THERE is increasing concern that when people have less money to spend, they would be less likely to patronise coffee shops for more expensive meals.

When fewer customers patronise coffee shops, the owners could probably only break even from the daily sales or continue to suffer losses.

Sabahans and Sarawakians, in particular, are feeling the pinch even more as the cost of living is relatively higher than in the peninsula.

Even though the cabotage policy was rescinded in 2017 in Sabah and Sarawak, which allows foreign vessels to land at Sabah and Sarawak ports directly, this has not resulted in a lower cost of living. 

Foreign ships from South Korea, Japan, Taiwan and China with smaller quantities of exports destined for Sabah and Sarawak still have to transit first in Port Klang, the national shipping hub before heading to Sabah and Sarawak.

This implies a higher cost as foreign cargo meant for Sabah and Sarawak have to go through a longer supply chain transport process.

As a result, the prolonged process of delivering goods to Sabah and Sarawak has, in turn, dampened cost competitiveness, which contributes to raising the cost of living, up to 30 per cent compared with the prices in the peninsula due to higher shipping freight costs.

Besides a smaller trade volume, other factors contributing to higher price levels in Sabah and Sarawak are weak distribution channels, high handling charges, inefficient inland transportation, the inefficiency of port operations and underdeveloped infrastructure in Sabah and Sarawak.

Although the issue of cost of living has been brought up for years, the price disparity between East and West Malaysia still persists.

By narrowing the pricing gap, the coffee shop owners in Sabah and Sarawak could enjoy lower ingredient and operation costs, giving them the chance to recover losses from previous lockdown measures.

During these unprecedented times, EMIR Research would like to suggest to the current administration to implement the following policies to reduce the financial burden among coffee shop owners in terms of ingredients and operation costs:

Increase crop diversification and produce high-quality agricultural products within Malaysia to reduce dependence on high-valued imported ingredients.

Sabah and Sarawak, which covers 60 per cent of the nation's cumulative land area (i.e., 198,354sq km), could potentially develop as Borneo's food hub to fulfil local demand.

Provide seeds, fertilisers and pesticides related subsidies paid directly to the farmers through a coupon system.

For instance, the padi farmer can use the coupon to buy high-quality seeds from any vendor or company. The vendor also can use the coupon to claim payment from the government. Not only will this approach create healthy competition among vendors, but it also would stimulate agricultural activities.

At the same time, it would motivate farmers to produce high-quality agricultural products with sufficient quantities for domestic needs, especially among coffee shop owners.

The Federal Agricultural Marketing Authority (FAMA) and related government agencies can assist rural farmers in transporting agricultural products to major cities of Malaysia.

Upgrade Sepanggar Bay Container Port (SBCP) in Sabah and Bintulu Port in Sarawak as National Load Centres (NLCs) by creating a dual gateway policy with Port Klang covering the western hemisphere and both Sabah and Sarawak covering the east.

Implement a freight equalisation programme like Tasmania, Australia, to reduce the price of goods in Sabah and Sarawak.

Hopefully, the prime minister would also address the critical issue of the price disparity between East and West Malaysia as chairman of the National Action Council on Cost of Living.

The government should also ensure that the Jualan Keluarga Malaysia also extends to coffee shops and food and beverage businesses that mainly service the B40 and lower M40 consumer segment groups in the Klang Valley, Penang and other urban conurbations.

The writer is a research analyst for EMIR Research

https://www.nst.com.my/opinion/columnists/2021/12/757518/reducing-cost-will-benefit-coffee-shop-owners