WE HAVE now entered the era of high-cost of living. The price of sugar has increased by 20 sen (S$0.08) per kilogramme, and the spin-off effect is immediately felt with the cost of brewed beverage going up by 20 sen.

It is time for the government to do something to arrest the spiraling runaway price surge, which is threatening to cause massive economic hardship for the people, especially the low-income group.

The government must study and examine why prices have been moving upward so rapidly lately, and act fast to control and curb the continuous and gradually deteriorating situation.

Otherwise, the grand and lofty vision of a high-income economy that the government has set out to achieve will instead become a nightmare high-cost economy.

There are many factors that lead to price hikes, including imported inflation, price hikes in raw materials, rising wages and rentals, and increased transportation and social costs. It also involves human and special causes.

A Malaysia's deputy minister told me a few days ago that he wondered why the prices of domestic cooked food are higher than those in foreign countries, such as Singapore and the US.

Singaporeans need to spend only S$2 or S$3 to have a meal but we have to spend RM4 ($1.68) or RM5 for a plate of chicken rice in Kuala Lumpur and Petaling Jaya. The prices are higher in some upmarket areas.

Income-based calculation

The price levels cannot be calculated with exchange rates, but should be calculated based on the per capita income.

The per capita incomes of Singaporeans and Malaysians are US$25,000 and US$7,000 respectively, while food costs accounted for a much higher rate of Malaysian incomes compared to Singaporean incomes.

Malaysians spend most of their money on food and the misery index will gradually increase.

According to the theory of The Big Mac purchasing power parity, there are great differences in purchasing power among different cities.

On a global average, 35 minutes of work is required to buy a Big Mac but only 10 minutes of work is needed in Tokyo and 13 minutes in New York.

In Kuala Lumpur, it requires 35 minutes of work to buy a Big Mac. In other words, Malaysians need to work longer hours to buy food and clothing.

The Malaysia-Singapore Coffee Shop Proprietors General Association recently pointed out that shop rental, salaries, the cost of raw material, liquefied petroleum gas, fuel, transportation, electricity and water, as well as other expenses have greatly surged, forcing food outlet operators to increase the prices of brewed beverage. As the housing prices in Kuala Lumpur have also been soaring, shop rental is expected to increase too.

High turnover

However, I have noticed that mamak restaurants can still maintain a reasonable level of food prices, such as each Indian bread costs 70 sen to 80 sen.

As all mamak restaurants and Chinese traditional coffeeshops have to bear increased shop rentals, and mamak restaurants usually recruit Indian workers while traditional coffeeshops recruit foreign workers, how could their food prices be so different?

Note also that traditional coffeeshops also get income from rented cooked food stalls.

Mamak restaurants adhere to the principle of meager profit but high turnover. If traditional coffeeshops set the profit margins too high, they would gradually lose customers and cause a vicious cycle.

Cooked food prices in Singapore are relatively low and we can actually learn from them. Food courts in Singapore were built by its government to curb illegal cooked food hawkers and the rentals are controlled by the government.

The Singapore government has increased the rental rebate from 10 per cent to 20 per cent last year and the total rebate amount is S$8 million.

Food courts are found everywhere in Singapore. Their cheap prices have not only attracted tourists but also reduced the cost of living among the Singaporeans.

If the Malaysian government can do the same, it can help in reducing cooked food prices. If nothing concrete is done to stop the inflationary spiral, the purchasing power of Malaysians would fall because of the rising food prices.