It has been with great interest that I’ve watched the development of the fuel price situation in Malaysia, and to a lesser extent, India and Indonesia. I have my views on the issue, but wanted to wait and see how the situation changed over a few days. I was not disappointed - from the moment last Wednesday when the price hikes were announced, the Malaysian public has reacted exactly as the international media - and I - thought it would.
Before I begin, this is definitely not meant to be a generalisation of the entire Malaysian community. This is merely my observation and commentary from reports the local and international media has fed me.
In the widespread protests, I’ve managed to gather these few arguments:
1. Why are fuel prices being pushed up while Petronas is still making profits?
2. Why are rising oil prices being pushed upon the people when government officials are still being paid so much?
3. This one is my personal favourite, written by a commentor on the blog rockybru:
“Simple logic: As an exporter of fuel, how can fuel price increase hurt us? Why, why, why?”
All the arguments boil down to one thing: that the protestors believe their fuel subsidies are a right, not a privilege.
Let me first say that it is incredibly naive to think that as a net exporter, Malaysia should be able to provide its citizens fuel at cost price. I may not be an economics major, but my “simple logic” is that every litre of subsidised fuel that is provided to Malaysians brings with it the opportunity cost of it not being sold on the free market. If prices were kept at their pre-hike levels of RM1.92 (S$0.81), every litre sold would lead to a an opportunity cost of S$1.19, since that litre could easily be sold in Singapore for (say) S$2. That’s a whole incremental income of 150%. Similarly, the citizens of Thailand, a net exporter of rice, suffer along (though not as severely) with the world as rice prices skyrocket. And to make matters a little worse, Malaysia is forecast to become a net oil importer by 2010.
If Malaysia were to put all its oil on the free market, the sheer amounts of additional profits would offer the country so much more in terms of long term benefits. Here’s food for thought: if oil were to stay at US$135 per barrel, the estimated amount of subsidies Malaysia would have to pay out could be up to RM45 billion - somewhere around 40% of total GDP. That’s RM45 billion to build a new public transport system, or to develop new Business Areas. And if you look back to 1999 since Mahathir introduced more wide-ranging subsidies, you could easily come up with a figure of around another RM40 - 50 billion. I’m no expert, but I’m sure a pretty decent transportation system could’ve been developed for that amount of money.
It is thus with some level of contempt that I look at how opposition politicians are taking advantage of the situation, playing on the emotions of the common Malaysian man. They lead protests, with moving rhetoric about how the fuel price hikes are unnecessary, and that they should be placed in power instead so that they can put things right. This, to me, is nonsensical, and if the opposition politicians really wanted the best for their country, they would stop stirring up emotions of their people and instead get behind their government. I feel that if they were really to succeed, and really do reinstate the subsidies of old, Malaysia will be in for tough, tough times ahead.
I think the protestors now really need to look at the situation at a whole, and realise that continued heavy fuel subsidies will only lead to the long term detriment of the country. Malaysia is lagging behind several of its regional counterparts in either growth rate or level of development, and if the right action is not taken, it will only fall further behind. Of course, it is difficult to look at the long term when you are struggling to survive, and I think that measures must be adopted to help this particular demographic cope. My view? Cut subsidies even more, and cut taxes for the lower income group.
Sometimes, the pain in the short term can only lead to sweetness in the long, and it certainly applies to Malaysia’s case.
Oh, and lastly, I really wish the media would give greater coverage to the situation - all I’m seeing is a lot of reports, not so much in the way of commentary. Thing is, I’m not even sure if the reports are balanced or merely trying to sensationalise the protests of a significant minority.
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In other news, besides helping me realise a lot of weight gain, my 4 and a bit weeks at my internship have made clear to me that I really, really do need a mentally challenging job for my long term career. I really enjoy it when I can’t figure things out, I’m quite the geek that way. On the other hand, when things get too easy and monotonous, I start getting all sloppy and disinterested.
Also, I appreciate that I really, really do need to make the right choice come this time next year. What’s the right choice gonna be? I wish I knew.
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