Wednesday March 1, 2006

It hurts, so make sure money is well spent

Comment by Wong Sulong

IT hurts bad.

Instead of staggering the petrol price increases over a period of time, the Government has decided on one big hit to compensate for the high world oil prices. Hence, the 30 sen rise per litre of petrol. It’s a near 20% increase and the biggest single increase in recent memory.

The howls of pain and protests are palpable – such a big rise in petrol and diesel prices will have far reaching effects on the economy and the pockets of all Malaysians. Prices of many items and services are expected to rise.

Already, the Government has signalled that electricity tariffs will be going up soon.

The Government will be unpopular. But it has taken a calculated risk to bear with the public backlash once, rather than to take the brickbats on a rolling basis if the petrol price increase were to be staggered.

I would like to make four points.

1. The Malaysian public, as a whole, do not expect the Government to continue subsidising fuel, particularly at current levels running into RM14bil to RM16bil a year. If world oil prices continue to rise, then Malaysian consumers, like consumers all over the world, must pay for higher oil prices. As far as possible, the user pays principle should apply to most economic decisions and for public utilities.

However, in return, Malaysians have a right to demand that public funds be spent prudently and efficiently.

This is very important when it comes to oil price increases because everyone knows that Malaysia is a net gainer when world oil prices go up.

Through the national oil company Petronas, Malaysia gains more from rising oil prices because the country is a net oil and gas exporter.

Petronas has managed the country’s oil and gas reserves well. It pays big dividends as well as income taxes to the Government.

Prime Minister Datuk Seri Abdullah Ahmad Badawi said the RM4.4bil raised from the petrol price rise would be used mainly to improve transport infrastructure.

This is commendable as it’s a daily struggle for many motorists and commuters to get to and from work. The situation is getting worse, particularly in the cities.

Sadly, the Government is not getting value for what it spends. There is a lot of fat, wastage, leakages and corruption in the system – at federal, state and local council levels as well as in many government agencies.

A renewed crackdown on wastage and corruption is necessary particularly under the Ninth Malaysia Plan to be unveiled at the end of this month. Most people do not mind paying if they know they are getting value.

2. The Government must ensure that in the weeks ahead, businesses, manufacturers, traders and service providers do not take advantage of the petrol price increase for profiteering.

In his last Budget speech, Pak Lah issued a stern warning against profiteers. They would be prosecuted and their licences could be revoked if they were found guilty.

Now is the time for the authorities to step up their surveillance to prevent profiteering.

If, as a result of the oil price increase, the cost of a particular item goes up by 20 sen, it would be fair for traders to pass on this increase to consumers. But if a trader raises the price of the item by 40 sen, then he is profiteering and must be punished severely.

3. The petrol price rise will impact on citizens unevenly.

The rich will not feel much effect. In fact, there is no reason why the rich, with their expensive cars, should be enjoying cheap, subsidised petrol.

For the poor, the increase could be devastating, and it could be quite painful as well for the middle and lower-middle classes.

The Government has implemented measures to ensure that the poor and the lower income groups do not suffer disproportionately, if at all.

For example, it has lowered the road tax for smaller cars, and done away with licence fees for motorbikes. This is very commendable. The Government should continue such relief efforts.

4. The days of cheap oil and energy are over. Oil is a non-renewable resource and prices are likely to remain high. This is being compounded by rising demand from emerging economies.

Malaysians must learn to use less energy.

The Government should have a sustained campaign to educate the public on energy conservation, starting from the home, school and work place.

I suggest that some of the money from the petrol price rise go towards such an initiative. I know Petronas and Tenaga Nasional have their own conservation programmes, but perhaps they can chip in, too.

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