Institute for Democracy and Economic Affairs (IDEAS) economist Adli Amirullah said when the government subsidised food items and sold them at KR1M outlets, it distorted competition in the market.
“The government has allocated RM3.9 billion from Budget 2018 for subsidising various food items including cooking gas, flour, and cooking oil. Some of the food items will be sold below the market price at KR1M outlets.
“It is unfair for small businesses that have to sell the same items at market price while KR1M has the privilege of selling it at a lower price with government subsidies.
“It is an anti-competitive policy in nature because KR1M may crowd out small businesses in the long run,” Adli said in a statement.
The KR1M 2.0 project was launched on Sunday by Prime Minister Najib Razak with new strategic partners Tunas Manja Group (TMG) and KK Super Mart.
This came after hypermarket giant Mydin, which participated in the government programme from its inception in 2011, withdrew in August last year.
KR1M was set up by the government to offer essential goods at prices 30% to 50% cheaper than other supermarkets.
Mydin managing director Ameer Ali Mydin, in a radio interview, said the hypermarket chain suffered losses amounting to RM100 million by taking part in the KR1M project.
TMG, however, is optimistic that KR1M 2.0 will be a success.
Muhammad Haidir Ravi, who is TMG’s head of operations for the KR1M 2.0 project, said the company will be using 21 of its 39 outlets across the country to sell the KR1M-labelled items.
“We will include these KR1M-labelled items in our stores and sell them along with other brands we have on the shelves.
“This way, we can minimise our cost of operating,” he told FMT.
TMG is a Kuantan-based supermarket chain which has been operating since 1986.
KK Mart, meanwhile, said it was still negotiating the details of the scheme with the domestic trade, cooperatives and consumerism ministry and Perbadanan Nasional Berhad.
Adli said in the long run, many local entrepreneurs would be demotivated to venture into the grocery stores industry, especially as there were already laws on price control and anti-profiteering.
“If KR1M continues to exist, local entrepreneurs will have no motivation to invest their capital in opening up grocery stores because they know they will lose to their competitor, which is the government, that is selling goods below market price.
“This will lead to a lesser supply of food items in the market and ultimately cause prices to increase even more.
“Governments should remain in the role of a regulator in a market. If the government wants to reduce the burden of the rakyat, it should find other alternatives in reducing the cost of living instead of participating as a market player,” Adli said.