Tuesday, June 03, 2008
Shahrir the Market Alarmist
At this moment, Shahrir Samad understandably is in the most unenviable position in the country, more than the Prime Minister. While one should sympathsie with Shahrir, he seems to be in the habit of shooting his mouth and causing endless panic.
The manner he is handling the situation of rising prices is noticably amateurish that it begs the question: Does he understand economics?
Poor Handling of Prices
The lackadaisical manner in handling of rising prices during the first term of Abdullah Ahmad Badawi has made the position of Minister of Domestic Trade and Consumer Affair a challenging post.
In the beginning, Abdullah was stubborn to not heed the warning by Dr Mahathir to strengthen the Ringgit to 3.60 from 3.80. Instead he did the stupid thing of succumbing to IMF to float the Ringgit, thus reducing one useful tool in managing the non production side of the economy.
Then came the denial bit where he rather speak of orang kampung benefitting from the rising commodity prices than bothering about the poor economic growth, rising price and non reflective CPI figures.
Just few months before the General Election, beleive dduring budget time, Abdullah sounded off alarm about rising cost of subsidy.
In the last oil hike, Government raise oil prices in an abrupt and big rise of 30 sen to the usual 5 sen or 10 sen that it stunt and nearly crippled certain industries.
Does he understand then that there was a boom in the global commodity cycle? While some producers benefit, consumer and Government suffer. That ignorance and denial caused BN the General Election and not judiciary, ACA or police issues.
Mouthful of Blunder
After General Election, that role is now given to Dato Shahrir, a veteran politician, who is vocal and eloquent when speaking in interviews and with the press. He was recently found out to be very quiet in closed meetings.
On two instances, Shahrir who graduated in Economics, is not convincing in his ability of understanding the micro-issues and made irresponsible remarks that caused panic in the market.
The first instance came about, if I can recall is about the time Tun made his speech in Kajang. Shahrir made a remark that we are facing a food shortage, specifically rice. This caused quite an alarm which saw rice prices practically double.
He reacted by saying the Government will ensure availability and develop rice stockpile fro food security.
Sources from Bernas revealed that there are sufficient rice in the country and the shortage announced by Shahrir is not true. The Chinese rice miller were holding back from milling padi by legally stocking up on padi.
These talk of food security is nothing more than a publci relation exercsie to justify the issue of another rice import license.
The second instance is the present comment in the midst of flip flop by the Prime Minister on his position on a different oil price for foreigners. Noticably he reverse the position for differential pricing for Singaporeans in Johor.
His remark that price will probably be hicked in August will only cause panic in the market. Prices rise from anticipation will be felt in all goods and services immediately adn exercebate the inflationary pressure. Contracts will be renegotiated and end product cost will rise based on this anticipation before the actual price rise.
If it is not handled well, inflationary pressure from anticipation will continue after the actual price hike.
Basic economics tells that prices are determined by the intersection of supply and demand curve. Inflation is casued by the shifting of the curve by either of two process - demand pull or supply push. Then there is the speculative and anticipation factor.
Shahrir remarks on two occasion has actually alert this alarm bell. With producers and suppliers quite aware of the international market price, it only takes a public remark to provide the excuse to raise prices.
Price rise announcment could have been done as surprise to avoid the anticipation of the market. In order to do that, systems, processes and procedures are already well thought out and in place for execution.
At times, talking and discussion can soften the blow. The various parties involved - consumers groups, producers, suppliers, raw material producers, etc - are invited for a discusion to seek the most amicable solution with the least of surprise.
But not in the current manner to announce a policy to stop selling at subsidised price to foreigner and then reverse it within days. The last a Government should do is lose public and business community confidence. Noticably the reversal involves Singaporean vehicles in Johor Baru as though we are pleasing the Singaporeans.
Now it is crstal that this Tiung can aptly be described in colloquil Malay as actually "cakap saja banyak, kerja tak tahu". Is his ability negated by the dictation from a bunch of wet beind their ears kids?
These kids are pro-total free market and no interventionist policies that is in contravention with our political economic priority to maintain stable prices.
One wonder what has happenned to Shahrir, used to be one bright star in politics. Is there anyone competent in Abdullah's cabinet now? Or is it a case of every capable politician or professional turn half past six when working for Abdullah?
The apologist will say kasi can and blame the past without realising how much destruction Abdullah's incompetence is ruining this country and it is really his poor or lack of management ability that is the core problem.
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