Friday, June 06, 2008

Prices Take A Hike: Where To?

The Government is not doing enough to alleviate the plight of ordinary Malaysians facing substantial increase in prices of essential goods after the fuel and electricity price hikes.

The Government has announced drastic reduction in fuel subsidies which will result in substantially higher fuel and electricity prices yesterday. As a result, there will be 78sen increase in petrol prices to RM2.70/liter from RM1.92/liter. Diesel is now RM2.58/liter up RM1 from RM 15.8/liter. Electricity tariffs are also expected to rise in the coming months.

While the increase in prices are expected and in all probabilities, unavoidable, what is perhaps more important is the Government's mechanism to redistribute the savings from the subsidies to ordinary Malaysians who are in need of assistance.

For now, the Government has announced cash payments by vehicle size. This involves annual payments of RM625 for vehicles below 2L engine capacity, RM150 for motorcycles below 250CC engine capacity. Road tax is reduced by RM200 for vehicles above 2L and by RM50 for motorcycles above 250CC.

While these measures seem fair and innovative at first look, they are clearly short-term in nature and have clearly failed to address the key pressing issues below:
  1. These efforts continue to distort transportation patterns, prices and preferences without encouraging or promoting the use of public transport. There are no incentives for Malaysians particularly those in urban regions to switch to public transportation which reduces our dependency of petrol, unclogs roads, and reduces impact on the environment as subsidies are given to vehicle owners. There is even talk about subsidies for buses to be reduced.

    The country is expected to save RM13.7B from the reduction in subsidies but the savings are earmarked for everything except improving public transport which will help us in the long run.

  2. Increase in fuel prices should be announced concurrently with concrete plans to expedite the construction of mass transportation networks, such as extending the LRT and bus feeder system or to improve the existing networks. Without such plans, it does not bode well for the Klang Valley and other urban centres where traffic congestion is common place and public transport is poor.

  3. Finally, energy prices will result in secondary price increases of all our daily essential goods and services. The proposed vehicle-based cash rebates will only benefit those owning cars or motorcycles but not help those without who will still suffer from the price increase of everyday items. Incidentally, the affected will more likely belong to lower income group who need help to combat the effects of secondary inflation caused my reduced subsidies.
I am repeating DAP's call on the government to adopt the grant scheme of up to RM3000 per working individual depending on income levels to be paid through the EPF mechanism. Consumers will then have the choice to utilize the grant in a manner which best meets their needs and will receive the grant whether they currently own cars, motorcycles or otherwise. Aiding the rakyat using the EPF is also cheaper and less cumbersome because it is an existing avenue for channelling funds back to the people.


Anonymous said...

Let me explain why our Public transport is screwed up. My family lives at most 15 minutes by driving for 90% of our need including work, shopping, leisure including my golf club. But I don't take ANY public transport at all but wake up early to beat the traffic instead. I can conduct all my business meeting in downtown by public transport IF I did not have to swith trains or to buses for most of them but I can't do it..

me said...

Indeed, the price hike is long overdue, as we've been living on artificial prosperity for far too long and practically buying on credit.

On the EPF policy proposal however, I must say that it is an unsuitable solution. I would have to say that this paints a strong contrast between the views of urbanites and the large proportion of rural dwellers, a contrast far too stark yet unaddressed by the DAP.

The fact is, the EPF is in itself an uneven instrument of distribution, whereby numerous citizens, especially those far away from the nexus of organised employment found in the cities, are simply not reachable by the EPF.

Certainly, no single institution can be reliably trusted to disburse state aid, but I believe the best reprieve is only achievable via the various tax mechanisms. It may be slower, but in my opinion, it's mor equitable.


Alex Yap said...


I thought in DAP manifesto before the election, it mentioned only RM1500 and not RM3000? Did I miss anything?

Anonymous said...

YB Tony,

Payment throught EPF not practical lah. How about for those who have the income and expenditure every month just 'ngam ngam'. How to fork out the extra in the first place?

Anonymous said...

YB, I am in absolute agreement with you that there should be corresponding effort to improve the public transport system for the longer term solution to this fuel crisis. After the last price hike last year there was a lot of talk including the setting up of a committee under the DPM to improve the public transport system with the RM4b saved. Nothing came out of it. There is no political will to get this done. Just lip service.

Like you, I used to work in Singapore and sometimes I find it less of a hassle to take the MRT compared to driving. But today, taking a bus from my home in Perling JB is to risk being robbed.

The EPF to dispense compensation may not be the best because retirees like me do not have EPF accounts anymore. Offhand I do not have any suggestions yet but all concerned should put on their thinking cap to work this out.

Retired and Tired

KIMHO8 said...

Mainkan politik seperti main masak-masak,

kerajaan yang rasuah memang suka medesak.

Ubah gaya hidup anda beramalan jimat cermat,

bilakah riwayat aneh negara ini boleh tamat.

Golf Afflicted said...

For those interested in the EPF disbursement mechanism, check out the DAP Budget 2008 - "Fair Wage" section. It'll ensure a fairer wage system, restructure subsidies, increase disposable income for the poor.

Anonymous said...

I think government needs to think in correct perspective:
1. Malaysia GDP is much lower than other countries that is not giving subsidies to rakyat.
2. Malaysia is still an oil exporting country, unlike Indonesia which is net import country.
3. Petronas is not a private company and has responsibility to rakyat, because Petronas is drilling Malaysian natural resources. MNC such as Exxon Mobil doesn't get to drill oil for free. Petronas should be treated the same if she wants to be a private company.

Anonymous said...

BN=Barang Naik

Anonymous said...

YAB Tony,
About your EPF scheme, what about those that has never had a EPF account? For example, a nasi lemak seller or hawkers? Unless the government makes it compulsory that every rakyat has an EPF account, I still feel that there will be a group of people left out of that scheme.
I thank you for your comment and insight into the recent fuel price hike. I really appreciate it! I hope that the Pakatan can be the voice of the people instead of bickering about bigfoot and big monkeys!!

Unknown said...

Public transport needs professional research and implementation. As the present public tranpsort system is obviously unsatisfactory, we either did not employ professionals to do the job, or we employed wrong professionals in the first place.

Anonymous said...

My quick thought:

1)These subsidies when it was first implemented, it seems like the government did not think these subsidies has to go some time. Maybe until the general Malaysian has move up to a better salary/ earning power from a global perspective. Unfortunately, the people's earning power has not been able to catch up with the cost (even after so many years of subsidies).

2) When our oil reserve runs out, there go too the "lubricant $$$" that lube the harmony in our country. When tak boleh cari makan, then cari pasal.

3) Can anyone share if Singapore has got subsidies too on the petrol? If not you will have to really respect the Singaporeans,no subsidies yet have much stronger buying power. We really have to value add our productivity in order to move up the value chain and catch up with the hikes.

4)How much money do we need to implement a more efficient public transport? LRT, MRT, commuter, buses etc.

TehJiao said...

Dear Tony,
I'm upset with the price hike but i accept it as this is a global issue. However, shouldn't our government abolish the car import duty and refund for all car owner since the government claims that we should buy fuel with market price, so can we buy our car with market price? With import duty 100-300% now, aren't we paying back the "fuel subsidy" which we'll be using in the next 10 years after we purchase new car? So sad, fuel market price with the most expensive car in the world yet with the most lousy public transport system. Sigh again.

Anonymous said...

Yeah.. had to be forced to buy substandard milo tin cars or made to pay skyhigh car import duties and now skyrocket fuel prices... with no decent public transport in sight. Have to worry about getting robbed in buses/taxies somemore.

This country is doomed.

Anonymous said...

Hi YB Tony,

Pak Lah asks Malaysian to change their life style. How about ours government servant? How about ours minister? Will they car pool to office? Will they take economic class fight? Will they use public transport? Please don’t ask Malaysia, actually we paying government salary to change ours life style and let the government servant enjoy.

Check this video clip in YouTube,

Asking Malaysian to change their life style actually ask Malaysian to go back ward and ware sarung.

Strong DAP Supporter

Anonymous said...

I'v read different articles about improving public transportation in KL or Penang. Some experts suggested that the quick and easy way to solve the transportation problem is to improve the bus services such as increasing the frequency and reliability of the services. May I know is Penang government going to do anything about the public bus transportation? Also, is KL and PJ MPs going to propose or analyze the possible solution on improving the public bus system?

Tony keep up the good work.

James Loh

Anonymous said...

Where does the so-called savings from reducing the subsidies go? The National Budget must be seriously scrutinised by PR MPs. For instance, do we need those submarines? Where is the logic in having expensive submarines? No wonder we have adeficit budget!

Anonymous said...

Dear system,

Singaporean does not get any subsidies for petrol, in fact our toll is also pretty high. We have ERP at most of our highway which deduct money from our cashcard everytime we drive pass it. For your information, cost of owning and driving a car in Singapore is one of the most highest in the world. However, I must say that we do have a good public transport as our alternative. The government is using the strength of Sing Dollar to combat the global inflation. So you should make your money in Singapore and spend them in Malaysia, that's why Singaporean like to shop and holiday in Malaysia. I suppose it is a win-win situation. Perhaps, I can help to get you a job here, then you will be in the best of both worlds. hahaha.

Anonymous said...

"I am repeating DAP's call on the government to adopt the grant scheme of up to RM3000 per working individual depending on income levels to be paid through the EPF mechanism."

Mr. Tony, I'm sorry to say that:
I strongly disagree.

It sounds like a vote buying tactic to me.

Pls don't misunderstand, I'm a strong believer in two-party system, which means I believe only the existence of two-party system could enforce check & balance.

Pls do not promise the distribution of grant. Neither it sounds realistic to me nor it could help us. How much could u afford to give out? RM625? RM2,000? For how long?

The govt (either BN govt or a new govt) should do whatever it takes, to improve the public transport system in KL/PJ.

The govt (either BN govt or a new govt) should do whatever it takes, to improve Malaysia competitive advantage. If agriculture is our competitive advantage, so be it, focus on it, don't waste money on producing unsafe cars.

Our beloved country is losing its competitive advantage, coupled with the depletion of oil resource. How far do u think we can go?


l藍海 said...



adi said...

Dear Tony Pua,

I left a comment on your fellow MP, Jeff Ooi's blog. I hope you could have a look at it and start working on getting better and improved public transportation.

Here's my note...

Dear Jeff,

Given the fact that you're a learned MP, I hope you'll press for quick resolution our public transportation which is in the states of shambles. If it’s not you (since you’re busy with technology matters), let somebody champion it. Ministry of Transportation is like a big kayu doing nothing at the moment. If they do, do inform us but no news means nothing!

For me, I can understand the global market forces that bring about the petrol price that we have today though government’s strategy of implementing it sucks to the highest order.

But what I can't understand is why NO (BIG N & O) MPs (be it from BN or PR) are fighting for a better public transportation system. Suddenly nobody is fighting for the rakyat, no?

Now that we've save A HELL LOT of money from petrol subsidies, why not somebody or anybody in the parliament (I don’t bloody care if you’re opposition or with the ruling coalition) WORK on the public transportation to improve it.

I understand that constructing the system and infrastructure will take donkey years, but the more you delay this, the longer we are going to enjoy excellent public transportation. So, please do whatever you need to do so that we move on and develop as a better nation. Come out with whatever Suruhanjaya or whatever crap you call it, JUST GET IT DONE!

I hope you’re not one of those MPs that just talk but not much is done because most of the time spent talking to people (which in Parliament it apparently shows. It’s like an executive who are busy in meetings but get minimal time to do the actual work.

Harping on the issue can only do so much. There are 1001 issues that are disturbing us. This is where Y-O-U PRIORITISE your issues and FOCUS on it. Know what your CIRCLE OF INFLUENCE is.

With better public transportation, by then only we all can reduce our reliance on our own car i.e usage of petrol.

p.s. Sorry to sound so Bossy, but you’re elected by the people for the people.

Anonymous said...

Dear system

Correction: For your information, cost of owning and driving a car is one of the highest in the world, and not the 'most highest'

Jonas Lee said...

Welcome to the New Era of Global Inflation!

After the government made the sudden decision to raise petrol and diesel prices with effect from 5 June 2008, Malaysians will be quickly entering a new era of globalised inflation ranging from between 5-7% per annum in the next one year. Is this good or bad after years of enjoying the shelter of government subsidies (basically our own money)?

Well it depends. Most sensible bloggers and economists are correct in concuring that a fuel price hike is necessary and will enhance the efficiency of the economy. We have lived under the shelter of excessive subsidies for too long and need to adjust our consumption habits. However, the whole debate about the fuel price hike of 41% to RM2.70/litre plus the efforts to provide a rebate needs to be simplified into 4 issues:

(1) The quantum of the increase is a shock to consumers and companies' pockets and this 41% hike in the fuel bill has never ever happened before in Malaysia's history. Who knows whether we will enter into a steep economic slowdown while most of our trading partners in the US , Europe and Japan are now going through economic stagnation? Is the government and the central bank so confident that they can fine-tune the economy after this shock treatment?

(2) About RM7.5billion or 55% of the savings from the government's reduced subsidy is given back to the people who are apparently car and motorbike owning lower income groups. So in a way, this is a form of income distributive policy by taking the subsidy previously enjoyed by both rich and lower income groups to give to the lower income car owners. But distinguishing the income groups by the capacity of their car engines is a questionable policy because richer people can sell their cars of > 2000 cc and buy cars of 2000 cc and below. Will this create more price distortions? Besides, the RM625 is not sufficient to cushion the higher cost of fuel.

(3) Is the government really short of cash when out of the estimated RM53 billion of subsidy (without fuel hikes), its actual direct subsidy is less than RM20 billion. Add the tax foregone of about RM13 billion and the RM20 billion paid by Petronas and other items, the bill totals to RM53billion. The tax foregone is basically a hypothetical issue, i.e. imagine what we could have earned from tax revenues at current elevated oil prices.

(4) Instead of using the rest of RM13.7 billion to subsidise food, why not improve the public transport system and lower the import duties on cars so that our standard and quality of living will be on par with Thailand and Indonesia where the prices of cars are much lower? Alternatively, build a wider and more efficient rapid train system similar to Singapore's.

Aside from the issue of leakages through inefficient spending, these issues will probably be played up by the Opposition, which incidentally, has suddenly made a U turn on their position on petrol prices. (anyone remember them harping about using Petronas profits to reduce petrol prices before the elections?)

Let's see whether the political backlash will lead to some solid debates in parliament and eventually more efficient use of resources

Tan Wee Tiong said...

My Penang friend based in S'pore has the following figures and facts to share:

Crude oil in 2003 average USD30.00 to USD33.00.

Lets look at share price of SPC(refinery) vs Petronas(own oilfield):

June 03--
SPC closed at SGD1.19 vs
Petronas closed at MYR7.05(at the rate 2.18 then, it was equivalent to SGD3.23)

06 June 08(5 years later....and in my opinion, it is as good as long term comparison and not subject to short term volatility)--
SPC closed at SGD6.48 vs
Petronas closed at MYR9.90(at the rate 2.388 yesterday, it was equivalent to SGD4.15)

SPC has appreciated 445%

Petronas has appreciated 28.48%.......

Ponder a little while........

Own oilfield...good or no good.....?

Is it the most important factor ? or the word"prudent & professional" is more important?

Anonymous said...

Seems like theres so much going wrong with the BN. I where's the rot coming from? I understand the much publicized issues with UMNO, and even more with MIC, but I can't help but wonder what's wrong with MCA? What do YOU think is wrong?

To be honest, I think it's the least wrong party in BN; but it does need to refocus on what it is set up to do in the first place.

What would YOU do if you led them?

Anonymous said...

For those who are reeling from the effects of the recent fuel price hike I have this to ask,"Will Malaysia's crude oil prduction going to last forever?". if the answer is "No", then why are we demanding to be protected from market prices? There is a price for the lower price (pun intended). If we continue with this insane fuel subsidy policy, demand will spiral and our oil will run out, very soon. And then, our children (if not us) will surely suffer petrol prices of RM 6-7 per litre...a hike of RM 5 overnight! Do you know how lucky Malaysia is in terms of crude oil? Come by and see just how much more Malaysian crude oil costs on the open market.

Unknown said...

Although there has been a huge public outcry about the new prices of petrol, the act itself is jusified but severely mismanaged. It is short sighted and poorly mismanaged. The public transport system in Malaysia should have been tackled first with out doubt.

Public transport is a mess, slow with poor information. The government will now go ahead and waste more money put into propping up these companies to little improvement solely because the system of creating those changes are broken.

Anonymous said...

Despite the enormous political & economical pressure, Pak Lah's government still make a "jaw drop" 40%increase in fuel prices. I have a strong bad feeling that the fuel prices will shoot up even more in the next couple of months. The RM2.70/liter is just the begining. This is the best "gradual increase" they can afford. We will see one of the worst economy downturn hitting hard, but deep in my heart I hope this will not crystallize though.

Anonymous said...

The oil in msia is expected to last for around 20 years at least. By then, alternative energy sources/tech such as solar or hydrogen will be viable. Guess what will happen to those earning billions from oil at the expense of the rakyat?

Of course now's the best chance to suck us dry before the show ends.

Alas, the millionares will think of their profits 1st and foremost rather than the livelihood of the common people. Numbers are much more important than hungry and angry poor. Classical capitalism.

Brace yourselves for hyperinflation.

Unknown said...

In fact, there is a petrol duty of S$0.41-S$0.44 for grade 92 and 98 petrol in Singapore.

No cut in petrol duties to cushion fuel hikes

The Government is not about to reduce duty on petrol to help cushion rising pump prices.
The duty - 41 cents for every litre of standard grade petrol and 44 cents for the high-end stuff - is meant to promote public transport and curb excessive use of cars.

These objectives remain relevant, a Ministry of Finance spokesman told The Sunday Times when explaining why the ministry would not lower petrol duties.

Singapore's stand is in line with European finance ministers who last week rejected a French proposal to cut oil taxes to help consumers hit by high fuel prices.

The British charge the highest duty in Europe: For every litre of unleaded fuel, which currently retails in London for roughly S$3.20, no less than S$1.82 goes to the government in various taxes. Elsewhere in Europe, taxes invariably amount to half the price of fuel.

In Singapore, since February 2003, petrol duties have been levied on the volume of fuel purchased.

This means that rising pump prices do not increase the amount of petrol duty collected by the Government.

Yang Huiwen
June 8, 2008
Rising petrol prices prompt switch to 'green' transport
By Tan Dawn Wei

Petrol prices last went up two weeks ago, the 12th consecutive hike since last July. This brings pump prices here to between $2.153 and $2.386.

Unknown said...

Firstly, I believe that this fuel price is not a Malaysia problem, it's a global problem. So, objectively, it's not right to blame Malaysia for this problem. As for the fuel subsidies, I believe it's an acceptable move as we Malaysians all along are living on this artificial oil protection. However, having said that, this additional few billion dollars the Government would be reaping as a result of this removal of fuel subsidy should be channeled to the right places e.g. to improving the public transportation system, food prices and other basic amenities for the Rakyat.

Further, hopefully, this should also motivate the government to review their automotive policies whereby protection is given to Proton. This protection to Proton is eating up a substantial amount of taxpayers money. Thus, the government should gradually remove the excise duty/tax that have burden Malaysians for so many years now. What fairness is there where we support a financially troubled Proton using our take home salaries?

In short, this subsidy removal is not entirely a bad thing. It motivates the Government to be more transparent and force them to more carefully managed the funds for the benefit of the people. Of course, this would be challenging for the Rakyat but, in long term, assuming that the Government does a good job in managing these funds (which the people would have continuously scrutinize), it would serve the country well.

Anonymous said...

Please read this
...imagine wat a tidal wave crash in world commodity prices will do to our CPO..


cy97 said...

Petrol price increase by 41% effective from 5th June 2008 in Malaysia. Well i believe the first reaction that most of the citizens had are anger and worry. We are angry because we have to pay more for our expenses and we are worry of not able to cope with it. It is only natural that we start putting the blame on the current government.
However if you ask any economists in the world, they will tell you that taking away the subsidies is the RIGHT thing to do. Abdullah had said the petrol price increase reflect the dilemma of Malaysian economy. Dr. Mahathir talked about our past purchasing power. The reality is we have been living in a somehow protected and virtual world by ourselves. Once the protected umbrella is taken away especially at this critical time, we felt helpless and don't know to response. I still remember during 1997, an Indian engineer came here and work told me. In India, there are a lot of people who doesn't not have skill will not get to work but in Malaysia, you can easily get a work. This more or less reflect our protected economy and it actually while retaining our purchasing power in the past but have actually without knowing making the GDP gap between our country and other opened economy wider.
Now, is the time we must face the reality. We have to think again, are we having a too happy go lucky lives ? Are we ready to face the competitive world outside? What is our value? Oil price increase may not be a bad thing after all. It could be a real wake up call for all of us in Malaysia. Think about it...
Thinking about it, i am not so mad at En. Sharil anymore.

Anonymous said...

Actually, there's alternative energy sources to run vehicles, planes, etc. New Zealand is using peanut oil to fly their Air New Zealand. Richard Branson's Virgin Atlantic is using palm oil mixed with other chemicals to fly their planes. So, what have we been doing ? What has Palm Oil Research Institute of Malaysia (PORIM) been doing ? What has Petronas been doing ? Aren't we have plenty of palm oil ? Right now, there's no need for R&D to be done because Virgin Atlantic is using it ! Just follow and use it maybe with modifications ...

Anonymous said...

Comparison of petrol price in real RM with other oil producing countries:

UAE RM 0.68/litre
Eygpt RM 1.03/litre
Bahrain RM 0.87/litre
Qatar RM 0.68/litre
Kuwait RM 0.67/litre
Saudi RM 0.38/litre
Iran RM 0.35/litre
Brunei RM 1.10/litre
Ngeria RM 0.32/litre
TurkmenistanRM 0.25/litre
Venezuela RM 0.16/litre

MALAYSIA RM 2.70/litre

In addition, most of these countries don't even have:

Palm Oil
Proton (protected somemore)
Electronics & Manufacturing

Go figure.

Anonymous said...

BN Government expenditure in transportation has bad track-record.

eg1: SMART Tunnel that cost $1.8bil. This amount of fund can be used to extend STAR LRT network by 50%. When STAR LRT was built in 1997, the LRT network cost $3.5bil (not adjusted with inflation).

eg2: new expressway from KLCC to Bukit Jalil. There is already existing expressway to bukit jalil. It is more efficient to add lanes and expand expressway capacity then to build a new expressway directly to Bukit Jalil.

There should more examples you guys could put up here. But the point is transportation needs careful and intelligent planning. A mistake would cause a huge wastage because these are expensive projects. And once it is built, it cannot be simply taken down and rebuild.

Anonymous said...

BMW 318 also below 2000L.... is that get RM625 also?????

Anonymous said...

I think we did the right thing by increasing the price of fuel in accordance to market price, to prevent undesirable long term distortions to consumption of scarce resources.

However, with the increase of RM 1 (more than 60%) for diesel, we should also sell better quality diesel -- which will also benefit the environment.

Seems that Thailand is using a better grade of diesel than us !?!

Anonymous said...





Unless fieldwork, group discussion, group meetings, board meetings, lab work, factory production work, etc are involved, then, travelling to workplace is unnecessary. Adminsitrative work can be done at home assisted by ICT, phone & fax. The medical personnel still need to be at their workplaces, they can afford with their salary... hostel created for nurses...teaching staff..hostel can be also created for them to stay beside the school... factory workers and staff, hostel can be crreated as well besides the workplace, the only ones left out perhaps are the service staff for businesses such retailers, hotels, stockbrokers, bankers, insurance agents, other frontline staff, etc, private traders, self-employed, lorry drivers, taxi drivers, bus drivers, etc That's where the gov subsidies should come in and good public transport is needed...

but then again, a lot of people will be able to reduce their travelling cost...