Brace Yourself for Hard Times Ahead

Thursday, 3 July 2008

Brace Yourself for Hard Times Ahead

Shop Wisely to Make Your Ringgit Stretch

Insulated from the harsh reality of world economics since Merdeka, many Malaysians have enjoyed low prices of fuel and goods for as long as we can remember. However, last June marked the end (or the beginning)of an economic tsunami sweeping across the nation, staring with the rise in the price of petrol. SJECHO meets up with Dato' Ameer Ali Mydin, the managing director of Mydin Mohamed Holdings Bhd, to get a businessman's perspective of what to make of the rise in the cost of things and how we can cost cut to still sail through. The ever smiling glowing faced Ameer, gave a glove's off perspective.

“Malaysia's economy is a protected economy. Over all these years, prices in the country have always been very low and this has always been possible because the government has never taken the bull by the horns and make people go to the market economy.”

“However, no economy will survive if it always lives on subsidies. The withdrawal of subsidies was in the books even before the General Elections (in March) and the government at that point was confident of getting the mandate to push for reforms,” Dato' Ameer said.

The recent reduction of subsidy for petrol by the government can be viewed from two perspectives according to him.

“It (the government) realised it cannot go on subsiding. It has to bite the bullet and face the music and move on with it.

“The government acted the way it did to teach the people a lesson. By voting for the Opposition the government has become weak. It is now setting the pace to see how the five Opposition States can survive,” he added.

Ameer expressed his hope that the latter perspective was not the way the Government was thinking.

“As a businessman, I feel that it is better late than never that the Government has finally woken up and done something about it. It has realised the subsidies cannot go on and a bulk of the funds have gone to subsidies.”

“The faster the Government weans the economy of subsidies, the better it is for the economy,” he said.

However, increasing fuel prices and at the same time giving rebates and introducing measures like reducing road tax worries Ameer.

“What message is the Government giving to Malaysians and foreign investors?”

“To the foreign investors, it may appear as if the Government makes decisions and then turns back. Malaysians on the other hand will have the impression that when they make noise, they get something in return,” he added.

Ameer questions whether the Government is passing the right message to the people and being firm on their decisions.

“Don't backtrack. We see a lot of backtracking. Increasing the price of petrol is the right move because for everything the Government subsidises, there will be leakages.”

“How long are we going to play this Mickey Mouse game of subsidy and allowing leakages?” he asked.

“People will be able to manage even if the Government removes all subsidies. We have a population of 28mil people. Do we have one million people who are very poor?”

“If we were to give RM500 monthly to these one million people, it would only cost the Government RM6bil annually. That amount is nothing,” he said, adding that the move would free the economy and provide a safety net for the poor.

Ameer said by giving out the RM6bil, one million people would benefit and subsequently that same amount of money would be pumped back into the economy.

“Who are these one million people and can we identify them?” he asked.

The business community, according to Ameer worry about how the Government made decisions but what happens was not as it should be.

“Government departments have been asked to cut cost. What cost are they cutting?”

“Does having no tea during meetings help in cutting cost? Honestly, it doesn't help the economy when you do so, as the man who provides the catering would have no business then,” he said, suggesting instead that the Government should pump more funds into the economy.

Reducing spending by reducing the use of electricity and water in Government departments and using public transport is okay according to Ameer.

“In times like this, the Malaysian business depends a lot on Government spending. Make policies which are more business friendly. Stop coming up with knee jerk reactions and hope that people will be honest and police themselves.”

“I personally don't agree with the percentage of the price increase in petrol. The Government should have given people a time frame, for example, two years, to gradually remove subsidies on fuel, rice, flour, sugar and many more items,” he said, adding that such a move should be spaced out, allowing people to adjust to it.

Consumer & Rising Costs

With the rising cost of living, everyone has to become smart consumers.

“Unfortunately, Malaysian consumers are the most gullible. Many believe the advertisements they see in the media.”

“If you see somebody putting advertisements in the media 2 to 3 times a week, who do you think pays for them? All the advertisements are paid by the suppliers and this in turn makes the goods supplied more expensive,” he said, adding that this would in turn pass on to consumers.

Ameer said many consumers were not disciplined enough to check where they could find the cheapest.

“On average, you buy about 50 items weekly. But how many in that is what's being promoted through advertisements?”

“For Mydin, we advertise once a month to remind people we are around. The savings we make is translated to lower costs and transferred to consumers who come to our stores,” he said.

Generic brands according to him are the easiest for people to compare prices from one hypermarket to another.

Local brands are one of options to go for to reduce the cost of buying groceries, he said.

“There are a lot of good quality local products. They are much cheaper. “

“Another option is to buy wholesale. Buy in bulk. Take for example, if you were to buy colouring pencils. It is 20% cheaper if you buy in bulk than buying single items. You can save by buying wholesale,” he said to which he reminded the writer that Mydin was the only hypermarket that has a wholesale division.

And indeed Mydin has. On the top most floor of the Mydin Mall in USJ1, practically all items, from torchlights, detergents, stationery, household items and even office items can be bought in bulk at wholesale prices.

Ameer said Mydin's hypermarket was attracting more customers these days. Predominantly a hypermarket which had more non-Chinese customers in the past, Mydin, according to Ameer has captured about 30% of the Chinese market in Subang Jaya and USJ.

“The Chinese are the most price sensitive. The fact that we have about 30% of the Chinese customer base coming to our Mall says it all,” he said.