Let the price go up.
Petrol price in Malaysia rose by 30 sen recently. The government says the hike results from a reduction in subsidy and tax reliefs.
Malaysians protest. They demand a reduction in petrol price. They want more subsidies.
I have a different view.
I agree with the reduction in petrol subsidies. And, therefore, I think the price hike is inevitable.
The protests are directed at the wrong target.
The reduction in subsidy is good. It is a step towards the right direction – viz. allowing the market to determine the correct price. Subsidies distort the market and any actions eliminating market distortion is good.
The protests should have been aimed at the stagnant or inadequate increase in household income. There is a serious need to redouble efforts to bring up our household income.
It would be better if income rises in proportion to increases in living costs, and all subsidies are reduced.
People would be generally better off.
Petrol prices would be at the correct level.
Petronas would be able to make as much profit as they can.
Government would earn more corporate taxes and would be less burdened by subsidy commitments, thus resulting in less need to tax people.
And once again, people would be better off.
Virtuous cycle!!!
posted by PROVOLUTION at 3/11/2006 02:46:00 am
5 Comments:
Very ideal indeed…
But let’s take a look at the bigger picture….
price hike is inevitable, yes, but let’s put the price hike within the right context of Malaysia as a NET EXPORTER of oil, not a NET IMPORTER, surely the Govt., thru Petronas benefits from the oil price increase. Surely subsidies should not be reduced as drastically as this, since the Govt. has the means to ensure that oil prices donot increase to such extent….mind you, it is a hefty 18.5% increase!!!
Drastic increase in oil prices inevitably results in rising food and energy prices and ultimately inflation….good for the economy??
As for the suggestion to increase household income….asking the employers to increase our salaries??? Easier said than done…. I’ve sat in a budget committee of a private sector company and if this proposal would pop up, the Directors would think that we are out of our minds….increased personnel costs during times when cost control is of prime importance?? Forget it lah…as one of my former Asstt. GM once said… don’t be so gung ho lah!!
Ask any Malaysian working in the private sector how much their salaries have increased over the past few years …. and has it ever been enough to cover increased living expenses?? Most would say no..that, after they have taken measures to spend wisely. Not many people here enjoy 40% o 50% increase within 3 to 4 years you know…unless you are somebody in a Company or work in successful companies such as CIMB… can enjoy up to 9 months bonus…. the problem is not anybody can be ‘a somebody’ and not everybody can work in such companies.
So, better take to the streets demanding increase in wages instead of reduction in oil prices??? Ha ha ha
The Govt. said that the increased revenue from the oil price hike will be ploughed back to improve public transport…hmmm let’s just wait and see if there will be black and white plans for this….and Wan, if you do come back for a holiday in 2 year’s time just wander around KL and see if improvements do exist.
As for the increase in Petronas’ profits, more corporate taxes…I don’t wish to comment further…waste of time
Maybe Malaysians should demand more transparency in the Government’s spending for that matter… but it’s a daunting task and seems almost impossible…. Do most Malaysians care?? no they don’t!!
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Firstly, Petronas should be made free of government interference. It should be allowed to become a properly "private" corporation.
Drastic increase is definitely uncalled for. It should have been done gradually. By what you said, I assume you accept that an overall price increase is inevitable, as long as it is gradual.
I did not say the sudden increase of 30 sen is acceptable. I said "I agree with the reduction in petrol subsidies. And, therefore, I think the price hike is inevitable." I did not address the issue of whether the 30 sen in one go is agreeable or not.
"So, better take to the streets demanding increase in wages instead of reduction in oil prices???" The answer is no. Taking things to the street would not resolve anything. It will not bring household income up. It will not bring petrol prices down either. Even if it did bring petrol prices down, the reduction will be temporary because subsidies will still have to be reduced. The only option is to up household income. That is the only permanent solution.
If the aim is short term political gain, then do go for street protests.
But if the aim if long-lasting improvement of our nation, then we must aim of our efforts at the right targets. And the right target is to free markets from interference, while at the same time ensuring citizens' income are appropriate.
Most Malaysians don't care. That is right. Unfortunately, those who care are being misled into becoming short-termists.
What I would like to see a proper policy paper on how an alternative government would manage Malaysia's economy. Not how well attended our demonstrations are.
Petronas is a GLC...Government-led company, the concept of a private company such as Petronas being free of govt. interference only exist in theories inside textbooks....the reality in Malaysia is not what we would like it to be
I may have miscommunicated my point stated in my earlier comment and would like to clarify herewith:
I still disagree with any price increase from the previous prices, be it a gradual increase or a massive increase like the one recently. Yes, fuel price increases are inevitable as fuel prices are determined by worldwide market forces, BUT the Government should control the prices so as to protect the well being of the people, hence the subsidies. The fact is, the Government has the resources not to reduce subsidies. It is not too heavy a burden to carry if you compare it to the burden borne by the public (especially the poor and the needy who are also fuel consumers), and companies. THE DOMINO EFFECT OF A FUEL PRICE HIKE IS ENORMOUS - Food, transportation costs, energy prices go up, as will the Bank’s BLR, companies suffer reduced profits, making our demands for higher pay almost like the Malay saying ‘seperti anjing menyalak bukit’ , Government will receive relatively lower taxes due to lower profit attained by companies, job vacancies shrink, unemployment increase, by the way, did I forget to mention inflation before this??….my goodness, the list is so long and can go on and on and on and on…
On this basis, can we still consider those dissatisfied with fuel price hike(s) as ‘short-termist’?? Not when the domino effect is long-term.
The well being of the people in any nation is only enhanced by increase in disposable income, what is the point of having an increase in income when it does not result in higher disposable income (because although income rises, expenditures increased as well – due to the domino effect of high fuel prices)
Again, it is too optimistic to expect Malaysian employers to be sympathetic and ‘compensate’ its employees for something that was not even a result of their own policy. In theory, yes, we can make an effort for this but in reality, I think our efforts will go in vain. Companies have other priorities too… they also suffer from increased fuel prices..asking them to increase wages higher than the normal annual increment rate is too much considering their bottom-line(profits) are reduced due to higher costs.
Let me also state here what I believe. This is from my observation and from what I’ve learnt:
On Free markets:
In the real world, there’s no such thing as a truly free market. Yes, markets should, to a certain extent be free of interference, but at some point there will and should be Government intervention, that’s what Governments are for, they are supposed to GOVERN!! Even the World Trade Organization (WTO) which advocates free markets, had in the past, made certain measures by protecting and favouring the markets of some of its developed member countries, at the expense of China. So is there really such a thing as a ‘free market’ in this world and if so, is it good for all?
Private companies and Government interference:
Privatisation policies work best when there is synergy for both the Government and private companies, when both parties are responsible, makes sensible decisions to the best interest of both parties’ ultimate stakeholder, i.e. the people.
We must not confuse ourselves that everything free of Government’s interference would be for the best interest of the nation. Yes, if we talk about judiciary, Public Sector audit and such things. But not when it comes to privatisation of management of the nation’s key resources. Definitely and undoubtedly full independence is required for effective functioning in the case of the former. But in the case of the latter, no private company should be allowed full freedom to do what it thinks best as some decisions may not be to the best interest of the people. Private companies have shareholders,who, in this capitalist world, is mainly concerned with maximisation of wealth, sometimes at the expense of public interest. But private companies also have many other stakeholders, the general public is one of them. Hence, the Government’s intervention is necessary
Although in the context of our discussion, the Government’s intervention in Petronas looks to bring more harm than good but the concept of the Government being a ‘watchdog’, to a certain extent, in private companies’ policies is still valid and should not be compromised just for the sake of ‘independence’. What needs to be done is for both parties to make decisions that maximises the wealth of its ultimate stakeholder – the people.
Subsidy(ies):
I can still remember in the UK, one of the best welfare states, providing Tax Credits and all sorts of benefits for some of its people, still a reduction in fuel prices is possible, if I’m not mistaken in November/ December last year it dropped by 2 pence to 3 pence after it had a price hike a month/two earlier. It is the market’s reaction to the negative effects of fuel price hikes, but who’s behind it? Who ‘subsidised’ fuel prices then? Did the oil companies make sacrifices for the benefit of the people – short-term sacrifice for lng-term gain?? Probably, and this proves that prices can be influenced if the parties holding power on it is responsible, rational and considerate enough. Anyway, whoever’s behind it, obviously didn’t ask this question: Haven’t the British public had enough 'subsidies' already??
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