15 June, 2008

Fuel Price Hike May Derail Poverty Eradication Plans

Prime Minister Datuk Seri Abdullah Badawi's scramble to stem the widening fallout from his high-stakes gamble to raise fuel prices is exposing his government's shortcomings in crisis management.

What's more, the policy flip-flops and the raft of poorly-designed counter-measures have only brought into focus the distortions in the Malaysian economy and Datuk Seri Abdullah's reluctance to confront the powerful vested interest groups that profit from it.

"Abdullah's fuel-hike move falls short"

- The Malaysian insider.

"If Malaysians were beginning to feel a tad sympathetic to the many challenges facing Abdullah's government, last week's fuel hike only served to bring to the fore concerns that dominated the public mood just before the early March national election - anger over the rising cost of living, the perception that the Barisan Nasional coalition government is insensitive to the plight of most Malaysians and widespread corruption in government."

"By shocking Malaysians with the roll-back on subsidies, Abdullah had hoped to divert public attention away from the crisis gripping his United Malays National Organisation party which leads the Barisan government."

"Abdullah said that his ministers would take a 10 per cent cut in their monthly entertainment allowances."

"But Malaysians didn't even know that the prime minister got a monthly entertainment stipend of RM18,865, his deputy RM15,015 and his Cabinet ministers RM13,320 a month each."

"Malaysians also didn't know that their ministers and their families were entitled to one all-expense paid holiday annually to any destination."

"As inflation picks up, economic growth falters and the drudge of having to make ends meet for ordinary Malaysians take its toll, Abdullah will have to wake up to the reality that the Malaysia he inherited more than four years ago has changed radically."

The sharp increase in fuel prices can derail the government's target to wipe out abject poverty or reduce the number of the poor to 2.8 per cent from 3.6 per cent by 2010.

Economists believe the 41 per cent hike in petrol and 63.3 per cent in diesel prices in the wake of skyrocketing global oil price has somewhat "threw a curve ball" at the plan.

"Fuel Price Hike May Derail Poverty Eradication Plans, Say Analysts "- Bernama

The economists, however, were doubtful on the prospect, arguing that based on today's purchasing power, more Malaysians could slip into the poverty bracket, if not below.

Bank Islam Malaysia senior economist Azrul Azwar Ahmad Tajudin said the people's purchasing power had shrunk significantly following the revised fuel subsidy which saw petrol price rising by 78 sen and diesel RM1.

"As in previous occasions, higher fuel price means increase in prices for everything, from food to other necessities including services.

"For the poor, the recent fuel price hike comes as a double whammy of sort. For the past one year, they have been struggling to make ends meet with the rising food costs. Now they are hit once more with more expensive fuel while there is zero growth in their income," he said.

Based on the 2005 calculation, poverty line for the whole nation is RM691, while for the peninsula is RM661, Sabah (RM888) and Sarawak (RM765). The figures are based on a family of five.

He believed the government could still provide a "comfortable" subsidised fuel for the people if the quantum of Petronas' profits allocated for subsidy was based on the global market price.

"At the moment, the government has not explained the formula in calculating the percentage given by Petronas from its profits. They just tell us the total amount.

"In this case, I suggest maybe the government can consider using a quantum based on the market price. Let's say, if it's US$40 per barrel, maybe Petronas should pay 40 per cent and if it's above US$80, they pay 75 per cent.

"I believe if this is done accordingly, the people can still enjoy comfortable fuel prices," he said.



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