Tuesday, October 09, 2012

Why is RM386m exclusive for KR1M?

Datuk Ismail Sabri has yet to respond why the RM386 million allocated to reduce the prices of goods in Sabah and Sarawak is channelled exclusively to Mydin through the setting up of Kedai Rakyat 1Malaysia (KR1M)

The Prime Minister proudly announced that the Federal Government will allocate RM386 million to set up 57 Kedai Rakyat 1Malaysia (KR1M) next year to “ensure the prices of essential goods in Sabah and Sarawak as well as in Labuan are sold at lower prices”.

We have criticised the above plan as being extremely expensive costing a whopping RM6.77 million each store.  This is in contrast to the RM40 million allocated in the 2012 Budget in the previous year, which averages RM471,000 each of the 85 stores.

Ministers of Domestic Trade, Cooperatives and Consumerism, Datuk Ismail Sabri has responded last Friday that the government only allocated RM87 million to build the 57 shops in the three states [Sabah, Sarawak and Labuan].

The balance of the RM299 million allocated is to cover “the overall cost for the initiative, including the cost of delivery and distribution of products…. [taking] into consideration the price uniformity programme between the peninsula and Sabah and Sarawak.”

The replies by Datuk Ismail Sabri does not in any way reply the original questions as to why Mydin will receive exclusive benefits from the Budget 2013 amounting to RM386 million.

Firstly, the allocation of RM87 million to set up 57 shops till cost RM1.53 million for each store on average.  Why is the setting up of a retail store selling basic goods and necessities so expensive even after taking into account the higher cost involved in Sabah and Sarawak?  This is especially since we have previously alloacted only RM471,000 for each store.

Secondly, the balance of the RM299 million mean for the “cost of delivery and distribution” is essentially a subsidy on the goods to be sold in KR1M.  For 57 outlets, that works out to a whopping RM5.25 million of subsidies for each store!

In fact the RM299 million of subsidy to Mydin exceeds the RM278 million sugar subsidy budgeted for the entire country for 2013!

The question remains as to why is it that this benefit will not be extended to all other shops in Sabah and Sarawak offering these “basic necessities”?

In fact, since the RM386 million grant and/or subsidy is given only to Mydin, the Government is in effect killing off all of Mydin’s competitors – from big hypermarkets to small mom-and-pop shops.  Mydin will have the monopolistic right to sell certain products at substantially cheaper prices than its competitors due to the exclusive RM386 million from the Federal Government.

We call upon the Government to make available the RM386 million all small retail outlets already in existence throughout Sabah and Sarawak to ensure that the maximum number of retailers and consumers will benefit from the programme to sell basic necessities at lower prices.  There is absolutely no need for the Government to sponsor its crony to open up new shops in these areas to compete unfairly and kill of local shop-owners.

We are in complete support of any measure by the Government to reduce the prices of goods and services in East Malaysia, especially over the longer term to ease the burden of Malaysians living in these states.

However, we are disgusted by the fact that even in a programme ostensibly designed to lower the cost of living of the poor, the Barisan Nasional Government chosen a mechanism to profit its cronies at the expense of the man-on-the-street. The approach taken by Datuk Seri Najib Razak is clearly designed to profit only Mydin Mohamed Holdings Bhd as the allocation goes direct to the company to set up these stores.
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