Licence to Kill

This is a classic case of an inept government policy.

When it is discovered there was a shortage of price-controlled items such as sugar, flour and cooking oil in some Malaysian towns, the Ministry of Domestic Trade, Co-operatives and Consumerism, in its infinite wisdom, decrees that all shops selling these price-controlled items should have an annual RM10 licence with immediate effect (1 June) or postponed (1 July), failing which:

(a) The shops are not allowed to sell - which will heighten the problem of access to these price-controlled items for the general public, or

(b) The shops will be selling the price-controlled items illegally - so the logical reaction of the association of shopkeepers is not to bother with the licence nor the selling (no hassle, small loss).

Many other possible causes.

(1) The shortage is caused by foreigners buying in Malaysian border towns. Administrative problem of restricting the purchase by foreigners.

(2) The shortage is caused by smuggling. Then the border police must work.

(3) The shortage is caused by smaller dispatches by factories. Talk to the factories. (The factories say they are not the problem.)

(4) The shortage is caused by customers stocking up. Could be caused by visibility of lower stock in shops. One-off abnormal demand triggering panic buying.

(5) The shortage is caused by shopkeepers stocking up (hoarding). Why? Again, fear of possible shortage.

As we can see from the above, the last thing the government should do is for the ministry to impose a licence on shopkeepers - unless, of course, the ministry wants to disallow foreign shopkeepers from selling smuggled Malaysian-subsidised price-controlled essential goods. Akin to asking thieves to legalise their operations (oops, the sports betting inept).

According to textbooks on war economies or totalitarian regimes, the most crucual aspect of price controls is the physical management of supply to demand. Demand is always there for "essentials" regardless of price. The supply lacks motivation because of fixed but small margin.

Yes, taking the lid of the price is the answer - in the long run - but producers are already circumventing the price control by value-addition to the products and making them non-essential or luxury.

So the price controls should be serving a very small section of society but the most politically potent because of their undeserved relative poverty.