The concept of “price” is more difficult than what is usually seen at the superficial level. In practise, most people would think that price is simply what the seller puts on the price tag. But how does the seller know what numbers to put on the price tag?
If you want to sell your old car, for example, the first thing most people would do is to check what the “market price” is.
You can do this by surfing the internet and checking the prices of similar cars. Or you can also check the prices at used car dealerships. These will help you know what other people are charging and you can then decide how much to sell your car for.
If you want to sell your car quickly, you might put a lower price so that more people are attracted to your car. If you believe your car is better or that many people would be demanding to buy it, you might want to put a higher price.
However, if you believe your car is just average, then you can price your car at the same level as others in the market.
That is more or less how market pricing works. It is governed by supply and demand. If you are supplying an item at the price that people are willing to pay, then a transaction will occur. You sell your car, and the buyer purchases the car from you.
However, if you don’t receive any offer after you have advertised your price, you know that the market is sending a signal that your price is higher than what people are willing to pay.
So, you may want to reduce your price to meet what the market is willing to offer. Or wait until someone comes to buy your car at the price you want to sell. It might be a long wait, but if you are not in a rush to sell, there is no harm in waiting.
The important thing is that you get to sell your car at a price that you are happy with.
But how would you react if I were to tell you that I am a powerful person with a lot of followers, and force you to sell at a lower price?
For example, you want to sell your car for RM75,000 but I insist that you sell it at RM50,000 because I have done my calculation and I am telling you that RM50,000 is the only fair price that my followers would want to pay. And to back it up, I tell you that if you don’t comply, I will hurt you. Would you happily comply or would you fight me back?
Well, that is what the government has been doing through the Price Control and Anti-Profiteering Act (PCAPA) 2011. One of the things the PCAPA enabled is the creation of the Anti-Profiteering Mechanism (APM), which is a method used by the government to determine if profits earned by sellers are at acceptable levels.
In other words, using the car example I stated earlier, the government is saying that you can only sell at a price that they determine. If you refuse to comply, they will fine or imprison you. The fact that the car is yours does not matter. They have voters to satisfy and they impose their will on you.
The APM was introduced to mitigate the impact of GST on consumers, with a promise that it would be stopped on June 30 this year. Of course, the government broke its own promise after realising that the APM can make them popular with some voters.
And now, as we get closer to GE14 and at a time when the government is desperate for popularity, the government says they want to extend it again for another six months, once again breaking their own promise.
Expecting the government to stick to their word is rather too ambitious these days.
Businesses need to respond to immediate market dynamics by reacting to changes in costs and competition. If they can’t charge a price to cover their costs or to beat their competitors, they will not sell that product and as a result consumers will find it harder to find such products.
And the definition of profiteering itself is very unclear. If a buyer is willing to pay the price charged by a seller, is the government implying that consumers are too stupid to be trusted on how they want to spend their money?
There is no real logic behind the anti-profiteering measures other than that it creates the false impression that the government cares. In reality, when businesses suffer, they may have to close shop and ultimately, it is the employees, normal people like you and me, who suffer.
The APM has served its original purpose of cushioning the impact of the GST. If this anti-market policy is continued for the sake of political popularity, the government is basically telling the world that Malaysia is no longer friendly to businesses and that Malaysia is not interested in fostering an environment for private investments to flourish.
This policy may be good to win elections, but it is bad for the sustainability of our economy in the long-term. That is why it is time now to remove the APM.
Wan Saiful Wan Jan is the chief executive of the Institute for Democracy and Economic Affairs, Ideas.
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the source: www.freemalaysiatoday.com