THERE was consternation on the part of the government before the Goods and Services Tax (GST) was introduced. The government then waited for some time, allowing the groundwork for the implementation of GST to be scrutinised thoroughly before it was greenlit.
Once the conditions were ripe, there was a carpet-bombing public awareness campaign that proceeded. After all, it was going to be an uphill task to convince the rakyat why they need to pay more for goods and services than before.
Of course, there was much grouse and gripe that followed the implementation of GST, but much of it was self-inflicted, given that the GST refund process was broken.
Like the GST, it can be said that changing the price of petrol can be a moment of disaster. Just look at what happened to Suharto in Indonesia after petrol prices were raised dramatically in 1998.
The irony of it all is that the first cut is the deepest, and subsidy cuts often remain even as political change happens.
It is because the apparent “benefits” petrol subsidies do bring to the populace. When Malaysia was a low income country, there certainly was an argument for subsidies.
But as the country progresses and gets richer, the reasoning then becomes diluted
It is not because the rich T20 is enjoying the subsidies the poorest should receive. The T20 often pays more in taxes than it receives in subsidies, so in short they are paying their share of the subsidies.
Normally, over time, countries with large subsidies, especially energy, do untangle them. You rarely see high-income countries, a target for Malaysia, having petrol subsidies.
Subsidies are never meant to be a long-term answer.
Having prices fluctuate means people can then adjust their spending. If the price of mutton is too high, then switch to a more affordable protein.
Market forces do have a role to play.
Just like one editor the other day remarked, ever since the subsidies for chicken were removed, there is no longer any “noise” of shortages.
When removing fuel subsidies, in this case diesel, the government should immediately tell the people how they are going to benefit.
It may sound like an oxymoron but there needs to be a plan on how healthcare will be improved, one how education will gain and also how we can then pay to buy equipment to defend the country.
There should be a detailed breakdown on how the RM4bil in savings will translate into other benefits.
The government needs to show how it is taking money from energy subsidies and reinvesting it for better public services.
Saying it will save money is not sufficient.
Raising the price of petrol will raise inflation once energy subsidies are cut back.
The good news is that it is often one-off.
After all, Malaysia did go through the episode of raising the price of petrol from RM1.92 to RM2.70 in 2008. There was a shock to a lot of people and the rate of inflation to 5.44% in 2008, but inflation fell back to 0.58% the next year.
