14 Mar 2023, 7:00am
The unintended consequences of market manipulation crowd out small traders and cause more problems than they solve.
When economic policies flounder, the ministers are not always to blame. After all, they are here-today-gone-tomorrow.

Most have no experience of being a minister and they know half the square-root of next-to-nothing about economics. So we can hardly expect them to understand.
The culprits are those who designed the policies. If they have economics degrees, their certificates should be ceremoniously ripped-up and thrown to the ground.

If they do not have economics degrees, they should stay out of economic policy.

 For example, the official data on the Menu Rahmah RM5 meal scheme appears to show that multi-billion dollar brand names are already dominating the market.

As of March 12, minister in charge Salahuddin Ayub said, 1,531 premises had been registered, bolstered by at least 10 top brands with more than 1,350 outlets across the country that have joined the scheme.

Added to the existing ones, this raises the potential number of outlets to almost 2,200 when all come online, more than 61% of which will be multimillion dollar franchise outlets.

So Menu Rahmah outlets are concentrated in the hands of the mega-rich, not the micro-enterprises.

On one side we have multimillion ringgit franchises offering under-priced, government-backed egg sandwiches and left-over salad. On the other side we have mom-and-pop food-stalls unable to compete and so are wiped out by the competition.

To be fair, the franchises are under pressure to take part and this is a loss-leader or a virtue-signal, not a means to drive more customers into their restaurants.

If left to the free market they would not entertain this segment because it is not profitable for them – and therein lies the problem.

Under normal circumstances big companies would leave this market space to small companies and all would have their fair share. Now because of the design of this policy big companies are under pressure to enter a market they would otherwise leave alone.

The effect is that the big companies lose money on the cheap meals, which of course they can easily absorb, but it also forces down the market price for cheaper segment meals and small companies cannot sell at those prices. They lose money, customers and market share and eventually they fold.

At its launch in January Menu Rahmah targeted 15,000 outlets and has now reached just under 15%. The on-boarding is relying on large, not small, companies and one reason for that is that small companies cannot compete.

So the growth in the number of outlets is likely to slow and worse the number of small food-stalls is likely to fall.

Again we see an unintended consequence of government intervention in the marketplace through policies aimed at forcing down prices.

It is unlikely that this will have an impact on inflation, especially prices for food-away-from-home which is nearly 12% of the CPI.

Instead, prices in the low-cost segments will be restricted and those in the high-cost segments will stay where they are.

Eventually, large companies will quietly exit this segment. Mydin Mohamed Holdings Bhd managing director Ameer Ali Mydin has already said that his company will review the sustainability of Menu Rahmah after three months.

After that the space will reopen but by that time there will be fewer small firms waiting to fill the gap. In the meantime they will be poorer and more reliant on welfare payments. This is a false economy.
There is no doubt that the cost-of-living is a pressing issue but interference in market prices is not the solution.

You do not solve the crushing problems of abject poverty with cheap meals in fast food outlets. Structural reforms are necessary and the solution must focus on raising incomes for those most in need.

The views expressed are those of the writer and do not necessarily reflect those of FMT.

Source: https://www.freemalaysiatoday.com/category/opinion/2023/03/14/is-menu-rahmah-harmful/