Archive

M'sians Should Re-assess Spending Priorities After Fuel Price Hike

KUALA LUMPUR, March 6 (Bernama) - Malaysians, especially those who had been weaned on heavy fuel subsidies in the past, should re-assess their spending priorities, says Dr P.H.S. Lim, founder president of Malaysian Investors Association.

"They should get used to it (removal of subsidies by the government)," he said, adding that pampered consumers would have to make adjustments to their lifestyles.

Describing the recent government's action to cut fuel subsidies as "the right move" as it would ease its financial burden, Dr Lim said the people should not rely heavily on handouts from the government.

The removal of the subsidies and increase in the price of petroleum, diesel and cooking gas had resulted in savings of RM4.4 billion for the government.

The government spent about RM10 billion on fuel subsidies alone last year. It decided to align local prices to those of the international market by removing some of the subsidies on Feb 28.

"It is unfair for the people to subsidise certain people who drive big cars," he said, adding that "whoever chooses to use cars, whether small or big, should pay for it. Malaysians have been pampered all these while."

Dr Lim said fuel subsidies should be totally abolished except for public transport, which should be effectively monitored and enforced to prevent abuses and leakages.

Talking about his personal experience in the Netherlands, he said fuel prices there sometimes increased several times in a day because they followed the international market price but the people there did not protest as they had been used to the price mechanism.

In this regard, he said it was important for the government to step up consumer education for consumers to understand the situation better.

Dr Lim also believed that the government's precious financial reserves should be spent on better endeavours rather than fuel subsidies like improving facilities in schools.

As for possible inflationary pressures resulting from the price increase of petroleum products, he said the government should be able to control inflation through mechanisms such as interest rates.

"If the US can control its inflation, Malaysia can also control its inflation through various mechanisms," he said.

Dr Lim said consumers should also decide whether they were willing to pay for the new prices or seek alternatives.

Consumers, he said, should boycott outlets which had raised prices unreasonably as they had the power to do so via their purchasing decisions.

AmResearch Sdn Bhd's executive director Gan Kim Khoon said the government should gradually work towards removal of subsidies because over the long term, such over-reliance would create a false sense of competitiveness and bring about the misallocation of the country's limited resources.

He also agreed with Dr Lim that the allocation for subsidies should be used for other parts of the economy rather than subsidising the Malaysia motoring public or even subsidising foreigners because a lot of subsidised fuel was brought out of the country through smuggling.

Gan also stressed that it was unreasonable to expect the government to keep on subsidising the public when crude oil prices had risen to around US$65 per barrel compared with about US$25 a barrel three years ago.

Malaysia's retail fuel prices were still considered low compared with other Asean countries, except for Brunei, he said.

"Even Indonesia, which is other major oil producer in the region, has removed subsidies," he said.

Describing the reduction of subsidies as timely, Gan said Malaysians cannot go on living with their "big subsidy mentality" forever and should learn to live with a minimum of subsidies.

Meanwhile, other analysts also felt that the fuel subsidy reduction would benefit the country's macro-economy in the long run as there would be greater efficiency in fuel and energy usage.

It would also strengthen the government's budgetary position with having less to spend on subsidies, they said.

Referring to public transport, another analyst said Malaysians preferred to own cars due to the inefficiency of most public transport systems and networks, which were often plagued by poor frequencies, inter-connections and feeder connections.

"Eventhough we have some of the highest toll rates in the world, our passenger car market is the largest in the region, considering that our population is much more smalller than Thailand or Indonesia," he said.

The government, he said, should channel the savings from the subsidy reductions to improve public transport systems in the country.

-- BERNAMA