Unemployment is expected to rise with the opening of more Kedai Rakyat 1Malaysia shops.

PETALING JAYA: Kedai Rakyat 1Malaysia (KR1M) shops will spell the end for family-run grocery stores.

A report drafted by economist group Research for Social Advancement (REFSA) said that opening more KR1M shops will drive private stores out of business.

While the intention to help Malaysians hard-hit by stagnant incomes and the rising cost of living is admirable, these 1Malaysia stores and similar moves could lead to a negative cycle, the report entitled Pre-Budget 2012 – The Rakyat’s Guide said.

The report said that the government intended to see KR1M’s goods sold at a 40% cheaper rate than other supermarkets and retail outlets.

This would create a negative chain reaction, especially with the government’s announcement to open 100 more KR1M stores.

“Shoppers at 1Malaysia stores will not be shopping in the usual private stores. (Hence), some of these private store owners will not be able to survive on the reduced business,” the report warned.

It added that these businesses would run aground, with their staff laid off. Later, shop proprietors and former staff would end up shopping at KR1M stores.

“This results in even more 1Malaysia stores being opened, which causes even more unemployment,” the report said.

Selling at reduced price

In July, the government introduced the KR1M initiative as a means to help people deal with the rising price of goods nationwide.

The shops had come mere months after electricity tariffs were raised by 7.1%. Inflation was also on the rise, and many groups complained that Malaysians were losing their purchasing power.

A quick look at the KR1M website showed hefty price cuts for its supplies. A 600g packet of instant full cream milk powder was priced at RM9.99, or 30% cheaper than other branded retail items.

A 400g packet of mee hoon noodles were priced at RM1.39, or 44% cheaper than other brands in the market.

In a previous FMT report, local hypermarket chain Mydin Holdings Berhad was said to have received government allocation for these stores.

(Mydin currently supplies all the retail items for the KR1M stores.)

Mydin however denied this claim, and said that the KR1M idea was a government plan to help the country’s urban poor.

Three KR1M stores have been opened to date, with the first at the Kelana Jaya Rapid KL LRT station, and the other two in Bandar Tun Razak and Pantai Dalam, all in the Klang Valley.