The economics of 1Malaysia Menu

For RM3.00, you can get rice, taugeh, chicken wings, beef or mutton?

According to the prime minister’s budget speech:

———————————————————————————

74. The Government will undertake measures to ease rising costs and prices as well as reduce the burden of the rakyat, as follows: 

First: Increase the number of Kedai Rakyat 1Malaysia (KR1M) nationwide in 2012. KR1M offers 250 types of 1Malaysia products, comprising consumer goods which are up to 40% cheaper. In view of the overwhelming response, the Government plans to open an additional 85 units in 2012 with an allocation of RM40 million; 

Third: Extend and promote the Menu Rakyat 1Malaysia which offers popular menu sets at reasonable prices with a maximum of RM2 for breakfast and RM4 for lunch. Currently, more than 700 food operators are participating and this will be extended to 3,000 operators by end-2012. To further expand this initiative, the Government encourages all cafeteria operators in Government offices* and the private sector to implement the Menu Rakyat 1Malaysia. 

* not only they get increment and bonuses without performance appraisal….
 ————————————————————————————.

What form of “encouragement” is the PM talking about? Anyone knows you can’t run business on a free.An operator has to pay rental (a mamak restaurant’s monthly rental can easily hit RM10,000), salaries and wages, and ever escalating prices of foodstuff. Simply verbal encouragement and a road show visit by a smiling PM won’t foot the operating expenses.

The prime minister have to be transparent and explain how 3,000 operators can and willing to participate. Are they being subsidised in some creative way via tax payers money?

We are all familiar with the modus operandi of ‘compensation for not reaching supernormal profit targets’enjoy by highway concessionaires for example. When you get a discount during festive balik kampung, the government will hack off around RM800million of tax collected/debt raised to pay Plus and bill back the tax payers later. Tax money which should have been used for education, healthcare, public amenities ended up as a nice profit before tax in some listed company

Did the Prime Minister Depatment sent financial professionals to help these operators to do proper financial and sensitivity analysis to help them set pricing of their products to justify lower selling price hence higher volume which will generate enough income for the operator to continue to function? 

Sorry, it is easy to poke a hole in it. Higher volume of sales equals to higher cost of sales hence by lowering selling price, the margin would be depressed instead. 

Similarly it goes with Mydin Group who is awarded the Kedai 1Malaysia franchise, a logo financed by tax money. How could it sold stuff cheaper by 40%? Is there a hidden subsidy somewhere? Did Najib administration have a written agreement with favourable terms for Mydin Group to enable it to use a trademark paid by taxpayers and  undercut all other retailers facing business risk on their own?