Thursday, July 15, 2010

More running, more dieting (less oil, less sugar)

At the time of writing, by tomorrow, we will have to deal with increasing petrol, diesel and sugar prices. Something brief for us to ponder:

1. At an average of 80 litres used per week, the increase is worth RM 4. That is less than a pack of cigarettes.

2. During 2008, when Pak Lah "wisely" increased petrol prices by a whopping 30-40 cents, the roads leading to work (I was with Maxis then) was for most part, relatively smooth. Don't expect the same this time.

3. The real impact will be suffered in the economic cycle involving transportation and manufacturing, which finally will be transferred to consumers. I read somewhere that 75% of petrol consumption is for commercial usage, either in the manufacturing process or transportation.

4. For example, my slimming product, coffee and other consumables has sugar as one of its ingredients. The increase in the price of sugar will be transferred from my contract manufacturer to me. This is not inclusive of the expected revision in transportation charges from the manufacturer to my company.

5. On our part, we then have to adjust our internal cost of transportation. Then we need to factor in the increase in cost to transport the finished goods to the end consumer.

6. Maybe we'll increase our prices, or maybe we won't. That is a business decision that has to be made by almost every company, regardless whether it involves direct product to consumers or others.

7. Even construction, cleaning, even services, would be affected.

8. The normal solution is to transfer the cost to the consumer - increase in the price of your coffee, increase in the price of magazine subscription...

9. So at the pumps, you may be losing only RM 4 a week, but the real cost is being felt whenever you buy some goods, from the frappucino at Starbucks to the raw fish at the local wet market.

10. I am all for a reduction of subsidies, with the savings be better utilized for nation-building (whereby my following write-ups on improving the economy would cover).

11. I too can accept the increase in the prices of consumer goods. But I find it difficult to stomach that prices keep going up, but it never comes down once the subsidy kicks back again.

12. Government shouldn't give and take back subsidies. I think Najib's administration is gradually moving forward with removal of subsidies without putting it back in.

13. Unfortunately, I have doubt that the money saved would be maximized for the benefit of the rakyat - not as long as there exist strong structural defects that allows leakages...



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