A few bold steps to revive economy

Some countries have incentives to boost consumer spending

COMPANIES and CEOs are often put to great stress by shareholders’ demands for higher profit and continuous growth.

Is this the time for them to re-examine some of the targets they have set?

It may not be possible to be always pushing for double-digit growth especially in the face of waning sales and a general economic slowdown.

In current times, the task of maintaining profits can be a challenge.

Governments themselves are often large shareholders in companies with almost monopolistic businesses.

Take the case of Tenaga Nasional Bhd (TNB), the national power giant.

Why does it have to guard its profits so carefully and keep prices high even in a scenario of falling oil and coal prices?

TNB's office

As a reader points out: “The Government expects businesses to lower their prices of goods because oil price has come down. What about electricity tariffs?

“When oil price was high, the electricity tariff increased by 26%. Now that prices of oil and coal are coming down, why isn’t the Government asking TNB to lower the tariff?

“Instead, it is only asking private businesses to lower their prices. Most businesses need electricity and it is a huge cost. If the Government can’t get TNB to lower the electricity tariff, how can you expect the private sector to listen to the Government to lower their prices?’’

Ask almost any Malaysian and he would have almost memorised the reasons why TNB needs to maintain its tariffs – one of which is to pay for some of the power it does not need from independent power producers.

Like many businesses, the currency factor is also being cited.

Government-linked companies like TNB are not spared from having to meet their benchmark performance targets, which are to be revised.

Whatever that revision may be, shareholders have to be cognisant of public interest and question whether maintaining profits under the current scenario is the correct thing to do.

There is a concern over TNB’s high debt levels; its ability to spend on future infrastructure may also be in jeopardy.

But consumers, many of whom are already in a tight spot themselves, cannot accept that they have to pay for TNB’s woes.

For that matter, any prices that are perceived to be artificially high are likely to face intense public scrutiny.

Consumers nowadays expect companies to find their own solutions and come up with strategies so that everyone can tide over the difficult period together. To do that, companies may have to bite the bullet and take less profit.

The pressure to maintain profits can also lead to companies, including banks, becoming extra cautious about spending and lending.

In the current downturn, there needs to be an element of courage in helping to generate positive economic activities.

This is especially crucial, going into the first quarter of next year, which a lot of people expect to be worse than this year.

There are some who would have to start the engine, so to speak.

We need to take a few bold steps to revive the economy; some countries have come up with incentives for people to spend a little more.

There are rumblings among small and medium-scale industries (SMIs) of difficulties in obtaining bank financing.

Some say the unused portions of overdraft facilities have also come under scrutiny.

Existing SMIs usually have less problems with financing but as the association rightly points out, more attention should be given to the newer and deserving cases.

It is the challenge not just in credit management but also in credit evaluation, that fresh faces may be groomed.

● Senior business editor Yap Leng Kuen believes that companies should look at the big picture and not be tied to just a few considerations such as profits, especially in current trying times.