RECENTLY, Ayer Hitam MP Datuk Seri Dr Wee Ka Siong posted a video on social media (bit.ly/ facebook_wks) about the knock-on effects of a power tariff hike.
The former Transport Minister [and MCA president] hit the nail on the head with his explanation, which I think deserves more attention in light of the impact tariffs have on the economy.
While the current government is on the right track with its subsidy rationalisation plan, it should only do so cautiously and after a comprehensive study.
A rushed job can have counterproductive effects on the economy.
Take the electricity bill cited by Dr Wee in his video. For many small and medium enterprises, power is a large chunk of their operating costs, especially factories or retail outlets. It can go up to 40% of operating expenses, depending on the industry.
What happens if these businesses face a power tariff hike?
Usually, they will either cut other expenses or pass on the cost to consumers.
The easiest cost to cut is human resources. This can come in several forms: A reduction in overtime pay to workers or not paying them at all (which is illegal, but many workers will be reluctant to complain to the authorities for fear of repercussions); or employers can choose to let go of staff, leading to increased unemployment.
The other option is to pass the cost on to consumers. This means consumers will have to pay more for the same products and services compared to before.
As it is, many are already feeling the pinch from the weaker ringgit and the overnight policy rate hike. The last thing we want is to have to stretch our already- diminishing ringgit further.
Neither option is desirable. Do we want our unemployment rate to go up at a time when we have barely recovered from the Covid-19 economic fallout? Or do we want inflation to get worse with traders hiking prices just to keep themselves afloat?
This is why an increase in power tariffs is not desirable.
Dr Wee has rightly pointed out why this is so and I hope the government hears him out.
I hope Prime Minister Datuk Seri Anwar Ibrahim, who is also the Finance Minister, can spend more time sitting down with economists and financial experts to come up with a comprehensive strategy to lift Malaysia out of its current economic morass.
VICTOR LOO
Taman Kota Laksamana,
Melaka
