Malaysia's cost of living keeps climbing

KUALA LUMPUR- Political scientist Wong Chin Huat had a shocking start to the year when his bill from the laundry came back 20 per cent higher than usual.

The business had raised its ironing charges from RM1 (38 Singapore cents) to RM1.20 a shirt, due to the hike in Malaysia's electricity tariff that took effect on Jan 1.

The bill gave him a jolt, even though Dr Wong, a fellow at the Penang Institute, had expected prices to go up soon after the government began rolling back subsidies last September.

"Businesses will pass on the cost, or just jump on the bandwagon, especially if they think that costs will go up further this year," he said, adding that this was only the beginning.

From electricity and petrol to food, many Malaysians complain that the cost of living is steadily climbing. Economists warn that inflation - now under 3 per cent - will be a serious challenge this year as the subsidy rationalisation programme hits the pocket.

From hawker stalls in Penang to coffee shops in Petaling Jaya, Selangor, businesses have raised prices by about 20 per cent, The Star reported yesterday.

With public unhappiness mounting, thousands of Malaysians wearing black swarmed Independence Square on New Year's Eve to protest against price hikes that ensued from subsidy cuts.

Fuel subsidies were first to be cut, resulting in petrol prices rising from RM1.90 to RM2.10 a litre last September. This was followed by the lifting of subsidies for sugar, now at RM2.80 a kg from RM2.50 last October.

Electricity tariffs are up by between 14.9 and 16.9 per cent, effective Jan 1. There is speculation that toll rates on 13 highways could soon go up. As a result, school bus operators have demanded a 40 per cent rise in fares. Even the prices of ice and stationery have reportedly risen.

"The pre-election party is over. It's time to face the post- election hangover in 2014," said Dr Chua Hak Bin, ASEAN economist at the Singapore-based Bank of America Merrill Lynch.

The government is under pressure to cut spending as public debt is bumping up against its self-imposed ceiling of 55 per cent of gross domestic product. Ratings agencies have threatened rating downgrades if the level is breached.

Dr Chua said another fuel price hike is likely if Prime Minister Najib Razak is to stick to his target of slashing subsidies by 15 per cent. He forecasts inflation could rise to 3.6 per cent this year and 4.5 per cent next year, from 1.2 per cent in December 2012 and 2.8 per cent last October.

Subsidy cuts, and the impending goods and services tax next year, will "keep inflation on the boil", he said.

Datuk Seri Najib announced measures last week to cut public expenditure but the opposition is demanding more. Democratic Action Party MP Tony Pua said the government should review toll concessions and dismantle monopolies in the import of basic goods like rice, sugar and petrol.

Meanwhile, Mr Edy Noor Reduan, spokesman for the Young Malaysians Solidarity Movement, one of the organisers of the New Year's Eve protest, said there are plans for another on May 1.

He said the police had not contacted him or anyone else despite reports that they were looking for those involved in the rally.

Kuala Lumpur police chief Mohmad Salleh told The New Straits Times yesterday that protesters had barged through police barricades and used water bottles and cans as weapons.

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