Economists warn against government intervention to tackle soaring prices


Economists have warned of calls for government intervention in the market, even as consumers struggle to cope with soaring prices for a wide range of goods and services, from online rides to chicken.

Complaints about rising commodity prices began two months ago during the festive season when the cost of food started to rise along with the cost of airfare for Malaysians wishing to return to their hometown.

More recently, public scrutiny has focused on the price of chicken and the fees charged by email companies, including Grab.

In some markets, chicken prices have reached RM12 per kg, while Grab rides in several cases cost RM40 at peak times compared to RM17 during normal periods for trips of the same distance.

Calls for the government to impose price controls are not new.

Every festive season, the government, through the Ministry of Domestic Trade and Consumer Affairs, sets ceiling prices for certain products to prevent consumers from being overcharged.

But economists who spoke to MalaysiaNow said price controls were not necessarily the best way to solve the problem.

Barjoyai Bardai said any form of intervention, including the implementation of price controls, would lead to market inefficiency.

“Take chicken, for example,” said Barjoyai, of Universiti Tun Abdul Razak.

“We try to control the price of chicken, but it is very easily manipulated when producers withhold market supply – prices will skyrocket.”

Meanwhile, on the black market, consumers will get chicken regardless of price “because they need the commodity,” he added.

Adillah Zafirah of the Iris Institute accepted.

He said the black market would only grow with the introduction of price controls, although these would protect consumers from exploitation by producers.

“For effective and sustainable government intervention, you need to understand market supply and demand,” he said.

“As far as the supply of chicken is concerned, it has been a problem for a long time. The government should actually play a role in the whole supply chain system.

On May 18, the government said it had agreed to waive approved permit requirements for food imports to allow more businesses to import food from outside the country.

But Barjoyai said tackling the problem from this perspective was a short-term measure, as commodity prices would rise again due to the exchange rate.

High airfare prices, meanwhile, could be due to a shortage of industry players offering that particular service.

“If we opened up the market to outside companies, there might be enough competition to bring ticket prices down,” he said.

“Of course, local businesses will argue that such a move would kill them, but the question is also whether they want to exploit their customers.”

The same would apply to the email industry, where Grab holds a virtual monopoly.

Grab had said the price increase was due to an increase in demand and a lack of drivers to meet it.

Adillah said the most sustainable solution would be to increase supply in the market.

Barjoyai meanwhile said the problem lay in what he described as the depth of the industry.

“An industry that is too superficial will only have it controlled by a handful of cartels,” he said.

“How can we allow 12 companies to control the supply of chicken across the country? It is very worrying.

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