Fuel price: No way out for knee-jerk remedies
The is one of the more articulate emails Screenshots has received on Joe Public's fury over the fuel price hike. It's sent in as a comment to this blog: Fuel vs Wallet.
I reproduced it verbatim for our common indulgence, believing fully that there are rational-minded people among us who would listen t o constructive criticism.
MailBag
By Suria Kenchana
March 7, 2006, 09:56hr
The recent increase in the price of petroleum at an all time high increment of RM0.30 was a major betrayal of the people's trust by the leadership of Pak Lah, who is supposed to be a fair and caring person. The current spate of upward revisions in the prices of petroleum products were preceded not only by the increase in the price of the said commodity in the international market but also by a major revision in the salary of our elected representatives from state councilors, federal cancellers to cabinet ministers.
Meanwhile inflation had made an upward trend which by now, I believe, is already well past 3.5 %.Interest rate had also been increased twice this year. Unemployment among fresh graduates is at all time high let alone those without such qualifications.
I appreciate the fact that continued hefty subsidy by the government is not sustainable as the opportunity cost is high and there had been a very substantial loss due to smuggling to neighboring countries like Thailand, Indonesia and even to Singapore.
What is to be regretted is the fact that both the escalation in the price of petroleum, inflation and interest rate happened at the time when there is still tremendous supply of money in the inter-bank market and the ringgit is still significantly undervalued. The government therefore appears to be managing the economy on piece meal and fragmented basis. The macroeconomic management objective appears to be very heavily skewed towards subsidizing the exporters through a policy of undervalued ringgit to the detriment of the general consumers by having to pay higher prices for imported goods in general and petroleum in particular.
A more balanced macroeconomic stance should have been to allow the ringgit to strengthen further to say RM3.60 to RM3.65 to the USD. This would have allowed the government to increase the price of petroleum by RM0.15 only and yet produce the same impact in terms of releasing the subsidy by the government and also in terms of discouraging cross-border smuggling of petroleum, as our exchange rate would firm up against that of our neighbours.
The other factor to consider is that at the moment Bank Nagara has to spend a lot of money in having to mop-up excess liquidity in the inter-bank market in order to maintain the benchmark inter-bank policy rate within the band it has predetermined. This so-called sterilization cost actually reflects the amount of subsidy that is being given to Malaysian exporters in order to make the price of their exports competitive in the international markets as it has to sterilize? the inflow of hot money in keeping the ringgit at an artificially undervalued rate as against major currencies such as the USD. This too is not sustainable in the long run as it invites speculators to crack this artificial exchange regime.
Now, this misdemeanor has fueled cost-push inflationary trend. It is the common people who would suffer, not their elected representatives or Bank Negara officials, as they all are well paid and have been taken care by the recent revision in their compensation package. Indeed it had been a well thought off forward planning at their personal level.
The fact that the government continues to be willing to subsidise exporters but have taken the stance to reduce the subsidy for petroleum to the citizens at large on progressive basis is something that is much to be regretted. To be frank, both of these subsidies are not sustainable on long-term basis; but why create a double standard?
The government should have given more thought on how to manage the economy on a more co-ordinated and integrated basis rather than finding an adhoc and simplistic way out.
Comments
what to say?!
hhmmmm... malaysia boleh?!
finding a better solution fo all these are not easy cause our higher education institutes have a quota to meet... not depand on how clever u r... besides, who ever out of this country has better knowledge, better mind, experienced professionalism people will not come back to contribute because our government has let them down not only once, but repetition.
who is causing all these?! [ DELETED - Keep your racist bigotry to yourself. Fuel price hikes make no difference of race worldwide. ]
Posted by: kanazai2001
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March 7, 2006 10:46 AM
without doubt, unemployment among graduates is high.
but what would happen to the overall unemployment rate if the subsidy for exporters is minimised or lifted? will it create a higher unemployment rate?
years of mismanagement will take its toll on the nation and her people.
be prepared. malaysia boleh!
Posted by: Freddy
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March 7, 2006 11:25 AM
It would not make any difference from .30 or 9.00 increment. What the government is telling us is “ if you can’t pump petrol at this price, walk”
When the government thinks they have the rights to bend rule and hide transparency, public do not and will never have their voices heard.
Democracy? Or Anarchy?
Posted by: terenceg
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March 7, 2006 11:38 AM
i am no economist so please forgive me for saying i don't see why it's difficult to decide between reducing fuel subsidy and letting the ringgit float free.
i read in the papers this morning that Ahpek-Lah said fuel subsidies account for 25% of the nation's total budget. imho, if that's true, we have a serious problem indeed.
otoh, could someone remind me proportion of our exports, and hence income, is price dependent - i.e. sensitive to the value of ringgit?
Suria argues that the two equally unsustainable policies should be treated equally. i'm not so sure we really want that.
when fuel subsidy is reduced. fuel prices go up. cost of doing business goes up. cost of living goes up. what do we do? we tighten our belts. re-prioritise our spending. yes, change our lifestyle. of course the poor and disadvantaged will need a lending hand. let do that, but surely that's not going to cost 25% of the budget. furthermore, some of these groups of people (e.g. fishermen) really should be encouraged to change the way they make their living. the gov should put more efforts and money on things like that. Let teach them to make better money instead of giving them subsidised diesel. agree?
what about if we let the value of ringgit rise? people go buy elsewhere. our export volume drops. factories reduce their capacity. eventually more manufacturers will move offshore. unemployment rate goes up. what do we do?
i'm sure some smart people will know the answer and do all these in a "balanced" manner but i trust most readers will agree by now that the two issues are not exactly equal. indeed, we have many legacy problems, some due to having a too-long-serving great leader. to resolve them will require great wit and steady hands. i for one favour doing the "easier" (may be politically deadly) things first. but of course i'm no economist. please feel free to straighten up my misunderstandings.
p.s. i thought getting rid of corruptions would have been easier than tackling problems with our economic model... apparently i'm wrong.
Posted by: lsk
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March 7, 2006 11:50 AM
So, after all these 'feel bad' factors recently, I can only conclude some things about my country Malaysia:
a. We are paying for the sins of our past politicians. Did we or didn't we sell forward futures oil contracts to finance bailouts in 1997? Why then are we not enjoying sky high oill prices now?
b. There is something structurally wrong with this country and system of government.
c. The millstone of affirmative action has to grind to a halt sometime. This country cannot go on financing this. What happens then?
d. Why most Chinese parents choose to send their kids to national type schools instead of kebangsaan ones? Its surely not for want of racial integration -- hey Minister, the kebangsaan syllabus SUCK, big time. Change that, and racial integration will improve in the next generation.
Any wonder why the best brains are migrating and/or staying away?
Thankfully, we all understand the root cause and the problems.
However, the stinking truth is that, with equality, there are just too much for one race to lose to the others. Therein lies the root of all our structural problems : racial politics. We've dug a hole too deep to be able to crawl out from -- or the Brits dug that one for us?
Now I'm depressed.
Posted by: Yumcious
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March 7, 2006 11:56 AM
The massacre... small scale fisheries who depend on the increasingly depleted near-shore fish stocks.
................
Nelayan pantai yang gunakan petrol menderita?
Mon | Mar 06, 06 | 01:25:28 PM
Oleh Mohd Sabri Said PULAU PINANG, 6 Mac (Hrkh) - Radio Televisyen Malaysia (RTM) sengaja mengelirukan pemikiran rakyat bahawa nelayan tidak menghadapi masalah dengan tindakan kerajaan menaikkan harga minyak petrol, diesel dan gas sebanyak 30 sen baru-baru ini.
Siaran berita tengahari itu menyiarkan pendapat beberapa orang nelayan di Kuala Muda, Kedah yang terlibat dengan subsidi diesel yang diperkenalkan oleh Menteri Pertanian dan Industri Asas Tani, Tan Sri Muhyiddin Yassin bahawa kenaikan harga minyak sepertimana yang diumumkan 28 Februari lepas tidak membebankan nelayan ekoran adanya subsidi RM1.00 seliter.
Sedangkan, hampir keseluruhan nelayan pantai tidak menggunakan diesel sebaliknya petrol sebagai bahan api.
Kenaikan harga itu sekaligus mengguntungkan bot pukat tunda atau nelayan laut dalam yang acapkali menghantui nelayan pantai sejak bertahun lamanya.
Pengerusi Persatuan Kebajikan Nelayan Pantai Pulau Pinang, Haji Saidin Haji Hussain ketika dihubungi menjelaskan, rakyat yang tidak terlibat dengan nelayan tentu akan termakan hasutan itu dengan menyalahkan nelayan kembali.
Menurut beliau lagi, tindakan kerajaan itu umpama menyeksa nelayan kerana terpaksa menambah kadar penggunaan petrol dari RM15.00 ke RM20.00 setiap kali ke laut. "Nelayan akan berputih mata bila turun ke laut sekarang ini memandangkan semuanya naik. Dulu minyak RM15.00 sekarang tambah jadi RM20.00. Sudahlah ikan kurang kerana pelanggaran pukat tunda tambahan lagi kenaikan harga minyak yang melambung, " ujarnya.
Sepatutnya tambah Haji Saidin, pemimpin yang dipilih oleh rakyat menjadi pembela bukannya
pemeras.
Pengerusi Persatuan Nelayan Unit Kampung Tepi Sungai, Kuala Muda, Kedah, Ismail Othman pula
berkata, kenapa RTM tidak datang menemuramah nelayan kecil yang menggunakan enjin jenama Suzuki, Yamaha dan Marina yang menggunakan petrol ini.
Sudah pasti, nelayan pantai akan mengadu nasib yang menimpa mereka saban hari setelah menanggung risiko kejadian tsunami pada 26 Disember 2004 lalu.
"Kenapa RTM hanya menemuramah nelayan laut dalam yang menggunakan diesel tidak datang tanya khabar nelayan pantai yang menggunakan petrol, " tegas beliau yang juga Jawatankuasa Kemajuan dan Keselamatan Kampung (JKKK) di situ.
Nelayan laut dalam atau pukat tunda sering menjadi sasaran kemarahan nelayan pantai sejak dulu kerana tabiat mereka menangkap ikan di zon larangan yang diperuntukan kepada nelayan kecil.
Akibatnya, nelayan kecil menjadi mangsa keadaan apabila setiap lapuran yang dilakukan tiada tindakan berkesan dari polis merin atau Lembaga Kemajuan Ikan Malaysia (LKIM).
Posted by: mambo
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March 7, 2006 12:38 PM
Subsidy down, petrol prices up/ interest rate up, ringgit value up and inflation down/affirmatiove action down,dadah addiction and crime up.
From above, expect interest rates to go up, taxes to come down (whether in the form of import taxes or cut in income tax rate, or if rates remains, spending on education and research (human resource assets???- Pak Lah's main agenda) to be increased.
Posted by: sydput
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March 7, 2006 01:29 PM
Microeconomic reforms are the ways to go forward. Just look at Australia and India.
We can see very good examples around us, just that the reforms that are needed are politically unpalatable.
Posted by: v2k20
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March 7, 2006 02:13 PM
Agriculture(including fishery) is the one suffered the most. Developed nation agriculture product is under HEAVY SUBSIDIARIES. So called "large scale farm" produce food in current price range if the fertilizer not subsidies. And don't forget incentive given to those farms.
Afterall, the biggest economy problem is not about subsidiries, cryonism or rent-seeking, but government efficiency.
Any country can tolerate a 60% efficiency which give some social and economy progress. When the efficiency drop below 40%, the society will start going backward; collapse in the worst case.
Today, Malaysian public borrowing is similar to the level of 1997 economy crisis. The bad news is, pre-crisis, the people can be self-sustained because of the bubble and low fuel price. And the low efficiency issue is not significant since it is overwhelmed by bloated market.
Can current administrition increase the efficiency? With so many politikus, I doubt it.
Posted by: moo_t
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March 7, 2006 03:02 PM
hmmmm.... it looks like the fault is not only in the spin... but also in Ahpek-Lah's gov's credibility, or lack thereof.
i can see how the increase in fuel prices at the heel of the news like MAS's losses, squat-gate, cartoon-gate, cabinet reshuffle, etc. can be hard to swallow, not withstanding the fact that it's not an appetising issue to begin with.
i suspect the reception would have been much better if the gov had announced a sensible NAP, or slap a certain high-ranking corrupt politician so hard we all see stars, before reducing fuel subsidies.
as it is now, even an optimist like me who prefers to give Pak-Lah the benefit of doubt can only hope that this fuel subsidy reduction is part of a holistic plan to revamp the nation's economy model into a more sustainable one.
my fingers are still crossed. the supposedly soon-to-be-announced NAP should tell us how serious the PM is.
Posted by: lsk
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March 7, 2006 05:17 PM
Well, think about this. The hike in fuel price can be beneficial for Malaysians.
With higher price, demand would fall off. We take less trips.
This leaves more of Malaysia's oil for export overseas. Given the recent increases in oil prices, that means more revenue for the government through oil export. Not just that the government will save money on subsidy, they will gain more revenue exporting the oil overseas. A double whammy.
Now, if the government then redistribute those oil income because of forgone domestic consumption, to the people, then all is good.
Posted by: mahathir_Fan
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March 7, 2006 05:43 PM
"Now, if the government then redistribute those oil income because of forgone domestic consumption, to the people, then all is good."
And of course, they can always do that. With the additional oil revenue, they can pump the money into the stock market and then the KLSE will rally and all is well.
Posted by: mahathir_Fan
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March 7, 2006 05:47 PM
Emmmmmm...., smells like we are going back the Late Finiance Minister Tun Tan Cheng Loke era.
JEFF OOI says: Get the facta right! Get the facts right. Tun Tan Cheng Lock was never Finance Minister. His son, Tun Siew Sin was. He ttok over from Tun HS Lee.
Price ncrease here,price increase there; tax here, tax there. Good, this is the Ahpek-Lah's way now.
Sooner or later, the Ahpek-Lah's gomen will reactivate the selling of Welfare Lottery again for raising fund. I love it.
But, could there be a better way other than this Nostalgic 60's. I bet.
Let's no worry, by 2020, we have more than enough crude oil to sell, sweet ones. Hooray!
Posted by: BaganSPU
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March 7, 2006 06:17 PM
its easy for us, the middle class malaysians to tighten our belts and grin with it. lets us not forget the poor.
the poor are the ones who are suffering in silence.
i have a worker, that works three jobs to support his family. in the early morning, he goes out fishing, coming back in time to work and in the evening helping out at a gerai.
he doesnt smoke, nor drinks. he toils sunrise to sundown to provide a living for his family and his children.
but since the fuel price has gone up, he no longer able to send his children to school, no longer can fish in the morning and lives without electricity (diesel generator) most of the time.
he has now requested to stay up at night, to do guard duty at our site so his children can study with him at night in the guard house.
subsidy? support? he has been hearing those empty promises since the last 2 elections.
pak lah.you are really out of touch with the malaysian people you sworn to serve.
Posted by: adzlan
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March 7, 2006 06:25 PM
Who the hell is the one who imposed capital control and fixed MYR3.8/Dollar? Needless to say but why the hell the previous regime did this?
To save him,his sons and his cronies is the answer! Hence,they were saved at the costs of the people.
MYR assets could not be converted to a foreign currency denominated one.
MYR has been severely undervalued and as a result,people suffering from increasing costs of living and deteriorating standard of living.
Now that fuel subsidies are cutted and the people are extremely unhappy with the present govt.He is the one that so delighted with all these.
So why let this big bully eat well,sleep well and "Speak Well"?
Posted by: teh-o
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March 7, 2006 08:05 PM
BaganSPU said: "Sooner or later, the Ahpek-Lah's gomen will reactivate the selling of Welfare Lottery again for raising fund. I love it."
why, i say why is that a bad thing? there are so many gambling license holders in this country whose pockets malaysians put millions and millions into every week.
why? why should we allow individuals to make easy money like that?
if there are people who need to gamble, let them. but profits from gambling should be for welfare only.
all profit from betting on 4d's, scratchies, lottery's, horses should go to help poor family send their kids to school, let their children see dentist, etc. instead of line the pockets of already-filthy rich cronies.
if we need an experience operator to run casino on genting, don't give them the license to get insanely rich. take a portion (say 30%) of their net profit and put it into the same welfare fund to help the needies.
no money that's use to do good is haram. let good money gambled away be put back to good use. now that's called good governance.
Posted by: lsk
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March 7, 2006 08:33 PM
Before squeezing the people on the fuel subsidies,this govt can fill its pocket up by whacking on the filthy rich one first.
Malaysian businessmen,big or small,are excellent in "proper tax planning".These businessmen xpecially those Dato-Dato,Datin-Datin and etc shld be checked thoroughly & strictly on their networth,sources of income to make sure they have paid the necessary taxes.In this context,Hasil has got more to do,current RM50 Billion tax collection target shld be increased to Rm75 Billion.
Soccer betting is virtually legal in M'sia,whether you like it or not,it is unlikely to get rid of it.Take it as a fact.
So,why don't banking on it by legalise it and it is a gold pot to tap on,contributing Billion of Ringgit to govt's pocket everyear.
Posted by: teh-o
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March 7, 2006 09:30 PM
Isk,
Why should you take legitimately earned gambling money away, when the government themselves are full of corruption that is denying these people their opportunity? Genting money is THEIR OWN hard earned money, besides they pay the world in taxes already. Robbing Peter to feed Paul only makes Peter very angry and inspires even more creative accounting. Please re-think about what you said.
Back to the topic though, Malaysia cannot afford to keep subsidising the nation's oil any longer. Market forces have to work to some extent or else the citizens will never learn. Sadly, as usual it's the poor that takes the brunt, not the bigwigs who are chauffeured to work in their choice of car. That is why, that while the oil prices must be allowed to float, there must be some corresponding compensation FOR THE NEEDY REGARDLESS OF RACE (I cannot stress enough how important that qualification is) such as income tax cuts for the lower wage brackets. We can't go on like this, the country will go bankrupt if this continues, and remember, the oil won't last forever.
Posted by: hann
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March 8, 2006 12:49 AM
I thank the govt for making a 30 sen increase in price of fuel instead of a 10 sen increment. I was hoping for a bigger increment so that it can function as a big shocker. But even a small shocker is good enough to replace all my wasted warnings to my friends and relatives of their "penny-wise pound-foolish" lifestyles.
For years I have been warning them that our artificially-low fuel prices are distorting their sense of judgement, such as making purchases of cheaper houses far away from the city center.
I hope the govt can make a firm decision on when all the subsidies would be eliminated, so that the general public can come to their senses.
Global peak-oil may already be happening, and the clearer the govt conveys the message to the public, the lesser the impact would be when a global oil crisis arrives.
Posted by: v2k20
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March 8, 2006 02:43 AM
Pak Lah seems to be pretty weak in governing, don't you think? Don't get me wrong, I personally think that he is nice person. But when it comes to leading a nation, implementing policies, inspiring a generation, choosing a team, he seems pretty lost.
Case in point, one cannot help but feel the increasing and looming presence of our DPM in recent "controversies" like the cabinet reshuffle, oil price increase, etc. We expect our PM to bear the brunt and explain this to the rakyat but he outsourced (ok, delegated) it to the DPM who, in my opinion, is only one slight notch more interesting that seeing water boil.
In fact, I feel that the Badawi administration lacks passion, implementation and consistency. It's like a very loose football team that consists of aging and bad players. The team also lacks the presence of a strong captain who can decide on what strategies to play.
The recent oil increase issue is a long time coming. Honestly, don't we all know that one day we would have to pay RM 2.00 or more per litre? While the decision to remove is right, the manner in how the government did the price increase left a lot to be desired.
The initial patronizing response of 'its all your fault because your lifestyle is lavish' is stupid. The rakyat's lifestyle was fueled in part by the promises of Wawasan 2020 (btw, haven't heard this for looonnnnggg time, haven't we?) and Malaysia Boleh where we were asked to think greater than what we are and to aspire for all things better.
Are we doing a reverse now where we are asked to be more humble, frugal and calculative?
Posted by: Sick Dog
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March 8, 2006 08:15 AM