Friday, October 3, 2014

Subsidy Cut

So, effective yesterday, petrol prices at the pump have been raised to RM2.30 and diesel to RM2.20.

Ballsy move, and to me, completely unexpected. With the 20sen cut in the petrol and diesel subsidy, Malaysia is within striking distance of abolishing fossil fuel subsidies entirely – at least, at the retail level. We still have the gas subsidy to deal with, but that’s less important for a couple of reasons: gas is a cleaner fuel (no negative externalities) and there’s also less implications for the government budget.

Resistance, compared to the similar 20sen cut last year, seems to me to be a lot more muted this time around. Nevertheless, resistance there is.

Some of it reflects the understandable concern over the impact on the lower income group. But that’s what the cash transfer under BR1M is for; it’s even allocated under fuel subsidies in the government budget.

If support for the disadvantaged is the goal, subsidies for petrol and diesel are an incredibly inefficient and wasteful way to go about it. Most of the benefits of energy subsidies goes to higher income households, not the lower income group. An IMF study found, on average, the top 20% gain six times more from energy subsidies than the bottom 20%, and that petrol subsidies are the most regressive (i.e. the benefit climbs higher the higher your income level). Cash transfers are a far more efficient and effective way of supporting the poor.

Some have complained about the timing of the cut (here for instance), just as global oil prices have begun falling. But that completely misses the point –  the best time to cut subsidies is when prices are falling, especially with the fixed price mechanism we use here in Malaysia. The reason is that it makes the final adjustment to market pricing – and ultimately, that’s the goal – that much easier to achieve. If prices are high, you’re going to have many more and deeper cuts, with correspondingly higher pain.

I’m flummoxed by the mention of India and the UK cutting prices. That’s neither here nor there. In India for instance, the petrol subsidy is fixed and prices adjust in line with the global market. With global crude prices declining, so will the retail price of petrol in India. The flip side is also true; when global prices rise, so will the pump price. The UK has full market pricing, and in fact taxes the use of petrol quite heavily along with taxes on car emissions. 60% of the price of a litre of petrol in the UK goes straight to the government, and UK drivers pay the second highest level of petrol taxation (and highest for diesel) in Europe. I can’t believe people are bringing up these examples.

If, as I suspect, the price of oil continues to decline, there may not be any need to make any further cut in the subsidy and it’ll disappear naturally. We’re not that far off, as another 10%-15% decline should do the trick. That would mean we can shift to a zero-subsidy regime without any further pain, something which would not be possible without the present cut.

Lastly, there’s the idea that a more gradual adjustment would be better. I have some sympathy for this view, though more for political economy reasons than economic ones. A gradualist approach, say a 5 sen cut every quarter, would be easier to sell politically and more palatable to the public.

However, it doesn’t make a whole lot of financial sense, which shows you how irrational people actually are. Say that after the September cut last year, the government switched to cutting 5 sen at three month intervals instead of the one-time 20 sen cut that we actually saw yesterday. While that would have made the whole thing an easier sell, if you take the net present value of the cuts (alternatively, call it the opportunity cost) the one-time cut would work out more in favour of households, because it came at the end of the period.

So what’s on the table next? Long term I’d still like to see fossil fuel use to be taxed, because just getting rid of the subsidy doesn’t account for negative externalities. There’s also still the issue of the targeted and tiered subsidy scheme that’s been rumoured about for months now. Personally, I think that should be taken off the table. With prices so low and still on the decline, the relative subsidy between income groups would be so small that it would be pointless to put such a system into place. In any case, cash transfers are a much cheaper and efficient way to achieve precisely the same thing.

Beyond that, I think there’s finally light at the end of the tunnel of this sage – we’re close to finally being rid of petrol and diesel subsidies, for good and all.

77 comments:

  1. I don't think anyone will begrudge efforts by any government to remove fuel subsidies - provided the same government doesn't misspend elsewhere.

    Is it even conceivable there are people who won't see misspending happening these days because their intent is to sanitize policy moves?

    1MDB, Petronas and FGV are just small examples of how the process at the top runs counter-current to the process that affects millions at the bottom.

    There are others which if uncorked will conflare present sentiments further.

    What assurance do the people have that the pain they are enduring today will translate into a more reassuring future?

    But you all already know the answer, don't you?

    This post - for the young native who was eating a bowl of bihun yesterday morning. With nothing else in it.

    ReplyDelete
    Replies
    1. @anon 8.50

      I have never thought of reducing petrol subsidies as purely a fiscal matter. To me, these are two completely separate issues, no matter what the government says. Two wrongs do not make a right.

      Delete
    2. http://www.brainyquote.com/quotes/quotes/t/thomasszas399818.html

      Delete
    3. I think I can agree to 'two wrongs do not make a right'. There isn't a like button :)

      Delete
  2. Muted response on the surface sometime can be more lethal to the current government.

    Muted response may underline greater despair among the citizen.

    my fear is the majority will exhibit their anger during next GE.

    Dr Muz

    ReplyDelete
    Replies
    1. Dr Muz,

      That's at least three years and more away. That's why I think they're doing it now.

      Delete
  3. Hisham, can I get a source for BR1M being parked under fuel subsidies?

    ReplyDelete
    Replies
    1. Barry,

      http://www.treasury.gov.my/pdf/bajet/maklumat_bajet_kerajaan/2014/b11.pdf

      Pg 200, under accounting code 020500

      I've seen it mentioned elsewhere as well

      Delete
    2. Thanks. Are you assuming that "serta Bantuan Tunai" here includes BR1M? I'd assumed it fell under the "Grants and Transfers" bit.

      Delete
    3. Barry,

      Fuel subsidies also fall under grants and transfers

      Delete
    4. That would be news to me. I'm looking at the numbers now, "Subsidies" and "Grants and Transfers" are separate items in central govt current expenditure.

      Delete
    5. Barry,

      I think we're looking at different aggregations. Under the detailed budget allocation, there isn't a separate category for subsidies

      Delete
  4. just as global oil prices have begun falling. But that completely misses the point – the best time to cut subsidies is when prices are falling, especially with the fixed price mechanism we use here in Malaysia. The reason is that it makes the final adjustment to market pricing – and ultimately, that’s the goal – that much easier to achieve. If prices are high, you’re going to have many more and deeper cuts, with correspondingly higher pain.

    hi hisham can u explain this cz ur article is too advance for me. tq

    ReplyDelete
    Replies
    1. @anon 11.33

      What anon 12.07 posted below. If prices had stayed higher, there will be more subsidy cuts (higher prices of petrol) before we can switch to a market price system (i.e. zero subsidy).

      Delete
  5. I do agree giving cash assistance is more helpful to the poor and the timing of cutting subsidies. But what make most people worry is-cost of living. We do have low inflation in number, but reality it not even close. What's the point of giving more few hundred to the poor, and everyone(exclude rich) suffering higher cost of living.

    ReplyDelete
    Replies
    1. @anon 12.02

      You're confusing inflation with the cost of living. These are NOT the same thing. It's entirely possible to have zero inflation and a very high cost of living (Japan) or high inflation and low cost of living (indonesia). The critical difference is not in inflation, it's in the level of incomes.

      Delete
  6. in 2012, global oil prices is higher than prices in 2014.

    as a result, in April 2012, the unsubsidized price of RON95 is RM2.95/l.

    however, as of October 2014, the unsubsidized price of RON95 is just RM2.58/l

    that's a 37 sen difference!

    if we cut subsidy in 2012, that 37 sen will have to be absorbed by the people and business (ie higher price increase). hence, it is better to cut subsidy in 2014 when global oil prices is lower.

    Reference:

    2012: Harga Sebenar - Perlepasan Cukai Kerajaan) = unsubsidized RON95 price
    http://beritasemasa.com.my/wp-content/uploads/2012/04/RON95-VS-RON97-price.jpg

    2014: The current unsubsidised market price for RON95 is RM2.58 per litre
    http://www.thestar.com.my/News/Nation/2014/10/01/Petrol-Price-increase-20-sen/

    ReplyDelete
  7. hisham, one thing that puzzles me is that the unsubsidized petrol price in malaysia is still significantly cheaper than.. say.. the philippines where the price follows the market. do we have intrinsically cheaper petrol, or are our petrol subsidies understated?

    ReplyDelete
    Replies
    1. @anon 1.22

      I suspect it has a lot to do with dsitribution and transport. The main hub for refining in the region is in Singapore. It's closer and cheaper for us than it would be for the Philippines,

      In case you didn't know, Malaysia has 1) insufficient refining capacity to handle our own production and 2) our oil has low sulphur content and is thus very valuable on the global market. So we do quality arbitrage - we sell our (expensive) oil internationally, and use Middle East or other oil (cheaper) for domestic use.

      Delete
    2. Probably with tax also..

      Delete
  8. When we discuss about the IMF Report we often fail to mention that the fuel subsidy does not only benefit the general public with a cheaper pump price. The subsidy keeps in check production costs and cost of doing business that translated into cheaper goods and services. This is one of the objectives of the fuel subsidy. Therefore, by removing the subsidy, inflation creaps in and affects mostly the lower and middle income groups. Whilst BR1M is touted as a targeted subsidy approach, it fails to address the inflationary impact from the initial decision to remove the subsidy and another round of general price increase brought about by the BR1M itself.

    ReplyDelete
    Replies
    1. @M Farhan

      Just as a blanket subsidy is an inefficient and wasteful way to support lower income households, it is just as inefficient and wasteful a way to support businesses. A blanket subsidy will benefit both large companies and small, and will not distinguish between those who depend on distribution and transportation networks and those who do not. And for those who do benefit the most, they will not have any incentive to improve efficient usage.

      On the second point, that's why I see a further increase in the BR1M in next week's budget announcement. As for inflation, as with anon 12.02 above, you are confusing the price level with inflation. Another consideration: a triggering of inflation such as you describe is predicated on being in a closed economy at full employment. We're not a closed economy.

      Delete
    2. @M.Farhan

      "The subsidy keeps in check production costs and cost of doing business that translated into cheaper goods and services."

      If we goto Tesco
      http://eshop.tesco.com.my/en-GB/Product/BrowseProducts?taxonomyID=Cat00002142&pageNo=1&sortBy=Default

      ikan siakap cost RM14/kg
      filet salmon cost RM40/kg

      subsidy goes into reducing cost of transportation+storage for both food items. but what's the point of subsidizng salmon? even middle income group don't eat salmon. while it is true that subsidy leads to cheaper goods and services, but big portion of that are non-essential goods and services. I think that is a big flaw

      Delete
  9. Salam. Do we hv any data ( ie RM/year ) how much is the govmt subsidizing gas for ipps ?

    ReplyDelete
    Replies
    1. @mohamed hazali

      Zero.

      Two reasons:

      1. The gas subsidy is borne by Petronas, not the government i.e. it's off balance sheet

      2. Subsidy pricing for gas is passed through into lower electricity tariffs. The problem with IPPs is not subsidised inputs, it's the built in margin

      Delete
  10. The assumption is that the govt can better use the subsidy for beneficial projects compared to the rakyat who will have to reallocate their money to pay for fuel, as public transportation is poor in Malaysia (relatively inflexible demand for fuel).

    ReplyDelete
  11. I think the anxiety comes from the expectation of price increase across the board.

    The hardest hit will be middle income group who can't get BR1M.

    This is the sentiment I heard. It does not help that our pasar malam pakciks and makciks raise price as high as rm0.50 per item. I feel that some of them does not agree to raise the price, but I suspect they do it anyway because peer pressure - even Pasar Malam have cartel.

    ReplyDelete
    Replies
    1. The government can help the middle income group by reducing their income taxes.

      Delete
  12. Assalamualaikum mr. hishamh,

    I always think that price of goods and services in Malaysia increases steadily irrespective if there is a fuel subsidy cut or not. The cut after another is just a bonus for the business to justify another price increase to pass the cost to the consumer as for them to keep their margin as high as ever. After all, most of the Malaysian consumer will always confront the government instead of the business.

    This scenario in my opinion is due to the lack of consumerism value among us to give appropriate pressure to the irresponsible business who charge unreasonable price, provide unreasonable services and many more unethical business conduct which abuse consumer. Thats why we still have a broadcasting co still making a huge profit eventhough they are offering a no broadcast services during rainy days and many other similar kind of businesses.

    It is not the government duty to fix price rather a demand and supply principle. Perhaps you could kindly comment on the role of consumerism to curb increase in price of goods and services or a piece of article on this. After all as a consumer, we should know how to deal with business charging unreasonable price or offering riddiculous goods or services. The cash flow is always the key. A disruption on the cashflow forafewmonths due to boycotting by consumer will give them a very clear signal to be reasonable.

    Regards

    Budak jawa

    ReplyDelete
    Replies
    1. @Budak Jawa

      Absolutely - vote with your wallets. Stronger competition would also have a mitigating impact on business margins

      Delete
    2. err @ Java boy, .have you heard of cartels or straightforward monopolies...ergo no consumer choice......

      Now I will have a cuppa of Java...hehehehe

      Warrior 231

      Delete
    3. @hishamh
      i would agree on warrior 231 on cartel or monopolies which results in no or minimum competition in malaysia. Dewan perniagaan xxx, persatuan penjaja yyy, blablabla and the list goes on.

      @warrior 231
      we talk about cost of living. there are a lot of items under the cost of living. of course not every things could be choosen, but surely still a lot more items could be. lets start with astro if you wanna know the power of consumer. and just look at what happen to mcd. after all market is all about demand (consumer) and supply (firm).

      Budak jawa

      Delete
  13. Kerajaan kuranglah pendapatan sebab harga export kurang. Jadi, tampunglah dgn kurangkan subsidi. Tulah. Terlalu bergantung lagi dgn duit Petronas.

    ReplyDelete
  14. Hi dude

    My response: Hahahahahajahahahahahahahahahaha....arwah...Am..choking already....oh the tummy ache.....Hahahahahajahahahahahahahahahaha(breath) hahaha... Good one mate, made my day.

    Anyway,selamat Aidiladha to you and the family.. May He bless you all always.

    Warrior 231

    ReplyDelete
    Replies
    1. @Warrior

      A belated Eid mubarak to you and yours as well

      Delete
  15. hello,

    can u comment how prices of goods in US does not seem to fluctuate much/still stable even though pump price floats in accordance with crude price.

    ReplyDelete
    Replies
    1. @stress-unplugged

      When businesses are confronted by volatile input prices, they manage by building in a sufficient price margin to ensure they remain profitable regardless.

      In any case, Malaysia and US inflation rates over the long term have been broadly similar.

      Delete
  16. So when subsidy got slashed since the top 20% gain six times more than the lower 20%, is this a good thing? The top 20% dont give a rat's ass whether the price go up or down, they still gain. You telling me that just because ananda or syed mokhtar gain 6 time more, slash the subsidy? Just because some cock and bull research by IMF say so, doesnt make it true. These were the guys who wanted to screw this tanah melayu and the great mahathir said fuck off and now we're taking their research as gospel? So tell me, who suffers more due to the slashed subsidy? The top 20% or the lower 20% when all shit under the sun starts to go up in price? The government has failed. Better the subsidy than giving najib extra cash. We all know he'll just go and stash it in the cayman like that shit 1mdb sunk fund. If ur an economist, im not surprised by this write up. Most economists i know are plain stupid will justify their shit with write ups with fancy words. U by any chance good with excel or powerpoint? Heard najib loves these types of guys.

    ReplyDelete
    Replies
    1. IMF's findings is mirrored by local studies. For exp, iISD's A Citizens' Guide to Energy Subsidies in Malaysia cited a local finding that 75% of petrol subsidy goes to higher income group. The rest share the remaining 25%.

      Subsidy reduces price of all goods and services, including luxury and non-essentials. Shifting subsidy to cash transfer for the poor can make essentials and daily items more affordable for the poor than they currently are today.

      If we are convinced Najib will stash any money generated from extra revenue and cost savings, then not just subsidy, we should demand income tax, corporate tax, summons, PEMUDAH etc be abolished. Otherwise, we should look at cost savings and revenue generating policy and corruption prevention as separate areas not contingent of each other.

      Delete
    2. @Spende jimat

      What anon12.24 said

      Delete
  17. The cost of living in Thailand, Vietnam and Cambodia is much lower although the fuel prices are much higher.

    ReplyDelete
  18. let market forces dictate pump prices. crude price up, pump price relatively high, crude price down, pump price relatively lower. apa susah-susah subsidi semua? Rakyat mahukan mekanisme harga yang menampilkan transparansi. itu aje....simple...

    ReplyDelete
  19. Agreed in abolishing fuel subsidies. Norway, although a major oil producer, taxes fuel heavily.

    It is important to point out in the Malaysian context there is a perceived trade-off - cars are heavily taxed (especially on higher end makes purchased by the rich) and in return the tax is 'refunded' via fuel subsidies. Arguablely also a form of indirect aid from the rich to the poor. In the UK, cars are taxed 21%. Though fuels is taxed heavily, there are virtually no toll roads in the UK as motorways are funded by this duty. Car ownership remains overall expensive for Malaysians. Cuts in fuel subsidies should be commensurated by reduction of car duties.

    ReplyDelete
    Replies
    1. @rebung

      Duties are not a big factor in car pricing:

      http://econsmalaysia.blogspot.com/2013/06/how-much-would-car-prices-come-down-if.html

      Delete
  20. "2 million Malaysian families surviving on less than RM3,000 a month" according to The Star website.

    How did this happen.

    Are these the "unfortunates" who have "fallen through the cracks" or is there a glaring mismatch between their education and skills sets and the requirements of the modern workplace?

    All this talk about the "rationalisation of subsidies" will cruel and meaningless if there are still hard core poor and disadvantaged in the country.

    ReplyDelete
    Replies
    1. @bee farseer

      Check the trends:

      http://www.epu.gov.my/household-income-poverty

      Delete
  21. I'm all for subsidy rationalization but like many of your readers, i am also deeply disappointed in the leakages and wastage of public funds described in the auditor-general's report each year. Does the government of the day have the political will to battle entrenched, nay, institutionalised corruption? I won't bet my life savings (or what's left of it) on it.

    ReplyDelete
    Replies
    1. @dukuhead

      http://econsmalaysia.blogspot.com/2013/10/public-waste-and-public-choice.html

      Delete
    2. that is true hishamh, some Malaysians demand better and more efficient government but at the same time they want their subsidies! I give the example of my office colleague who is an ardent opposition supporter. He says the government MUST continue to subsidise fuel because we as tax payers have paid for these subsidies. Then he goes all out to support "Bersih" and other like causes. Which gives one pause to reason that some of these people cannot think rationally. You cannot have your cake and eat it too. Malaysian have to learn to be more mature politically and intellectually. It is easy to just slam the government because that is what everyone does, but can you back up your arguments with facts and figures and take a good look in the mirror first?

      Delete
    3. @dukuhead

      I think that's a cue for Michael Jackson!

      Right, a lot of people don't realise that actual taxpayers number just 10% of the overall workforce

      Delete
  22. Subsidy rationalization is good move and save the government money but how about the government spends hundreds of millions of ringgit on clueless consultants, PR agencies and e-con advisors?

    ReplyDelete
    Replies
    1. @anon 10.17

      As per my reply to dukuhead above

      Delete
  23. Hello Hisham

    Can you comment on these posts by Institut Rakyat regarding BR1M. Love to see ur data on the matter.

    http://www.themalaysianinsider.com/malaysia/article/rm490-million-gone-as-putrajaya-overpaid-for-br1m-says-think-tank

    http://www.institutrakyat.org/br1m-hujah-tanggung-rakyat-3-bulan-tak-betul/

    http://www.institutrakyat.org/sejauhmanakah-br1m-membasmi-kemiskinan/

    ReplyDelete
    Replies
    1. @anon5.28

      1. There's a whole bunch of contradictory numbers out there, and I cannot confirm which is the correct figure. The 38.8% for 2012 appears to be the most accurate. Note that EPU and DOS data should be the same, as the source is the same (Household income and expenditure survey conducted by DOS):

      http://www.statistics.gov.my/portal/images/stories/files/LatestReleases/household/HIS_2012_Eng.pdf

      2. Absolutely right:

      http://www.statistics.gov.my/portal/images/stories/files/LatestReleases/household/HES_0910.pdf

      Average household expenditure already hit RM2190 in 2010.

      3. I'll be generous - call this one a political piece. Otherwise its almost wholly inaccurate. Take the first point for instance, about race being embedded in development policy.

      From the Second Malaysia Plan:

      "The Plan is a blueprint for the New Economic Policy. It incorporates the two-pronged objective of eradicating poverty, irrespective of race, and restructuring Malaysian society to reduce and eventually eliminate the identification of race with economic function."

      The rest of the "points" aren't much better.

      Delete
    2. I should add:

      One possible source of discrepancy between the HIES and the number of actual BR1M payouts is that the HIES includes unearned income such as imputed rent (see here for a discussion), while BR1M eligibility is validated at the back end by cross-checking with LHDN and EPF i.e. earned income only. Given the magnitude of the difference (as much as 20%-25%), some excess over the HIES number should be expected, though without the detailed data, I can't tell you by how much.

      There are also differences between the definition of taxable income (LHDN; includes non-wage income) and income liable for contributions (EPF; includes only employee compensation), which has led to some being given BR1M who shouldn't and some not getting BR1M who should. But this kind of threshold effect is normal and should be expected.

      Another issue is that of workers/proprietors in the non-formal sector or workers in the formal labour force but with employment contracts structured as private contractors (e.g. bus and taxi drivers), where income cannot be verified through either LHDN or EPF. That covers nearly a quarter of the labour force.

      Delete
  24. Are "subsidies" the Malaysian equivalent of Emperor Nero placating the restive Roman citizenry with "bread and circuses"?

    We all (at least those who studied Roman history) know what happened to Nero's version of populism!

    Is the subsidies regime in Malaysia going to be a " bread and circuses" thing, an entitlement even?

    It's going to be hard to get the rating agencies not to call time on this.

    ReplyDelete
    Replies
    1. @bee farseer

      Are you talking about subsidies, or BR1M?

      Delete
  25. Back from a short hop to the land of the rising sun right after korban, it is good to know there many ways to tank an economy, the easiest of which is by crimping consumption spending through ill timed taxation:

    http://www.washingtonpost.com/world/asia_pacific/japans-abe-must-deal-with-grim-economic-news-and-a-muddled-strategy/2014/09/19/444502f1-220a-45bc-9c04-c3c1778825a2_story.html

    So Abe is learning the hard way that once profligacy sets in, via mindless binges, leakages or otherwise, its is very hard to undo it unless you do some bloodletting aka financial sepukku as my pal Kobayashi jokingly remarked.

    Subsidies the much maligned animal in the local context is actually not a bad thing really. Especially, considering how one adds RM 100 to monthly costs via a fuel hike and try to alleviate that with a roughly RM 80 BRIM monthly refund (assuming a annual payout of RM 900) which still leaves a net deficit of roughly RM 20 in lost spending. Take out the multiplier and one can figure out the opportunity costs to the economy due to mutilated discretionary spending.And I am talking about a poor household here roadblocked for life in terms of social mobility by creeping wages being outrun by spiraling costs that leap and bound in gay abandon...hahaha

    Then we can rub salt into the gaping financial wounds of middle, low middle and poor Malaysia by talking about negative externalities and by imagining carbon taxes and the like...hahahaha. Come on policy wonks, get real for a change, hop on your Harleys, ride through the boondocks and live a day with rural Malaysia (of course paying them a princely sum for that "privileged access" to insider knowledge courtesy of their warm hospitality) and try to fathom what they really feel and think of it all...

    And I am not talking about semi suburbias yet...much less the slums in our cities....... you know the places where roughly 55% of the proles dwell:

    http://www.themalaymailonline.com/malaysia/article/what-does-it-mean-to-be-middle-class-in-malaysia

    Warrior 231

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    1. Well, I've just got back from a spot of R&R in Perth (including a trawl through the wineries of Swan Valley) and have had an earful of opinions about Tony Abbott and the Aussie economy.

      It's amazing the number of Malaysians (and Singaporeans) one meets in Perth - residents, students and tourists. All with decided opinions (the Malaysians at least) of where the country is headed and their opinion of it's socioeconomic policies.

      More on this later....

      Delete
    2. @warrior

      Seriously?

      RM100 in increased fuel costs implies a monthly usage of 500litres. That's about the fuel consumption of my household (three cars, all 2000cc and above, average commute 2-3 hours daily). Average monthly Malaysian household consumption (per EPU) is less than a third of that, the median level is lower still.

      500l? That ain't no poor household.

      Delete
    3. I think you meant 500 liters per year not per month. A RM 100 increase per month only get you 43.47 liters of RON 95....

      Am I missing something?

      Zuo De

      Delete
    4. @Zuo De

      RM100 extra per month = consumption x change in subsidy (RM0.20 per litre)

      That solves to consumption = 500litres

      Delete
  26. I read that even after the latest round of fuel subsidy cuts, the government will be footing around RM21 billion a year in subsidies (I am not sure whether this is for fuel only).

    Surely, this isn't sustainable?

    It does not take a rocket scientist to realise this.

    The IMF has a point when it says that fuel subsidies should be eliminated and the funds saved should be spent on improving social safety nets for the poor and marginalised.

    ReplyDelete
  27. First things first kiddo

    Make of car and consumption:

    Proton Iswara A/B, M, 2000, 60%CT 40%HW 9.8km/l

    Source: http://forum.autoworld.com.my/index.php?s=16d550d0acc29a5de5823dc7c22b9306&showtopic=22279&pid=1868345&st=330&#entry1868345

    Traveling distance from home to workplace (22 days per month)

    Tanjung Malim to KL and back : 82 Km x 2 = 164km

    Source: https://www.google.com.my/search?q=distance+from+Tanjong+Malim+to+KL+&ie=utf-8&oe=utf-8&rls=org.mozilla:en-US:official&client=firefox-a&channel=np&source=hp&gws_rd=cr&ei=enc2VMz1DMSOuAThv4DIBQ

    And just before anyone starts yapping about public transport, just click on the cute bus/train icon on the same site and enjoy the delay……

    And thenceforth I will proceed slow and easy……….for keepsakes…..hahahahaha:

    So total mileage /distance per litre = 164 /9.8km will generate fuel needed per day as = 16.73l

    At old rate : 2.10 per litre

    16.73 *2.10 * 22 = 771.50

    At new rate : 2.30 per litre

    16.73 * 2.30* 22 = 846.50

    Now compute the difference = that’s RM 75 flat (after all the rounding) + plus no one pours petrol cukup makan style…hahaha

    And that’s just the work part of it for starters. Kick in dropping lil daughter at school in the infernal hours of the morning and picking her up from the sitters in the evening…will yield the RM 100.00 plus I mentioned and I haven’t factored in all those nitty gritty little journeys or pesky detours one is compelled to make plus I have not even mentioned the remaining 8 days of the month. You reckon poor dad, miserly daughter plus grumpy grandma are gonna stay put cooped up in their house, stare at the leaking ceiling and talk about the ontology of leakages…hahahaha .

    You think I am bluffing…well trawl semi and rural or even urban Malaysia for a change and see how many jalopies from the old millennium are still running in the new one, then we can have a conversation over Negi Toro Hiyayakko (chilled tuna with tofu) washed down with Shirayuki fresh sake or palaver over some short-rib wangyu teriyaki and a glass of Cho-tokusen Junmai-shu Akafuji…..hahahaha

    And please everyone don’t start with why oh why he doesn’t move to KL for pete’s sake………..

    And there are many doing the Behrang, Bukit Beruntung, Seremban, Nilai, Bentong blah blah blah KL daily run and cursing themselves blue black for ending up on the short end of the bargain.


    Warrior 231

    ReplyDelete
  28. Warrior,

    Yes painful but I am for subsidy reduction. Malaysians need to readjust somehow, drive slower, smell the roses, inflate the tyres more, etc etc .....

    Ahh cannot win them all.

    Zuo De.

    ReplyDelete
  29. Zuo De, the gap between the subsidized price and the actual price has narrowed considerably to the point where any fuel subsidy rationalization would merely have a derisory effect on fuel consumption or wastage, subsidy or no subsidy.

    Ex- September whatever before the new rate kicked in, the 2.10 was roughly 81% of the actual price at 2.57 : 2.10/2.57 X 100

    Post September whatever, it amounts to 90% = 2.30/2.57.

    Whether at 81% or 90%, folks are still going to be careful as to how they use or maximize the precious commodity. It is still money outta the pocket whether its 770 per month pre or 850 per month post.

    All the talk that subsidies on fuel distort the price mechanism and skews it in favour of the rich is poppycock. You can jack the pump price to RM 10 per litre and the affluent will still pay without batting an eyelid, try selling that to the middle incomers or the poor on fixed wages especially when you don’t have an efficient seamless transport system in place.

    Ask any Tom, Dick and Harry and they will say that they will gladly fork out RM30 for a daily commute from TM to KL provided they get to work with half an hour or even 15 minutes to spare.

    After all, using the real world example I gave you above, that would just amount to RM660 (30 x 22) with a spare RM200 to fatten discretionary spending if one is on a 22 day per month work schedule. And I am not talking about hidden savings in the form of parking costs, wear and tear, maintenance, man hours lost on the road etc.

    And take out the multiplier if 66% of all those savings (lets say 200 outta 300 ( fuel +parking costs saved) are thrown back into the economy .

    You don’t cut subsidies just because some effing IMFer says it would be good for ratings, fiscal consolidation blah blah….. you cut it when you are sure there wont be a backlash to consumption spending cos you know a booming economy will yield more revenue especially when you have a good expansive GST model about to be emplaced plus you do it once you know all the planned transportation infra are going to fall into place soon (talking of which why not a Penang Kl link to the HSR to Spork, after all that would easily tap into the commute corridor all the way up northwards (KL as focal point), in the US for example, people as far as Baltimore or even Boston hop on trains daily to New York or even in the UK where a Manchester – London commute is normal as is Osaka-Tokyo on the Shin in Jap ) to cushion the blow.

    Given all that, subsidy rationalization is a quasi tax on the consumer especially when that increase in individual expenditure is not offset by a complementary reduction or "infusion" elsewhere, period.

    Warrior 231

    ReplyDelete
    Replies
    1. In a nutshell, therefore, you are saying that continued fuel subsidies are justified because Malaysia's public transport systems (especially in KL/greater PJ/Klang Valley, Penang and JB/Iskandar) are basically abysmal?

      That's cockamamie logic any way you look at it.

      Instead of taking the federal and state governments to task for not investing in efficient and cost-effective public transport systems, you have chosen to beat the drum for continued fuel subsidies on the grounds of "social equity" and the adverse knock-on effects on private consumption if discretionary income were to be hit by increased fuel bills up and down the value chain.

      This despite the fact that we have a living laboratory of sorts next door in Singapork on how to address the public transport conundrum.

      So, let's call a spade a spade and say that the governments' (federal and state) public transport policy has failed and that Malaysians are having to deal with the consequences thereof.

      Delete
  30. Since you filched out “cockamamie” from your esteemed intellect, let me trundle out “numbskull” and other stuff to liven up this response, POS, for all manners are off the table now.

    Your erudite prose cannot disguise the fact that you are a moron, a numbskull who cannot read right and least of all, think right. Read carefully and clutch your crotch while doing so lest you get overexcited and wreck the keyboard as you post such inane comments. Go reread it again slowly and carefully sans all your agitation to get me. And remember to engage your brain upstairs rather than flipping on your filthy switch downstairs

    You must be a closet schizo too in your secret life…hahaha. You see, blithering nutcase, after berating me for stating the obvious implications arising thereof, you reveal your idiocy with your last paragraph which sort of contradicts whatever you said before. No surprises there, for you don’t know to think straight much less as to what you want. You must be the same type who raised banners against KIDEX and now DASH to preserve your effing property value and 10 years later with values quadrupled and money banked in after profits made lambast the government for poor infra. You must be the reason why Khalid Ibrahim got the sack after he provoked you with his KIDEX move……the moment he did that he became pariah non grata for hippos like your ilk, you know the kind that must have their, their wives and kids 'bs' and 'cs' ensconced in comfort, the kind who think that once they buy a sliver of landed property, they automatically own everything beyond their front-yard the air included

    If your kind was in Singapork you would have ended up like Chiam See Tong, who was thrown into prison, as Singapork raped his beloved Nanyang and Chinese education…..that’s how you progress…get rid of irritating selfish vermins like you, for the Porkian regime knew that the moment the likes of you are serenaded, that is the end of the story for the larger good.

    The problem with nincompoop hippos like you is that they really believe their own smart aleck press forgetting for a fact that in their haste to publish that self discovery and bask in all the ensuing limelight, they are actually parading their innate imbecility in all its naked glory. Short of mass “lobotomising” the pretentious, poseuring, condescending psudo-intellectuals and sundry charlatans who think they know the panacea to everything walking, living or throbbing, just because they are certified eggheads or otherwise, there is no hope for the development of an informed, constructively critical society in this beloved country of mine.

    In fact, Malaysia is doomed for being burdened with dross like you who think they are god’s gift to civil society when they have no inkling as to what informed civil discourse is all about, how policies should be formulated to attain optimal outcomes, how to balance liberal democratic inclinations with public welfare etc etc.

    Think about it as you clutch your crotch and down the next glass of Don Perignon in some swank upmarket Bangsar joint that prides itself as some gathering hole where petit bourgeoisie pseudo-intellectuals like your goodself blather about life like some desperately wannabe Krugman, Galbraith, Friedman while all the while seething pathetically in the knowledge that you lot are nothing more than piffling, piddling pipsqueak nonentities who wont draw a second look on Main Street. Alhamdullilah, I don’t have that baggage to tote around with daily.

    And just for the road, tell me where are all those effing dogs who talked about peak oil blah blah blah:

    http://www.themalaysianinsider.com/business/article/oil-falls-to-lowest-since-2010-as-opec-ups-supplies

    probably already in the dump yards of history like all those Y 2Kers and soon, global “warmists” or climate alarmists

    Now that will do and get outta my sight, stupid fellatist.

    Warrior 231

    ReplyDelete
    Replies
    1. That was some broadside, Warrior.

      I agree with you on the removal of subsidy because it will not affect the booming economy and not because some IMFer say so or some western investment bankers say so, amen.

      Zuo De

      Delete
    2. ZuoDe,

      That broadside will be immaterial in a couple of years especially if artsy fartsy liberals and their airy fairy poseur fanboys and girls continue with their hocus pocus blinkered ways.

      What is going to happen?Well, Douglas Alexander in this article has a premonition when he speaks about the Scotland referendum:

      http://www.ft.com/intl/cms/s/0/9ec3fdac-5085-11e4-9822-00144feab7de.html#axzz3FiAuQQAT

      Yup....the extremist fringe gains the balance of power at the polls and hold all of us sane ones, who are desirous of a secular Malaysia premised on the 1957 Constitution and Social Contract, to ransom. It doesnt need a rocket scientist as to where the fringe will come from in Malaysia but the smart alecks are sure sowing the seeds for precisely that scenario, wittingly or unwittingly.

      Warrior 231

      Delete
    3. The Warrior cleverly (or deliberately) avoids the point by raising all sorts of extraneous matters?

      The simple question is this: has the plethora of toll highways and "dispersal links" encouraged Malaysians to stop using their cars and motorbikes and hop on to public transport to get to school, to work, for business or for a night on the town to swill down Dom Perignon, Krug and Moet?

      Ask the JBites if the EDL has made them any more inclined to use the public transport system in JB.

      People like you, who presumably are at the higher end of the socioeconomic ladder don't realise that the ordinary rakyat use public transport, not because it's efficient, fast and effective, but because they can't afford to own and maintain a car.

      So, what are you trying to prove here?

      Zuo De - I'd love to see what you will say when some pimply analyst in Moody's or S&P downgrades Malaysia's credit ratings with a stroke of the pen. Maybe the consequences will be immaterial to you, eh?

      Delete
    4. annon @ 8:35am, what with you people so taken by the westerner??? Do not forget these Moody, S&P and other western rating agencies were the cause in the massive fraud of the sub-prime loans!!!!

      Please you have a brain think a bit deeper for yourself and not rely on these fraudsters.

      Zuo De

      Delete
  31. Part 1

    Well I know who is this goddamned SOB POSseur is. I should not dignify this buttworm with a comment but this is a good chance as any to tell off this filthy unwashed a-ed pigface, you know the kind that gloats about its superiority when it is all the while wallowing in pondscum.

    So who is this?None other than that effing scumbag of a douchebag Pasir Ris, Singapore based pig farmhand who is trying act funny once more, You know the one who stalks me under multiple nicks until it ran out of ideas and was so mortified by its humiliation it now skulks anonymous hahaha.

    A typical smart aleck know it all IMFer (not the financial variety, mind you) whose condescending spiel pathetically hides his childish desire for revenge. Well POS, I am not going to play along . I will not satiate your desire that I call the government out. You think I am stupid to fall for your race baiting. So go back to my original and read it again with your brains engaged to find the obvious….hahahaha

    You boleh pergi mampus for all I care. In fact, why don’t you just do that? Throw yourself off a cliff, or off a skyscraper or under a speeding truck or a runaway train….you types are better off dead for you make the world a horrible place…You are the same type as those IS kaffir bastards who love beheading innocents cause they cant get over the fact that they chickened outta circumcision a long time ago…..hahahahaha. It is poor groveling scumbags like you that will speculate on anything they don’t even know about like the stupid Emirati Tim Clark on MH370 when he doesn’t have a clue about technicalities or even a basic understanding of what a handshake means. Next thing, they will say Datuk Seri Najib shot the thing outta air with a MANPAD! Poor fella that Najib….him having to get all the shit from effing losers like you!

    It is scumbags like you, pigface who thumb down DASH, KIDEX to preserve your property value and ten years down the road blame the government when traffic is choc a block down his effing high class street. Itu jam bising macam anjing gila bila dah kena kat batang hidung. It is slimepoops like you who keep blaming Mahathir and the past for everything gone wrong. Poor things trapped in the past cos they are too scared to live in the present….hahahaha. It is pathetic bastards like you who will twist, lie and pretend just to score cheapskate brownie points.

    Dei liar , now I will call you out on your lie regarding vehicle affordability and public transport. All those Yanks must be poor Joes and Janes indeed haahahaha:

    In 2013, Americans took 10.7 billion trips on public transportation - - the highest in 57 years.
    Since 1995 public transit ridership is up 37.2 percent, outpacing population growth, which is up 20.3 percent, and vehicle miles traveled (VMT), which is up 22.7 percent.
    source: http://www.apta.com/mediacenter/ptbenefits/Pages/default.aspx

    You are gonna say cut and paste right? Well, all my informed comments are backed up with facts not personal madcap rants or musings while yours are just subjective, unverified farts generated in your infernally filthy bowels and your diseased imagination, you devil’s spawn!.

    You want to comment about my post..come armed with facts not IMFing lies…you either get it, pigboy or you get lost.

    Warrior 231

    ReplyDelete
  32. Part 2
    This is the self same bastard b*shafter who will affect concern about ratings but who will creatively manipulate his income to avoid taxes. And if he is so concerned about ratings…then how come S&P and Moody have held their horses for so long:

    http://www.themalaysianinsider.com/business/article/malaysias-long-term-economic-prospects-remain-favourable-says-moodys

    You think pipsqueak Fitch call the shots the world over…hahahahaha. I have no respect for RAs as I have averred in this blogin a long exchange with HishamH before so whatever ratings they assign (good or bad) is laughable. They are as likely to accord triple A to money launderers and junk bond to people they dislike.

    Take the case of Indonesia…a decade or so ago it was below investment grade that no one wanted to touch it…save a discerning knowledgeable few like yours truly, the rest is history.:

    http://www.bloomberg.com/news/2012-01-18/indonesia-sovereign-debt-rating-is-raised-to-investment-grade-by-moody-s.html

    In fact, Indonesia was never a chronic defaulter as even the RAs knew that:

    https://www.moodys.com/sites/products/DefaultResearch/2007100000522782.pdf

    You know you are on a winning bet cos Indonesia is an exporter of raw materials to a booming China and the globe over so sooner or later…things fall into place when everything is put right financially.

    Kalau bodoh macam u ikut rating agency mampuslah sampai bilapun pigfarmhand jugak

    A mere 1.1billion saving on fuel subsidies is going to knock chickshit outta a mountain of deficit. It can be as easily done by canning 500m to certain education systems and a 500m slash in the sports budget. But tax the consumer and he is gonna save, shift his spending, reduce expenditure, do whatever to offset the added costs. The same applies to industry with the diesel thingy…worst comes to worst, a factory kicks out 50 workers and life returns to normal for it…but not the workers and their families……..you see the point mother efffer. But that’s not my concern anymore as is yesterdays’ budget. Don’t have the time to give a damn anymore…..

    So quit your madcap rants and your donkey brays. You are an ignorant, stupid, moron. An imbecile incapable of thinking critically let alone straight. All you are capable of and good at is feeding your pigs and milking them…hahaha….that is your station in life as are other stations for all those smart aleck wannabes of your ilk. Like you, they became good through robotic memorization and slavish rote learning…nothing more or less…so accept your stations in life and quit heaping blame on the government for you haven’t done anything at all for the country to deserve even that right…Understand?

    And one last warning, don’t tangle with me again…unless you come prepared…for the next time I will unleash the obscenities even at the risk of being banned…for I have had enough of moronic Malaysian POSters like you.

    Warrior 231

    ReplyDelete
    Replies
    1. Oh, really?

      So, when Modi talks about doing away with diesel subsidies in India or Jokowi muses about canning all fuel subsidies in Indonesia, they are merely mouthing off?

      So, who gives a damn if India and Indonesia are way poorer than Malaysia?

      The Modi and Jokowi administrations have probably got their economic logic all wrong, according to your worldview.

      But it's no skin off my nose. Time will tell which countries will make a go of it, which countries will plod along and which will be relegated to the sidelines.

      Let's see who is laughing then.

      So, unleash the obscenities, mate. They amount to crap all in the great game....

      Delete
    2. Incidentally, I just spent a few fun-filled days in KL....it's amazing what the purchasing power of the Sing Dollar can achieve - hahaha.

      Anyway, while spending quality time with friends in the ritzy watering holes of the KL Hilton, I took note of the those who patronise said outlets for a spot of wheeling and dealing, if you know what I mean.

      It seems that these types are racially heterogeneous, which seems to show that wheeling and dealing in Malaysia is a ubiquitous pastime.

      (incidentally, there's also the condo "mania" in Johor Bahru), but that's another topic for another day as some very, very sensitive issues are involved - as certain bloggers have pointed out).

      Delete