Galloping and persistent inflation makes a mockery of the 2nd Malaysia Plan

Speech by DAP Secretary-General and Member of Parliament for Bandar Melaka, Mr.Lim Kit Siang, at the first anniversary of DAP Kampung Simae Branch on 12/8/73 at 8pm.

Galloping and persistent inflation makes a mockery of Alliance Government’s second Malaysia Plan to restructure society and eliminate poverty in Malaysia

For more than a year, Malaysians have experienced the worst crisis of inflation in the history of the country. Inflation has in fact become major national problem today.

As a result of the unchecked, galloping and persistent rise in the prices of all goods, including essential and daily necessities, the value of the dollar in the hand of a consumer has shrunk considerably by 10 to 15 per cent.

In this situation, the people who are the worst hit are the poor, the low-income and the fixed-income; while the rich and affluent are hardly affected.

The galloping and persistent inflation in the country makes a mockery of the Second Malaysia Plan’s declared objective of restructuring society and abolishing poverty, for its direct consequence is to widen the gap between the haves and the have-nots. With low incomes, and rising cost of living, the poor, whether from the kampung, the new village, the estate or the urban slum, are even more unjustly and unequally placed than before the launching of the Second Malaysia Plan in 1971.

One abiding feature of the inflation crisis in Malaysia for over a year is the utter helplessness of the government to check the galloping inflation and the corresponding helplessness of the consumers and the consumers’ associations to bring down the prices.

Inflation is deplored by government leaders and Ministers by word but tolerated by inaction. In fact, if we look back on the Alliance record over the months, we will be struck by the fact of the Alliance government’s preoccupation to score political propaganda rather than to get down to the root of the problem.

The much-publicised measure enforcing price-tagging did not check the upward march of prices. In May this year, government leaders and Ministers found a scapegoat for the nation to blame the inflation on the shopkeepers. The public were exhorted to boycott shopkeepers who charged high prices, and the Deputy Minister for Trade and Industry, Inche Musa Hitam even spoke darkly about consumers getting ‘rough and tough’.

But as events have proved, the shopkeepers are a much maligned group of people, and although a few might have been guilty of hoarding and profiteering, the villains of the galloping inflation must be found elsewhere.

Last week, we were told by the Finance Minister, Tun Tan Siew Sin, that one of these villains was importers who made over 100% profits.

It is obvious that the Alliance government does not have an overall strategy to combat inflation, partly because the Alliance Government is not aware that inflation has become a major or national problem in Malaysia, as it is a party of the rich for the rich.

Unless the Alliance government seriously comes to grips with this problem by working out a national strategy to declare war on inflation, the Second Malaysia Plan’s objective to restructure society and abolish poverty will remain a paper dream.

The government should consider the various causes of inflation, and impose statutory control on prices, to ensure that the rakyat are not fleeced and held to ransom by avaricious monopolists and cartels through unconscionable price fixing.

The Alliance Government itself is one of the villains of the inflation. One of the causes of inflation is the government’s sales tax, excise duties, import quotas and high tariffs.

Taxation should serve not only to collect sufficient revenue, but even more important, to act as instrument to redistribute wealth in order to reduce social inequities. Unfortunately, the 5% Sales Tax, being a regressive indirect taxation, bears down harder on the poor than the rich. It also serves as a blank cheque for the manufacturers, wholesalers, importers to increase the prices of goods in multiple stages.

That Tun Tan Siew Sin’s 5% Sales Tax has a pernicious effect on consumer price stability has been admitted by no less a body as the Bank Negara itself. In this 1972 Annual Report released this year, the Bank Negara said there was a strong correlation between the imposition of the 5 percent Sale Tax and the noticeable rise in the consumer price index.

Causes of the inflationary situation were “because of raising revenue and the protection of domestic industries.”

The abolition of the 5% Sales Tax must therefore be one of the measures to combat inflation in the country if the Second Malaysia Plan is to benefit the poor of all races in the country.

Another area which the government can profitably look into to combat inflation is to slash public sector expenditures on projects of no or little economic value. The Senai International Airport, where tens of millions of dollars are being expended, is a classic example of government ‘white-elephants’. Another example is the thinly-disguised pleasure trips by govt.servants, State Assemblymen.

To sum up, therefore, the Alliance Government, in accordance with the declared objective of the Second Malaysia Plan to restructure society and abolish poverty, should declare national war on inflation and work out overall strategy which would include statutory control of prices, abolition of sales tax and other regressive forms of taxation, and the pruning of non-essential government expenditure.

Let the battle against inflation move from words to action.