out the years of downcycle, which the companies had to paddle through.

Also, the savings of RM2bil might not be significant compared to the billions of ringgit in leakages prevented if the Government had made it more transparent of how public projects were awarded, instead of keeping them on direct negotiations, which did not encourage competition and efficiencies. Soon after the new measures were released, a major contractor said a certain project would double to RM4bil due to higher cost of building materials. No details were given as to how that figure was derived. If the public project was financed on the rakyat's hard-earned money, wouldn't it be fair for us, the stakeholders to have the preview of the terms?

A public leader adviced the public to get a second job to cope with the higher standard of living but if everyone were to do so, companies would complain that their employees were half-hearted in doing their jobs because their focus is on two separate occupations. As a result, productivity might drop and businesses would be ineffective in generating more profits needed to pay better salaries to staff. And what about relationships and personal well-being?

A person with two jobs would have less time for himself or his family members, resulting in broken families, friendship and so forth. The lack of balance between work and the rest of life would lead to individuals who are not fulfilled and dissatisfied. At the end, Malaysians would turn out to be bitter, un-appreciative, angry and disappointed bunch of people. A bit drastic illustration, but a possible scenario if the simplest solution to inflation was to just get a second job.

Instead of trying to fight market forces, perhaps the alternative is to work with it. How can we manipulate market forces to our benefits? If people had to deal with more expensive goods, how then can their salaries be increased so that they could still afford their living? Could people upgrade themselves so that they can improved their value? Can companies having more profits allocated for training and development, and move up the value chain? And instead of having fork out 30% extra to secure projects, can the 30% be channelled back to those involved in drawing out efficient and intelligent proposals?

A listener who called up a local radio station put it aptly - "Companies just have to make more sales so that they could still maintain the kind of profits they were generating before instead of cutting on cost (which is already very efficient) or reducing manpower (which could be used to produce more sales)."And because companies have even higher sales targets now than before, employees would have no choice but to double their productivity because their salaries and remuneration are tied to the performance and they have to make a living in a more expensive environment. Let the economics do its work and let governments play its role - keep the environment friendlier for the economic mechanisms to perform.