Cut costs, don't raise prices, Dr M tells gov't

It will be better for the government to cut costs or to maintain the existing prices of necessities, instead of raising them, says former prime minister Dr Mahathir Mohamad.

In a blog posting, and citing the "cost down" principle, Mahathir said when a business is faced with competition or its cost of production reduces its profits, it can either increase prices or reduce costs.

"To a certain extent the price can be increased. This might cause a reduction in sale and also profits. It is far better to reduce costs and maintain or minimise the increase in price.

"When a business exercises cost down, what it does is to examine everything it does that contributes to the cost of doing business.

"It examines the efficiency of the process, the material costs, the reduction of wastage and the speed and volume of production. Invariably, some costs can be reduced.

"The same can be done by the government. All its costs can be examined to determine which are truly necessary, which costs can be reduced, which services can be curtailed or modified," Mahathir emphasised.

Why all increases at the same time?

The people are facing the prospect of an electricity hike, and possibly an increase in toll hikes next month, amidst a rise in sugar and petrol prices as a result of cuts in subsidies.

Mahathir also questioned the need to introduce all the rises in cost of living around the same time, and said the better way would be to introduce the hikes in stages.

"We must accept that the government needs more money with the passage of time. But should the increase be as big as the government says? Should the taxes and rates come all at the same time?" he asked.

He also said that the government "often wastes money" because it appears not concerned about the returns to its expenditure.

"Every year the auditor-general reports on wastage through improper procedures and carelessness. Usually, not much is changed so as to benefit from the auditor-general’s criticism," he said, noting that changing procedures too can save costs.

Mahathir then proceeded to remind the government that re-examining the new rates could do it good in the next general election.

"But with due consideration for the cost to people and business, the government should really examine the tax rates to be introduced. It will not hurt the government too much, but it will gain a lot of goodwill from people," he said.

"They might even remember this in the next election."

Several NGO groups, such as Turun and Solidariti Anak Muda Malaysia (SAMM), have teamed up to hold a rally against the price hikes in Kuala Lumpur on Dec 31.