Thursday, June 5, 2008


Fuel prices decision good for economy, say economists


Economists have described the Government’s decision to increase fuel prices as good for the nation’s economy in the long term. “It’s a short-term pain, but a long- term gain, in terms of better economic stability and reducing the imbalances,” said RAM Consultancy Services’ Chief Economist. Dr Yeah Kim Leng. He said the increase was basically to ease Malaysia’s fiscal position so that in the longer term, it would be more efficient and better prepared to cope with rising prices. “No doubt the 40 per cent increase is the biggest jump in the history, it’s significant and sizeable, but if it is properly channel for development projects and for the improvement of public transportation, the public will be able to support it,” he said when contacted. Prime Minister Datuk Seri Abdullah Ahmad Badawi announced yesterday that petrol and diesel prices will go up by 78 sen and RM1 per litre respectively at Wednesday midnight. The new price for petrol at the pump would be RM2.70 per litre and diesel, RM2.58 per litre. Dr Yeah said the Goverment had no choice but to allow the price to increase as it had been holding back such a move or adjustment since one and a half years ago, despite the higher fuel prices. “It has resulted in the budget deficit to go to an unsustainable level. So today, you see a 40 per cent adjustment, which is significant but it still comes with some form of subsidy,” he said. He said the Government’s immediate challenge would be to handle public reaction to such a sharp rise in fuel prices. “For the middle and higher income groups, the increase will not be significant and will only slightly dampen their demand. They can afford it but with a reduce in saving, which means, real income will be lowered. “For the lower income group, the Government’s proposal for the rebate was a relief as it would be help them cope with the increase. They will be a reduction in spending too and definitely there will be impact on the consumption,” headded. He expects the increase in food prices would be moderate. Meanwhile, economist Prof Dr Mansor Jusoh said the cash rebates to Malaysians who owned private cars or motorcycles would benefit the middle and lower income groups. Under the cash rebate scheme, a total of RM625 per year will be given to owners of private cars of engine capacity of up to 2,000cc and pick-up trucks and jeeps of up to 2,500 cc. Owners of private motorcycles of engine capacity of up to 250cc will be paid a cash rebate of RM150 per year. Prof Mansor, however, said that the benefit of the cash rebates would not be felt by the poor who had no vehicles but had to face the increase in the price of essential items following the fuel price increase. He suggested that the Government put in place a special mechanism to help the poor. Prof Mansor said the Government’s decision to maintain the price of liquefied natural gas and natural gas at RM1.75 per kg and 63.5 sen per litre respectively, would benefit the power-generation industry. “So, the electricity tariffs should not increase and Tenaga Nasional Bhd should be able to absorb the fuel price increase in the global market,” he said. The increase would however impact the public transporation in major cities and towns, he added. “People will now think twice before buying a car because of the costlier fuel,” he said. In this context, he said, the Government should give attention to improving public transportation, especially the commuter services which often the subject of complaints among the public. - Bernama


Fuel prices hike stuns consumers


The drastic hike in fuel prices announced by Prime Minister cum Finance Minister Datuk Seri Abdullah Ahmad Badawi yesterday took Malaysians by surprise. Just a couple of days after being informed that the fuel prices will only be reviewed in August, the latest development has aroused the feelings of dissent and disappointment among the people. According to former United Sabah Chinese Communities Association (USCCA) Youth Chief Steven Liau, the hike will burden the people, especially the low income earners. “If the hike is about 40 sen, we would understand but to raise it by 40 per cent is too much. It does not make sense for citizens of an oil producing country like Malaysia to pay so much for fuel,” he said. Abdullah announced’ late yesterday afternoon that the price of petrol will be increased by 78 sen per liter whereas diesel vehicle owners will have to fork out additional RM1 per litre. The new prices of petrol and diesel effective midnight yesterday are RM2.70 per litre and RM2.58 per litre respectively. “I understand that because of circumstances, the Government has to increase fuel prices but to do so by about 40 percent is overboard. Countries which do not produce oil can sell the commodity at a high price because they spend money to purchase it but it should not be the case for Malaysia,” Liau contended. “In an oil producing country, the Government should be able to control the price,” he said. Liau also pointed out that during the last fuel price hike, Abdullah said the RM400 billion saved in subsidies would be used towards improving infrastructure in the country. “But so far we have not seen anything of that sort yet,” he said, adding that the latest increase would deter young Malaysians who are studying overseas from returning to the country to work. “Our wages remain the same and cost of living is getting higher, so i don’t think that many of the younger generation overseas will be interested to come back to work unless something is done,” he stressed. According to Liau, the Government does not feel the pinch of the price increase as its fuel is paid for by taxpayers. “For those in the Government, their fuel is free, so they don’t suffer like the layman,” he said, suggesting that the Government consider using the money paid for its departments and agencies’ use to subsidize fuel for the people.


Abdullah hopes people will not demonstrate


Prime Minister Datuk Seri Abdullah Ahmad Badawi said he hopes that the people of Malaysia will not take to the streets to vent their anger over the fuel price hike announced yesterday. He said although there had been an increase in prices of fuel and goods in the country, their costs were still the lowest in Asia. “I hope the people will not resort to street demonstrations because what we are doing now is the best decision under the circumstances,” said Abdullah after announcing the Subsidy Restructuring Package here. He said this when asked if Malaysians were expected to demonstrate in light of the hike in fuel and diesel prices starting today. Asked who is to be blamed for the spiralling price of oil in the international market, forcing many nations to face unrest and instability, Abdullah said there are many parties to be blamed for the global shortage of oil. However, Abdullah said he was pleased that the issue was being addressed at the global level before it spread further and caused more instability. - Bernama


Lower income earners Won’t be burdened: Minister


The restructured subsidy system will not burden people from the lower income category but the higher income group might have to pay more in the Government’s efforts to counter the challenges posed by the increased prices of commodities. Second Finance Minister Tan Sri Nor Mohamed Yakcop said the Government was confident of overcoming the challenges after having faced even more serious crises and will ensure that the implementation of the subsidy mechanism will not bring about an outcry from the public. He said an outcry can happen only if the lower income group ends .up having to pay RM200-RM300 more for oil without any assistance given. “But if the Government can ensure that this group does not pay more because of the rise in oil price, and comes up with the best solution for them, I am certain that there will not be any outcry,” he said during RTM l’s “Bersemuka Dengan Media” programme aired here on Tuesday evening. The current economic scenario in the country was the topic discussed during the one-hour programme. The media guests on the programme were Editor-in-Chief of Bernama, Yong Soo Heong and Blogger Ahiruddin Atan. Nor Mohamed said the restructuring was also important to ensure that irresponsible parties do one misuse the subsidies especially for smuggling purposes. On calls that Petronas income is used for subsidy, he said that it will not be a responsible thing to do considering that Petronas will not be making profits forever and that by 2014, the country will no longer be an oil exporting nation. “The Government is of the opinion that Petronas’ profits be used for the future of the coming generation,” he said. Nor Mohamed stressed that the Government will continue to be steadfast in its responsibility of providing subsidy especially in the health and education sectors. The Government has been entrusted to manage the economy not only for the 27 million people in the country but also for the coming generations, he said. - Bernama