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M'sian traders scorn govt's order to cut prices as ringgit dives
PUTRAJAYA'S move to pressure traders and restaurant operators to reduce prices of their goods and food and beverages on the back of cheaper fuel appears futile as the ringgit tumbled to 4.313 to the US dollar on Monday, prompting further anxiety among Malaysians.
The currency's performance at the start of the week - whether a result of depressed global oil prices, the expectations of a US interest-rate hike following the latest positive jobs data in the United States, Malaysia's declining international reserves, or a combination of factors - brought more gloom to a country shrouded in haze in many areas.
But while the haze - a perennial problem because of illegal land clearing in Indonesia - is expected to clear in a few weeks, many expect the ringgit weakness to continue well into 2016.
The region's worst-performing currency has lost a whopping 35 per cent against the greenback and slightly over a fifth against the Singapore dollar over the past 12 months.
Given its 3 per cent depreciation against the US dollar in the past seven days, an order last week by the Ministry of Domestic Trade, Co-operatives and Consumerism to traders and eateries to lower prices following a 10 sen drop in RON95 petrol to RM1.95 a litre on Sept 1 is unlikely to cut the mustard. (Fuel prices are determined by a managed float and could change on Oct 1).
In any event, businesses have scorned the order as unreasonable.
Yeah Kim Leng, dean of Malaysia University of Science & Technology's School of Business, agrees. "It will be difficult to enforce. Traders also face a rise in imported costs and the ministry will have to be product-specific about local and imported goods. There are so many variables in business that it is better to let market forces dictate prices rather than impose short-term measures."
Operators interviewed by local daily The Star pointed out the cost of nearly everything else - raw materials, rent, labour, spare parts - had increased and unless their suppliers reduce prices, it would be tough to expect them to do so.
Scoffing at the short deadline, Malaysia-Singapore Coffee Shop Proprie-tors' Association president Ho Su Mong maintained association members could not afford to lower prices because of overheads and the 6 per cent goods and services tax. "We cannot work magic. This is not the way to do things."
Putrajaya has said the feeble ringgit is a result of external factors including China's recent decision to depreciate the yuan to boost exports, and that these developments are beyond its control.
Analysts claim another big reason is the widening trust deficit in Prime Minister Najib Razak, now embroiled in a financial scandal involving purported donations amounting to nearly US$700 million which were deposited into his personal bank accounts in Ambank in 2013 ahead of the 13th general election.
Also the finance minister, Mr Najib contends an Arab donor wanted his party Umno and Barisan Nasional coalition government to continue to rule. Many Malaysians believe the funds are linked to debt-laden state-owned 1MDB which owes an astounding RM42 billion (S$13.8 billion) to its creditors.
Also the chairman of 1MDB's advisory panel, Mr Najib has refused to step down pending investigations into the strategic development company or the controversial deposits and using his considerable executive powers has stymied the probes.
Instead, he has tasked a special economic committee with providing answers to the economic and ringgit predicament.
The recommendations are scheduled to be announced when the 2016 budget is tabled on Oct 23. Few Malaysians dare to consider if the ringgit may be charting new 17-year lows by then.