Powering up the Global South

 

Collective strength: Tourists taking photos in front of the Temple of Heaven in Beijing. The strengthening of the foundation of Global South cooperation should focus on building consensus and promoting cultural and people-to-people exchanges. — Xinhua

Projections indicated that by 2030, three of the four largest economies in the world will be in the Global South, led by China, India and Indonesia, which can significantly alter the balance of power and influence in the near future.

ON Nov 13 to 15, 2024, I had the privilege of joining more than 100 international think tanks at the Second Global South Think Tanks Dialogue themed “Global South: Equality, Openness and Cooperation” held in Nanjing, China.

It was co-organised by the International Department of the Communist Party of China (CPC) Central Committee, CPC Jiangsu Provincial Committee and China Council for BRICS Think-tank Corp.

The dialogue was attended by more than 100 distinguished scholars, researchers, panellists and participants coming from five continents, whereby individual country’s representatives presented their views in four parallel plenary sessions.

The themes of the sessions were “Addressing Challenges Together to Safeguard Peace and Security”, “Pursuing Open Development to Build Synergy for Development, “Upholding Fairness and Justice to Improve Global Governance” and “Deepening Mutual Learning Among Civilisations for Common Progress”.

The dialogue in Nanjing concluded with the establishment of The Global South Think Tanks Alliance, co-founded by the Chinese Academy of Social Sciences, China Media Group, Tsinghua University, Fudan University, Renmin University of China, and more than 200 domestic and international think tanks and universities.

The alliance is committed towards promoting mutual understanding and learning, as well as sharing of knowledge and resources amongst the Global South countries toward building a better world.

It involves collaborating to conduct joint-research on common subjects, issues and challenges in the pursuit of modernisation process, while preserving the civilisation and interests of different ethnic groups.

In building the foundation of the Global South cooperation, the Think Tanks Alliance will enhance policy communication flows among the Global South, forging consensus building and engaging consultations, as well as promoting cultural and people-to-people exchanges and cooperation.

The Global South includes Africa, Latin America and the Caribbean, Asia (excluding Israel), and Oceania (excluding Australia and New Zealand).

Regardless of multiple definitions, the Global South is a formidable entity.

Projections indicated that by 2030, three of the four largest economies in the world will be in the Global South, led by China, India and Indonesia, which can significantly alter the balance of power and influence in the near future.

With the global power balance shifting from bipolarity to multipolarity order, the rise of the Global South plays a pivotal role in the global economy, international relations and the formation of a multipolar order.

Since 1990s, the economies of the Global South have consistently outpaced the gross domestic product (GDP) growth of the Global North.

Notably, Global South economies make up 85% of the world’s population and their contributions to global GDP has expanded rapidly from 19% in 1990 to 42% in 2022.

The Global South lower and middle-income countries are experiencing a “youth bulge” and can reap a demographic dividend if their economies grow and income levels improve.

The young adults have a median age of almost 25, which is younger than the global average of 30.

Many countries in the Global South are endowed with abundant natural resources such as fossil fuels, minerals and agricultural products, while some countries have high production in lithium, nickel, cobalt, manganese and graphite that are required for the global green energy transition.

Setting mostly natural resource-rich South countries on a path of sustainable and inclusive growth will depend on their continued investments in education, healthcare, human and physical capital, and building up institutions, as well as seeking technical and resources support from the international institutions.

Greater efforts are needed to expand access to better education and learning outcomes in enhancing the people skills and improve employability.

Global South countries must implement pragmatic policies and impactful socio-economic programmes to support the pace of economic growth that will create better income employment, improve living standards, reduce the level of poverty, and help to narrow the growth divergence between the developed and less developed countries.

Governments need to enhance the investment climate, making business environment more friendly and conducive, as well as de-risk their economies to attract and boost both domestic and foreign investment.

What roles can the developed South countries play?

Developed countries should help developing and underdeveloped countries to expand their economies through policy advice, capacity-building activities, and concessional financial and resources support.

Assistance should be targeted at enhancing national trade policies and regulations, developing infrastructure, and building technology capacity, digitalisation, new knowledge and manpower development.

> SEE NEXT PAGE

China’s Belt and Road Initiative represents a key pillar of the global community’s shared future, promoting higher- quality development through the financing of public infrastructure and transportation projects to improve connectivity, facilitate trade and people-people movement, and opening up and sharing China’s development opportunities with the rest of the world.

China International Import Expo, which has been running for eight consecutive years, provides strong evidence of China’s commitment to opening up to the world.

China also offers certain socio-economic initiatives as part of its Shanghai Cooperation Organisation’s outreach.

The availability of financing at reasonable terms for the development of Global South countries is essential.

These include innovative financing solutions and new funding sources, as well as currency swaps.

China has emerged as the new major financier of the Global South economies.

The New Development Bank (NDB), formerly referred to as the BRICS Development Bank, is a multilateral development bank established by the BRICS states (Brazil, Russia, India, China and South Africa).

The NBD will support public or private projects through loans, guarantees, equity participation and other financial instruments.

Additionally, Global South countries are encouraged to use their local currencies for the settlement of trade among member states.

While the deepening of economic and financial integration via cross-border trade and financial flows can help the Global South countries to integrate into the world economy, the world free-trade international architecture is experiencing unsustainable inertia, blamed on an aggressive and protectionist trade agenda by some advanced economies.

The biggest disappointment is the dysfunction of the World Trade Organisation, which is supposed to promote free trade deal, but is unable to manage the disruptive trade and technology war between China and the United States.

Additionally, it failed to push forward its agenda to address current global challenges such as climate change, unfair trade practices, inequality, and underdevelopment.

As a result, Global South countries often face unfavourable trade conditionas and unbalanced investment frameworks due to the protectionist policies of advanced economies.

Hence, key areas for cooperation should include reinforcing the multilateral trading system, restructuring development finance and global financial architecture, and ensuring the availability of climate mitigation financin.

Amid economic influences and geopolitical shifts, the Global South is on the march with enhanced political visibility.

Cooperation among peer countries has helped the Global South to have a “louder voice” and member states are increasingly asserting themselves on the global stage.

For example, China brokered a surprise detente between Iran and Saudi Arabia in March 2023.

Both China and Brazil have also made efforts to unite developing countries behind a plan to end the war in Ukraine.

With the vast size of this bloc, the united Global South can be a formidable force capable of challenging the profound changes in the current international political and economic systems to better serve the development needs of its member states.

The Global South countries’ economic growth and investment prospects look promising in the years ahead.

The ability of the bloc members to advocate shared common issues that benefit their interests, regardless of geographical boundaries, and choose its own path will solidify its significance, while navigating the geopolitically-driven fragmentation of trade and investment flows.

Going forward, as more Global South countries join BRICS as full members, partner countries, or in the “BRICS Plus” format, the collective strength of the Global South can be harnessed to build together a better community with a shared future for mankind.

Hence, building trustworthy relationships, friendships, and communities, as well as international people-to-people exchanges and cooperation, hold the key to maintaining sound relations among member states.

The consolidation of the foundation of Global South cooperation must give full play to the role of building consensus and carrying out various forms of cultural and people-to-people exchanges.

By offering rational analysis to address misinterpretations and misjudgments, and deepening mutual trust and learning in a professional way, the Global South Think Tanks Alliance will help people around the world form a more comprehensive and objective understanding of the Global South cooperation.

In conclusion, the diversity of the Global South countries will become a formidable force in the shaping of the international order, which has been dominated by the Global North.

An empowered Global South is inevitable, and its rise will foster unity among diverse member countries, demanding a more equitable world order.

Lee Heng Guie is the executive director of the Socio-Economic Research Centre. The views expressed here are the writer’s own.

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Competitiveness ranking: An objective perspective

MALAYSIA’S competitiveness ranking dropped by seven notches to 34 in 2024, from 27 in 2023.

It was the worst ranking on record as the lowest score was 32 in 2022 based on the available data since 1997.

The country’s ranking also slipped four rungs to 10 out of 14 countries in the Asia-Pacific region, making it the first time that Malaysia had ranked lower than Thailand (25 from 30 in 2023) and Indonesia (27 from 34 in 2023).

We must view the slip rationally and identify areas for improvement in order to undertake necessary actions for improvement. 

Prime Minister Datuk Seri Anwar Ibrahim had remarked: “We take an open approach and if there is constructive criticism to improve, we will do it. We will not take a too defensive stand if there are weaknesses that could be improved.”

From 1997 to 2024, it was observed that our country’s ranking had declined 14 times, went up 13 times while one time remained unchanged.

On a long-term trend analysis, Malaysia’s competitiveness ranking had been slipping since 2010

Our ranking had dropped by nine notches to 28 in 1999, 10 notches to 26 in 2005, six notches to 16 in 2011, 12 notches over four years to 24 in 2017.

In 2020, the ranking had declined by five notches to 27, and dropped by seven notches to 32 in 2022 from 25 in 2021 (see chart).

The highest ranking on record was 10 in 2010. Since then, it was hovering between 12 and 19 from 2012 to 2016, before slipping lower to between 22 and 34 from 2017 to 2024.

The government has eight years to achieve top 12 in the Global Competitiveness Index, one of the seven key performance indicators targeted under the Madani Economy Framework.

We have to analyse objectively the factors and components attributing to the competitiveness trends, and identify areas for improvement. Policymakers must use the findings of this report to benchmark progress, stimulate policy debate and identify potential challenges.

On the competitiveness landscape, the ranking for “government efficiency” dropped by four notches to 33 in 2024 from 29 in 2023, reflecting largely a drop in business legislation (to 50 in 2024 from 45 in 2023), societal framework (to 42 in 2024 from 39 in 2023) and institutional framework (31 in 2024 versus 29 in 2023).

The ranking for “business efficiency” dropped by eight notches to 40 in 2024 from 32 in 2023.

This was reflected in productivity and efficiency (53 in 2024 versus 36 in 2023), management practices (42 in 2024 versus 31 in 2023), attitudes and values (40 in 2024 versus 34 in 2023), Labour market (34 in 2024 versus 30 in 2023).

While the “infrastructure” ranking was maintained at 35 in 2024, the technological infrastructure slipped to 29 in 2024 (2023:16), while the ranking was still low for scientific infrastructure, health and environment, and education.

As for the “economic performance” competitiveness, it was ranked eight (seven in 2023), mainly due to a sharp drop in domestic economy to 35 in 2024 from 16 in 2023, as real gross domestic product growth slowed to 3.6% in 2023 (8.7% in 2022) on a normalisation of domestic demand post the Covid-19 pandemic as well as exports contraction.

We believe that the ranking for the domestic economy will improve in 2024-2025 as the economy will strengthen to grow by 4.5% to 5.5% over the medium-term, underpinned by continued expansion of domestic demand and stronger momentum of exports recovery.

However, we caution that domestic economic growth outlook remains subject to downside risks, mainly from the worsening of geopolitical tensions, stubborn inflation, as well as higher and longer interest rate in the US economy causing more financial volatility.

On the domestic front, any delay and execution risk in the implementation of approved investment projects and fiscal projects as well as slower consumer spending inflicted by the subsidy rationalisation’s cost adjustment would temper domestic economic growth.

Malaysia remains a sweet spot to investors.

The respondents of the Executive Opinion Survey have ranked the following top five key attractiveness factors for the economy. They were business-friendly environment (61.8% of total respondents), followed by cost competitiveness (58.8%), reliable infrastructure (52.9%), skilled workforce (44.1%), and dynamism of the economy (39.2%).

By fostering a more business-friendly environment and thriving ecosystem, Malaysia can unlock the full potential of its investment opportunities, entrepreneurial spirit and innovative capabilities. Both public and private sectors have to step up efforts in reskilling and upskilling the workforce.

The Malaysia Economy Madani Framework, New Industrial Master Plan 2030 and National Energy Transition Roadmap has laid the direction, initiatives and policy thrusts to transform the economy and manufacturing industries into high technology as well as green sustainability.

Malaysia has embarked on a series of incremental reforms to address competitiveness issues related to subsidies, transparency in public procurement, over-reliance on foreign workers, technological capacities as well as skills development.

Nevertheless, the following bottom five indicators have the lowest percentage of respondents are effective labour relations (17.6%), competitive tax regime (17.6%), competency of government (16.7%), strong research and development culture (15.7%), and quality of corporate governance (11.8%).

The taskforce comprising of representatives from public and private sectors not only need to sustain the improvements or even raise their ranking higher but also work on

improving the components and factors that contributing to a decline in competitiveness ranking.

The government, through a Special Task Force to Facilitate Business or Pemudah platform, is drafting a document entitled “New Deal For Business” to boost business confidence, stimulate economic growth as well as drive national digital transformation.

The need for a new look at the new deal for business. In an increasingly complex economic and business environment, we have to redouble our efforts to reduce business paint points, address structural impediments and situational challenges as well as undertake reforms towards dealing with bureaucratic red tape, inefficient and outdated regulations and undue regulatory burden faced by investors and businesses when doing business in Malaysia.

The pain points for businesses amongst others are problems of lengthy processes for registration, inconsistency application processes across states and lengthy approval time for incentives, the difficulty in complying with regulations, complexity in getting a construction permit, layering at various agencies and departments, burden of providing the same information multiple times as well as outdated rules, regulations and laws.

There are also funds and incentives support as well as financial related pain points such as tedious application procedures and processing, resulting in slow disbursement of fund and low utilisation rate.

Delivering a new deal for business must go beyond ‘business as usual” and “government knows all”, requiring a long-term commitment to maintain a cordial and clean relationship between government-business to create a conducive ecosystem where business feels empowered to invest, to innovate and to create good jobs.

Priority actions are as follows:

> “Act, Enable, Influence” framework, which offers a comprehensive approach to outline a defined sustainable and meaningful relationship between government

and businesses with a culture of collaboration to achieve common goals to grow our economy. The Government is not merely an actor implementing consistent

and simpler rules and regulations, but also listen to businesses and allow the right business voices’ active participation in policy development and shaping the

operating environment.

> Maintaining an effective open, inclusive and honest engagement between business and government (Federal, state and local authorities) with innovative and critical thinking can provide certainty and consistency for businesses as well as break down barriers to efficiency and high productivity.

> Developing new ways to oversee and assess the impact of regulations on business, including a full review of existing and new government’s policies and regulations are developed to ensure businesses are consulted at all stages.

> Three Rs of effective REGULATORY REFORMS: First, RETAIN regulations that support the basic rules of a market economy. Second, REPLACE regulations that

have legitimate aims but also have harmful unintended consequences. Third, REPEAL regulations that are motivated primarily by the manipulation of public

policy for unproductive rent-seeking.

> PEMUDAH to monitor and assess the competitiveness performance of Federal, state and local authorities in reforming processes and regulations for making them more efficient, accessible and simple as well as to avoid costly regulations for businesses and investors. Focus on regulating the exercise of power to constantly streamline administration and delegate power, improve regulation, and upgrade services.

> Provide a central dashboard as policy tool to monitor and analyse the performance of government websites and digital services (e.g. tracking website traffic, automated reports with key metrics to inform the progress of KPI, benchmark performance compared to other government websites).

By Lee Heng Guie who is Socio-Economic Research Centre executive director. The views expressed here are the writer’s own.

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Sack Anyone Who Doesn’t Perform

Sack anyone who doesn’t perform – PM and other ministers should learn from Tiong

Madani economy for a better Malaysia

People walking past a mural depicting the faces of Malaysian children at Jalan Raja Chulan, Kuala Lumpur. — AZHAR MAHFOF/The Star\

THERE are numerous structural weaknesses, challenges and issues hindering Malaysia’s current and future growth trajectory.

These include a complexity of business regulations and investment climate; a lack of private investment dynamism; slower productivity growth and capital efficiency; a low level of technology adoption, lack of innovation and technological advancement; shortage of talent and skilled manpower; high dependency on low-skilled foreign workers; corruption; income inequality and regional growth disparity.

Pressures from external sources are getting more complex and intensified on the aspects of competitiveness, geo-economic complexity, economic security threat as well as the disruption of environmental and climate change.

The state of the nation needs a fundamental reset to cope with external shocks and seize new opportunities. It is no longer a choice but a must take fundamental re-orientation.

The “Madani Economy: Empowering the People” framework navigates our desired economic development path (mission, execution and targets) over a 10-year period to rebuild a Better Malaysia that is sustainable, competitive and resilient.

The re-engineering of Malaysia will be anchored on Madani values – sustainability, care and compassion, respect, innovation, prosperity and trust. The seven targets to be achieved over a 10-year period are:

> Top 30 largest economy (currently at 37),

> Top 12 in global competitiveness (currently at 27),

> Top 25 on the Human Development Index (currently at 62),

> Increase labour share of income to 40% (currently at 32.4%),

> Improve Malaysia’s position in the Corruption Perception Index to Top 25 (currently at 61),

> Towards fiscal sustainability, targeting deficit of 3%, or better (currently at minus 5.6% of gross domestic product or GDP in 2022), and

> Increase female labour force participation rate to 60% (currently at 55.5%).

The Madani Economy framework offers clarity on what we aim to achieve; what are the broad strategies and enablers to get there from where we are now.

It consists of two pillars:

> “Raise the ceiling” – which is aimed at restructuring and elevating the economy through greater regionalisation and enhancing competitiveness, driving foreign direct investment (FDI) and domestic direct investment (DDI), digitalisation, sustainable green investment (climate resilience, renewable energy, electric vehicles and food security) as well as moving up the value chain, and

> “Raise the Floor” – ensuring inclusive growth, quality jobs and higher wages and equality of opportunities for all the vulnerable households regardless of race and geographical location.

The narrative serves a framework for current and future actions. It is a call to action to move the agenda forward; to address a broad spectrum of critical issues that we collectively face; and aiming to shed light on what future we face, what future do we want and what must be done to get there.

The initiatives and strategies for addressing the structural problems must be formulated in a coherent way, providing a mapping of macroeconomic policies and constructive policy proposals on the “no finishing line” transformations agenda, and the reshaping of the Malaysian economy is a continuous process.

We know what went wrong and what needs to change. We have to endure the painful transition costs and adjustments when making radical reforms and overhauling the system.

The consideration of our development, economic and social priorities require new systemic changes, reforms of state intervention to facilitate private sector’s growth dynamism, more radical welfare reforms and well-being policies, competitive and high-quality and durable taxation measures and rising awareness of climate change, ecosystem degradation and pollution destroying the environment.

Towards this end, public sector and fiscal reforms are urgently needed to rebuild the fiscal buffers through broadening a narrow revenue base (tax revenue at 12% of total GDP), re-prioritisation of non-critical expenditures, containing high public debt (more than 60% of GDP) and targeted subsidy rationalisation.

We need strong fiscal resources and effective administration capacity. Good fiscal governance is needed to plug leakages, strengthen public delivery efficiency with enhanced tracking of fiscal programmes and spending.

Political rhetoric, including populist rhetoric, must not be deviating from realism. The government needs to carefully weigh on the fiscal budget deficit and ballooning debt sustainability when considering the populist measures as fiscally unsustainable measures can undermine investors’ confidence in the soundness of managing the country’s public finance.

The rollout of the National Energy Transition Roadmap (Part 1) has identified 10 flagship catalyst projects and initiatives (an estimated total investment of more than RM25bil and 23,000 job opportunities) to accelerate the pace of the energy transition.

The New Industrial Master Plan 2030 will map out a comprehensive industrial direction as well as strategies with the aim of positioning Malaysia for new catalytic sectors and industries.

It is a mission-based approach with identified mission-based projects to drive the manufacturing industry transformation in four ways, that is by advancing economic complexity, tech-up for a digitally vibrant nation, pushing for net-zero target, and safeguarding economic security and inclusivity.

While we have the elements (diversity strengths, strategically located in Asia, and diversified economic sectors with strong industrial base) to build on to make Malaysia great again based on a whole of nation approach, strong political conviction is needed and all stakeholders must be committed towards making a “total national reset” to secure a better future for Malaysia.

If we continue with “business as usual” and implement half-baked reforms, Malaysia will continue to regress and achieve sub-par economic growth, and continue to lag behind her regional peers.

Can the country rise to these challenges and restore its economic vibrancy?

Radical changes are needed for transformations to be a competitive nation, and to deliver more just, equitable, sustainable and resilient futures.

This requires fundamental cognitive, behavioural and mindset shifts, including rethinking the role of state, rethinking growth dimension, rethinking resources efficiency, rethinking the commons and rethinking as well as upholding justice and ensuring equitable.

Attempts to promote reforms are politically hazardous, especially when the potential losers are politically influential.

Our observations showed that some political interests often override economic consideration, and any push for economic and market reforms will necessarily have to come from within.

The government must regain credibility and trust of our people, businesses and investors when it comes to economic agenda matters to Malaysians.

These include building a sustainable and resilient economy, fixing the middle-income trap, raising the households’ income, reskilling our manpower for future-proof, providing quality and affordable core services (housing, healthcare, education), as well as making our community safer, inclusive and equitable for all Malaysians regardless of race, religion and geographical location.

Lee Heng Guie is Socio-Economic Research Centre executive director. The views expressed here are the writer’s own.

by Lee Heng Guie

Writer

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SST - for better or worse ?

What is Sales & Service Tax (SST) in Malaysia? - SST Malaysia

Today, the Sales and Service Tax (SST) makes a comeback on our tax radar screen to replace the three years and two months old Goods and Services Tax (GST), which was implemented on April 1, 2015.

The abolition of the GST and replaced with SST is an election promise of the Pakatan Harapan manifesto.

It has been claimed that the GST is a regressive broad-based consumption tax that has burdened the low- and middle-income households amid the rising cost of living. The multi-stage tax levied on supply chains also caused cascading cost and price effects on goods and services. That said, the Finance Minister has acknowledged that the GST is an efficient and transparent tax.

Following the implementation of the SST, the Government will come to terms that the budget spending will have to be rationalised and realigned with the lower revenue collection from the SST to keep the lower budget deficit target on track.

The expected revenue collection from SST is RM21bil compared to an average of RM42.7bil per year in 2016-17 from GST.

During the period 2010-2014, the revenue collection from the SST, averaging RM14.8bil per year (the largest amount collected on record was RM17.2bil in 2014), of which 64% was contributed by the sales tax rate of 10% while the balance 36% from the service tax of 6%.

Faced with the revenue shortfall, the Government expects cost-savings, plugging of leakages, weeding out of corruption as well as the containment of the costs of projects would help to balance the financing gap between revenue and spending.

The sales tax rate (0%, 10% and 5% as well as a specific rate for petroleum) and service tax of 6% is imposed on consumers who use certain prescribed services. The taxable threshold for SST is set at annual revenue of RM500,000, the same threshold as GST, with the exception for eateries and restaurants at RM1.5mil.

As SST is levied only at a single stage of the supply chain, that is at the manufacturers or importers level and NOT at wholesalers, retailers and final consumers, it has cut off the number of registered tax persons and establishments from 476,023 companies under GST as of 15 July to an estimated 100,405 under SST.

The smaller number of registered establishments means no more compliance cost to about 85% of traders.

The distributive traders (wholesalers and retailers) will be hassle-free from cash flow problems, as they are no longer required to submit GST output tax while waiting to claim back the GST input tax. During GST, many traders imputed refunds into their pricing because of the delay in GST refunds. This was partly blamed for the cascading cost pass-through and price increases onto consumers.

For SST, 38% of the goods and services in the Consumer Price Index (CPI) basket are taxable compared to 60% under the GST.

It is estimated that up to RM70bil will be freed up to allow consumers to spend more.

Expanded scope

The proposed service tax regime has a narrower base (43.5% of services is taxable) compared to the GST (64.8% of services is taxable).

Medical insurance for individuals, service charges from hotel, clubs and restaurants as well as household’s electricity usage between 300kWh and 600kWh are not taxable. However, the scope of the new SST has been expanded compared to the previous SST. Among them are gaming, domestic flights (excluding rural air services), IT services, insurance and takaful for individuals, more telecommunication services and preparation of food and beverage services as well as electricity supply (household usage above 600kWh).

For hospitality services, the proposed service tax lowered the registration threshold of general restaurants (not attached with hotel) from an annual revenue of RM3mil under old service tax regime to RM1.5mil, resulting in expanded coverage of more restaurants.

Private hospital services will be excluded under the new SST regime.

How does SST affect consumers?

Technically speaking, the revenue shortfall of RM23bil between SST and GST is a form of “income transfer” from the Government to households and businesses. This is equivalent to tax cuts to support consumer spending.

Will it lead to higher consumer prices?

The contentious issue is will the SST burden households more than that of the GST? It must be noted that the cost of living not only encompasses prices paid for goods and services but also housing, transportation, medical and other living expenses.

The degree of sales tax impact would depend on the cost and margin (mark-up) of businesses along the supply chain before reaching end-consumers.

The coverage and scope of tax imposed also matter.

As the price paid by consumers is embedded in the selling price, this gives rise to psychology effect that sales tax is somewhat better off than GST.

The good news to consumers is that 38% of the goods and services in the Consumer Price Index (CPI) basket are taxable compared to the 60% under the GST.

Technically speaking, monthly headline inflation, as measured by the Consumer Price Index, is likely to show a flat growth or even declines in the months ahead.

It must be noted that consumers should compare prices before GST versus the three-month tax holiday (June-August).

Generally, consumers perceived that prices should either come down or remained unchanged as the sales tax is levied on manufacturers.

On average, some items (electrical appliances and big ticket items such as cars) would be costlier when compared to GST and some may come down (new items exempted from SST).

Nevertheless, we caution that consumers may experience some price increases, as prices generally did not come as much following the removal of GST in June.

There are concerns that prices may still go up in September when the new SST kicks in as irresponsible traders may take advantage to increase prices further.

Household consumption, which got a big boost during the three-month tax holiday in June-August, could see some normalisation in spending.

The smooth implementation of the new SST, accompanied by strict enforcement of price checks and the curbing of profiteering, especially for essentials goods and services consumed by B40 income households, are crucial to keep the level of general prices stable.

Strong consumer activism with the support of The Federation of Malaysian Consumers Association and the Consumers Association Penang as well as the media must work together to help in price surveillance and protect consumers’ interest.

Credit to Lee Heng Guie - comment

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