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| Photo courtesy of Malaysia Chronicle |
NOT
JUST A FUEL PRICE HIKE, THIS IS BN’S LONG-TERM POLICY FAILURE
The Barisan Nasional government’s move to
raise the price of petrol and diesel today once again demonstrates its
wrongheaded approach to economic policy and national development.
Before cutting fuel subsidies the
government should have ensured that public transportation was adequate and
Malaysian wages were healthy enough to withstand a jump in prices.
World oil prices are at a three-year low
and have been on a downtrend since July, public transportation has been
neglected in favor of private vehicle use, and no adequate measures are in
place to cushion lower-income households from a rise in prices.
By raising RON95 prices RM0.20 – nearly 10%
- to RM2.30 last night consumers can expect across the board inflation. Yet, the
downward trend in world oil prices means the government will be enjoying an
even lower subsidy bill than it did previously.
With falling fuel prices the government
could have held off rolling back subsidies, but Malaysian consumers have no
immediate alternative to rising costs.
The short-sighted policy decision taken
during the Mahathir years was to promote mass private vehicle ownership in
order to sustain a national automaker. This meant short-changing strategic
investment in high-quality public transport infrastructure with integrated
networks of bus, rail, and taxis.
Whilst some individuals profited handsomely
out of national auto sales, ordinary working people had to take on burdensome
auto loans. The situation for the consumer was made worse by Mahathir’s
decision to specialise the Malaysian economy in low-wage, low-skill production.
Having a viable public transport
alternative would have given a boost to the disposable incomes of workers and
freed them from one source of debt. As it is, were commuters to abandon their
private vehicles today and convert wholesale to public transport the latter
system would not have the capacity to move them efficiently.
A matured public transport system would
also have spared the government the fiscal pressure of maintaining fuel
subsidies for so long. BN’s historic policy mis-steps ultimately result in the
lower-income households taking the brunt.
The BN government likes to talk of BR1M
handouts when it rolls back subsidies. Indeed, the Domestic Trade, Consumer
Affairs and Cooperatives Ministry has said that more BR1M is forthcoming to
alleviate the subsidy rollback. But it will be too little and too late for
those poor households living hand to mouth.
BR1M has a lag time of two or more months
after the Budget is tabled. Yet fuel is a weekly, even daily, cost for the poor
and represents a higher proportion of their income than it does for wealthier
households. BR1M is a temporary injection. It falls far short of what the poor
need: structural change that helps them graduate out of hardship.
It is irresponsible and unjust to squeeze
the incomes of the poor before having a timely solution at hand.
Any discussion of ‘fiscal rationalization’
cannot close without mention of the inefficient and wasteful manner in which
public monies have been spent by the BN. Every year the Auditor-General’s
report identifies billions of ringgit wasted by government and its departments.
Few are called to order, instead the burden of meeting deficit reductions falls
on the consumer.
We are supposedly six years away from
becoming a ‘high income developed nation’. With clunky policy mis-steps like
this it sure doesn’t feel like it.
Executive Director
INSTITUT RAKYAT
Petaling Jaya
3 October 2014
