Malaysian minister says price controls a joke
Wednesday, 26 March 2008

Malaysia’s price-control system which is designed to suppress the cost of essential goods is “a joke”, the new domestic trade minister said according to a report, reports AFP.

Anger over rising prices of food and fuel were a key issue in general elections earlier this month, and one of the factors credited with the ruling coalition’s worst performance in its half-century history.

In a bid to win back support, Shahrir Abdul Samad—a maverick in the United Malays National Organisation which leads the coalition—was installed as domestic trade and consumer affairs minister last week.

Shahrir signalled a sweeping review of the expensive system of subsidies and price controls which he said were unrealistic and no longer working. “The whole price control mechanism is a joke,” he said in an interview with the New Straits Times.

“If you have price controls just for PR (public relations) purposes, it does not make the government look good, especially when you have price controls but can’t control the price.” Shahrir said that for example, the government had set a price ceiling on steel bars 600-700 ringgit (190-220 dollars) below market price.

“But contractors can’t buy them at these prices. So what they do is inflate the price with other costs. It becomes a joke and the government gets laughed at.”

Malaysia heavily subsidises petrol, diesel and gas as well as 21 food items including milk, salt, wheat flour and rice, but the controls have triggered severe shortages, as well as smuggling across its porous borders and long coastline.

The government has already indicated it will have to radically review fuel subsidies which are expected to cost it 35 billion ringgit (10.7 billion dollars) this year if oil prices hover around 100 dollars per barrel.

Shahrir did not specify exactly how he would address the problems, but said he would not be “constrained by practices of the past”. “Prices go up and yet Malaysian wages don’t. So these are all issues the government has to settle,” he said.

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