Thursday, June 5, 2008

the petrol price, greener cars and railways

"...the increase in petrol price should be in smaller steps instead of a whooping 40% overnight; the income per capita to petrol price ratio in Malaysia is unreasonable; the govt. should have a better control over the distribution of the petrol in view of the price hike; the govt. did not consider a holistic compensation for increase in petrol price; there will be a domino effect..."

I think almost all blogs in Malaysia will be about the increase in petrol price today. But I think my stand on this issue will be different from the rest, because I'm in favor of the price increase!

Yes, all the arguments against the price hike has its merit. And as a consumer myself, I can feel the pain too. But from a country point of view, it was necessary.

For long, our country's economy has relied on exports of raw material. In particular, oil export has proven to be a lucrative business. However, our dwindling oil reserves means that we can continue to enjoy this business for only another 10 years (or so). This means we need to plan ahead and 10 years is pretty short from a country's economy point of view.

For every cent of subsidy in petrol price, we are in fact taking away funds that could be use to prepare our country for the years after our oil reserves are depleted. The profit obtained from the price hike should be invested in building infrastructure, transportation and help building more research centers and improve our university such that we are still competitive when our oil reserves are gone.

The ratio of income per capita to the petrol price in Malaysia is obviously unreasonable and the price hike will definitely have a short term impact. But to improve this ratio, the govt. have to either reduce/maintain the price or to improve the income per capita. As of the current situation, it'd be difficult to improve the income per capita without having to resort to the increase in petrol price. Hence, this price hike is a necessary short term pain for a long term gain.

...

I have a proposal, which will perhaps kill two birds with a stone - the environment and the petrol price hike. I'd like the govt. to exclude all hybrid and electric cars from the import tax. Encourage car manufacturers (including Proton) to produce and sell green cars. This may just work in Malaysia because our car import tax is ridiculously high. And by taking away the import tax, you can probably buy an Honda Civic hybrid car for around MYR90k.

Again, in short term, it may hurt. This policy may hamper our local automobile industry as they try to adjust from selling conventional cars to electric cars. Malaysians will also be skeptical about such technology. But I think it's a good time to start to change. I hope this, could be the first of many steps that the govt. would take towards a greener society.

...

This petrol price hike could be a good thing for Malaysians, really. But if and only if the profits from this increase in price is put into good use. And knowing our govt., this should be our grave concern. Out of the 70 cents increase, how much of it will go to corruption and how much will go to developing our nation? Unfortunately, without transparency, we can only hope.

If the funds are used to build another twin towers, then please "kill me". I'd rather if the govt. use the funds to build infrastructures that could promote economic activities, to build things that will be catalyst to economic growth. For example, improving our transportation system, communication system, research centers etc.

Another proposal I have here (which YTL has already proposed something similar) is to build a high-speed train that connects our major cities - KL, Penang, JB and possibly to Singapore too. The main purpose of such a train service is not because that these routes are lucrative, but because by connecting these cities we are creating a synergy for our economy.

Imagine if you could be in KL in the morning and then travel to Penang for a meeting in the afternoon in a comfortable short trip. Imagine if you are staying in Penang and want to come to Midvalley for a shopping spree. Imagine if you are in KL and want to go Penang to try out its famous laksa. Imagine if I prefer to stay in Penang with my family but I can travel to work in KL everyday because of the advent of such high-speed train services.

KL has overgrown. We need to offset KL's cons with Penang's pros. And vice versa. These cities can complement each other. We need such a high-speed train service that connects these cities. It will be like combining 3 major cities into one location. Maybe the ROI of this railway won't be as lucrative, but the economic consequence of such service will be.

23 comments:

khensthoth said...

Well written my fellow Malaysian. It's very hard to find someone who shares the same view. As painful as it is, I support the price hike. Petrol subsidy is not sustainable, both economical and environmental. At least, not in our country.

Most of the people in the blogosphere currently are just lamenting and scolding the government. The truth is, I feel like scolding them too. A long term roadmap towards gradually abolishing the subsidy should have been in place long ago, instead of such a massive hike. However, most people don't seem to get it. They blame the federal government for increasing the price, and blame the state government for not controlling the price.

I do not have a degree or any professional training in Economics, but at least I still some common sense. The way I see it, a lot of Malaysians don't. Even opposition parties are asking the hike to be removed.

I fully support Pakatan Rakyat forming the federal government, but I downright oppose their stance on oil subsidy.

quentinjackson said...

I also agree that pump prices should reflect market prices. BUT, how will this impact the lower income groups? Will the working class see a 40% increase in transport allowance? Will salaries grow with the inflation following the fuel price increase?

Yes, sure we have less financial burden placed on the government but how much of the savings will end up trickling back to the public? Will we be able to safely say or at least try to convince ourselves that it will not end up in some mismanaged project or in pockets of cronies and corporate fat cats?

As one rightfully pointed out on a Malaysiakini article, we should also adopt market value for imported cars then; as the duties imposed on them far outweighs the average fuel subsidies the government makes over average lifetime of the car.

Anonymous said...

I agree and support the price hike. But I disagree with the magnitude and way gov handle this. See what Petronas adviser has just said http://www.chedet.com/2008/06/oil-price.html

And knowing depleting oil reserve issue many years ahead, gov or Petronas should do something much early on. Else it's gov's failure in addressing this issue and mismanagement in Petronas. See how Singapore, Exxon Mobil or Shell address or attempt to solve this. I do not see these entities are shrinking.

cy77 said...

hey liang! welcome welcome to blogging. i see things heating up here :)

I think us brothers have telepathy! hehehe.. I also think that the price hike is good IF our government put the savings to good use.

the last time they increased to 1.9 they said better transport, better this and that... where is it?

so it really depends on the 'manager' (in this case the govt).

as for greener cars. I'm in!

A RAY OF HOPE said...

Nice article and interesting ideas. I would just like to add that for the longest time, the government have used subsidies as a political tool while ignoring the economic consequences. Other than that, we have to look seriously at the growing number of civil servants in the government, it's really draining away our revenue.

Anonymous said...

Price hike is a must, but how should government carry this out properly? Suddenly, our resources are going to deplete in a very near future, and as a smart kick-ass consumer, we so called expected cost-push inflation to come. However, our PM gave some speech and said, there'll not be any price hike in near term. And then, it's an increase of 40% of oil price now, how credible is the government's announcement? And next, how should public react to this announcemnt when setting their inflation expectation? I think for this time, there'll be a serious hurt to our economy, and I start to ask, how long will the inflation be there as the traders are still speculating on oil price? Asian is rising, more and more oil field are depleting, when will traders stop speculating? But majority of public will start to set their price, and stick to it. I argue, inflation will stay for a longer time, due to this too-harsh increase.

And then, accompanied with this floating oil price, the NEW policy to PREVENT non-Malaysians to pump their petrol was cancelled, for no more than 1 week? What happen to our government? Making policies or making jokes? U first create a stupid policy, and then u correct your stupidty, it's good. But, this affects the reputation of a government. I wonder, how they make the policies? There's never a good reputation of our government policies, but now here we come, a terrible one.

When you tell the public about concept of greener cars, it looks damn cool, as cool as power rangers. Then when you tell the parliament about your concept, they laugh this concept as it's power rangers. I think particularly those UMNO ministers will laugh their right ass off. ( not being racist, but most stupid quarreling and views come from our UMNO buddy ). It sounds cool, but it's damn hard to work out. And I think it's over-expectation for Proton to produce such greener cars.

But the harder things to work out is to decraese the trribly high import tax. If the tax is lower, and this surely positively contributed to public wealth portfolio and it's a damn big portion. It's 300% is decreased to 100% then it's like..... oh My god, it's like.... oh Gosh... I'm like ... Oh Jesus !!! .... ( just trying to be like Paris Hilton to show that I'm really shock). I always wonder, how much portion of this terribly high import tax contibuted to our society welfare? Or it's meant to be high so that corruption can be bribed and then, particular ministers are getting richer?

When the government said that they HAVE to spend the damn-high revenues from Petronas to search for new oil field, I'm quite amused. Even though our economy income is much contributed by oil revenues, but say if u used-up billions to find an oil field that can sustain for another years, why dont we start to use this revenue to spend in other areas, like what you say, the high speed link? Without oil, we still have other resources, why scare like a baby and refuse to look for a change at our future outlook? Look at Singapore, perhaps, changing our attitude and ways of solving problems is more important than sorely solving the problems when they pop-up.

The latest news is that the economic growth is expected to be in 5-6% and inflation will be around 4-5% this year. Okay. Now start to be a vegetarian and eat grass.

When growth goes away, and inflation stays. Government seems to have nothing to say.

oh Gosh. Corrupted one is laughing and public is crying. Public is eventually the victim for our stupid government. Stupid what? Say who? Say me !!

Meng Chun, NG said...

Hi Shin Liang,

A litle off-topic here...I am Meng Chun of MGTP Maxis, hope you still remember me. Didn't know you have such a great blog! Really enjoy reading it!

All the best in your PhD! I might be joining you soon! Maybe in Autumn 2009 :) Keep in touch ya. My email add: mengchun@gmail.com

Jeremiah said...

Hi Shin Liang

I agree with most of your views. However, your analysis that overcrowding in KL could be alleviated by the bullet train between KL and Penang, or other cities is debatable. Overcrowding could worsen if people in Penang decide to work and stay in KL. Cluster theory says that people migrate to where their talents are most valued and where they can commune among themselves.

Go to jeremiahliang.blogspot.com for more political/economic views.

Lim Fung Yong said...

I agreed that the petrol hike should happen and the subsidy mentality be done with once and for all.

However, I disagreed with the shock and the "suddeness" in which it was done. The Federal govt should have " shock-absorbed " the increase by carrying the increase over a period of time.

The end result of the increase is the spiralling effect on the rest of the economy and debilitating effects on the poor , the retired , those urbanites and the rural folks. How to change one's lifestyle when he is already practising the minimum lifestyle.

The net effects are :
a. No wage increase
b. Increase in food bills
c. Increase in transportation costs
d. Cutting in entertainment and
leisure activities-detrimenntal
to mental health
e. Crime rate up

I hope both the federal and state govts come up with a long term plans to overcome and minimise the ever rising inflation rate.

FY Lim

Anonymous said...

Agree that our oil reserve may dry out soon. The point is that where will the subsidize saving be use in? It should be use wholly for revamping our whole public transport system. As mentioned by author that we abolish tax or even subsidize for a green car or hybrid car. Invest in renewable energy source like wind farm and solar. Make palm oil Biodiesel available for malaysian. If the saving is use for North, South, East Corridor, then the saving is a good as flush down the drain. Infrastructure investment will not general good return, look at cyberjaya multimedia corridor, once the tax incentive expire, off they go to another country. Can our twin tower, tallest this, longest that and the malaysian who went to space able to safe our current state of economy? Our Oil tax, dividend and royalty contribute 37% of our federal government revenue, this to show how dependent and badly our economy have been manage in the past 50 years, compared to our neighbor. The fact is that we, the tax-paying public, bear the full impact from this economy mismanagement, while all our ministers and ex-ministers will retire with a huge sum of money. We have every right to get angry.

fargowin said...

The truth hurts.

The Chinese or the yellow race is what brings progress. Just look at Asia……….is enough.

Whether they do it internationally or locally they will survive.

We can distinctly see the lowering of Malaysia standards of living as the percentage of Chinese in this country goes down.

In the 70s we were tops with 40 over percent of Chinese and today with only 25 percent we are far behind Singapore, Hong Kong and Korea.

Main reason is the number of such Chinese migrating to these countries - the best ones and rich ones.

Next ten years as the percentage goes even lower, we would be nearing Indonesia or Philippines.

Meanwhile enjoy your stay and the good time.

On the whole as the Chinese spreads out throughout the world, the average standards of these will have much higher standards of living over others.

reek said...

It is blatantly obvious to everybody except Umno gangs. That is because they are corrupted, suffering from denial syndrome, regressive Muslims, low IQ and living in the past. They would rather see and prefer the nation going to the dogs than having meritocracy and doing away with NEP.

Otherwise, how does one explain the rot and malaise this country is suffering?

Hon said...

The most important asset of a country is not its natural resources, but rather its human resources. This is especially true in a knowledge-based economy, which of course, will be the trend in the future if not already the trend in most of the western countries.

My daughter, who is in her final year medicine in Auckland, told me that a team of Singapore recruitment officers have just visited Auckland and talked to the Malaysian students there, offering jobs and training prospects for the final year students once they graduate.

My daughter also told me that over the last few years, quite a lot of her Malaysian seniors, after graduating from medical courses in New Zealand, have gone to Singapore to work as house officers and subsequently stayed back in Singapore for their postgraduate training. Similar teams are sent to UK and Australia for recruiting Malaysians there to work in Singapore.

About a year ago, Reuters reported: 'Malaysia is counting on bright, ambitious people like Tan Chye Ling for its future, to lead it away from manufacturing and into the knowledge age.'

But the 32-year-old scientist, a postgraduate in molecular biology, is not counting on Malaysia to look after her future.

'I felt very suppressed in Malaysia,' said Tan, who moved to neighbouring Singapore, the region's pacesetter for biotech investment, after a decade of study and research in Malaysia.

'I have benefited from the better research environment and salary scheme here. Things are much smoother,' she said by phone from the National University of Singapore where she is studying dust mites and allergies. Tan estimates that 60 percent of the research teams she works with in Singapore are from Malaysia, despite her country's efforts over several years to develop a biotech industry.

There is a serious problem facing Malaysia and that is the problem of 'brain drain'. Why are Malaysians overseas not coming back to work? Well, pay may be part of the reasons but it is not the main reason. Singapore recruitment teams offer Malaysian medical students a salary which is a few times what they would expect to get in Malaysia S$40000 a year for houseman after tax (equivalent to RM86000) which is about five times the pay of a houseman in Malaysia.

But, as I say, pay is not the main problem. The living expense overseas is high. And for a person working overseas, the loneliness and the stress level is also high. So not everyone opts to work overseas because of the pay. Many would not mind to work for a lesser pay if they can stay near to their loved ones. So why do people choose to work overseas, away from their loved ones?

Malaysia has many state-of-the-arts hospitals and research centres, which may even be the envy of many overseas countries. But hardware alone would not attract these experts to come home. In the medical field, I have so many friends/classmates working overseas, many in world-renowned centres. Why do they do that? Some of my classmates and friends did come back as specialists. After working a few years (many only lasted a few months), most got disillusioned and went off again.

There is really not much prospect of career advancement here. How many can hope to become a professor even when they are an acknowledged expert in their field? On the other hands, lesser beings are being promoted to professorship for doing much less. How many of them can have a say about how things are to be run? How many of them can blend into the local team where the work attitude is vastly different from that overseas?

There is an unwritten rule that even if the person is very good, the head of the team has to be someone from a certain ethnic group who may not be even half as good as him. In everyday life, some become disillusioned with the corruption, the red tape and the 'tidak apa' attitude of officialdom. For an overseas doctor applying to work back home, the application can take up to six months to get approved, whereas Singapore sends teams overseas to recruit them on the spot and offering them jobs immediately as long as they pass their final examinations. See the difference?

It is the sense of being wanted and being appreciated that make these people stay overseas. Back here, they are often made to feel that they are of a lower class. They do not feel wanted and they do not feel appreciated. That is the main reason.

For those with children, the education system further puts them off. Even school children can feel being discriminated against and one glaring example is the two system pre-university education.

All these make them pack their bags and off they go again, leaving behind their parents, perhaps their siblings, the friends they grew up together with and their favourite food that is often not available overseas. No one likes to be away from home but circumstances and a sense of being recognised for their worth make them go away. It is really sad.

Parents spend big sums of money on educating their children but the ones who benefit most are the Singaporeans, the British, the Australians, the Americans and so on. As long as race politics is not done away with, this problem of 'brain drain' will continue and Malaysia will always trail behind the advanced countries no matter how many Twin Towers and Putrajaya we build.

miya said...

This is what happen to a good country ruled by a bad ruling party.

Enriching themselves and forget the rest. Those greedy and selfish Umno are to be blamed.

yuking said...

I think most of us Malaysians know the country is rotting to its core for the last few decades. It only takes a Michael Backman to confirm it.

Such a pity this country could have been a 1st world country like Singapore but had to be misgoverned by a bunch of crooks using misguided policies for their own ends.

It looks like the country hasn't reach rock bottom yet and it is going to get a lot worse before it get any better.

Local companies are moving away, rich peoples are moving their money elsewhere and the country's top brains are simply draining away. Our leaders are still happily plundering the country's wealth regardless of everything else.

Our future is bleak, very bleak indeed.

aston said...

As I had said, it is free economy that work!

Do you believe that the teacher love your kid more than you?
Do you believe that the headmaster love your kid more than you?
Do you believe that the education minister love your kid more than you?

If the above answer is NO, why don't they give the right and choice to choose the school, back into the hand of the parent?

The problem in Malaysia is the government want to control everything! Down to the sugar price! They do it in the name of the citizens! By using a navy ship to deliver sugar is another form of subsidiary to the sugar factory, you are in fact using state resources!

The more you let the bureaucrats to control our everyday life, the more problems and ineffective the citizens will face!

oversee said...

Each time I read such comments, it always makes me feel how lucky I am to out of Malaysia.

Emigration is not for everybody but those who have done so, ultimately feel highly rewarded in terms of the future for themselves and their kids.

Imagine them growing in an environment devoid of racial, ethnic and religious discrimination.

More importantly, they are now exposed to a wider community that embraces multiculturism, meritocracy, fair go and personal freedom.

Guess which group will be better equipped to face the future challenges in this world?

konek said...

Hahaha, once again we should appreciate the stupidity of government officials. This is great opportunity to embarrass them more……..not that they have not embarrassed themselves bad enough.

ruyom said...

For Royal Professor Ungku Aziz to say that there was no social contract between the founding fathers of our nation, this has put a nail in the coffin on those ultra-malays who still see Ketuanan Melayu as a cornerstone for race relationships in this country.

While other matured and well-developed nations have put to rest the 'master and slave' relationship among the various races, it baffles the mind of thinking people why should such policy still remain relevant in this 21st century here in Malaysia. We might call our British colonial masters 'Sir' or 'Tuan' in the early days but after half-a-century of independence, don't you think that such thinking is out of date?

Mind you, the United States who imported Negros from Africa a few centuries ago to be the white man's slave might have a black man to be their next president if Obama wins the ticket to the White House in the coming US presidential elections.

Malay rights have been ensconced in the federal constitution and cannot be taken away unless by a two-thirds majority in parliament subject to the malay rulers approval. No one doubts that in the early days, the bumis especially the malays, needed affirmative actions to take them out of their cycle of poverty to be on par with other races, especially the Chinese.

But the NEP has outlived it purpose and it should be replaced with a new policy which will eradicate poverty regardless of creed and race.

The playing field should be more even and let the best among the best compete among themselves in order for our nation to progress in the future. Why should rich malays with their 'right political connections' obtain a big slice of the economic cake while the poor people are denied such opportunities to get them out of their cycle of poverty?

To be a respected race, the malays must discard the notion that the government will always have to provide them with opportunities in studies and business as if it was their birth right. The malays should be able to compete with the other races on an equal footing and work hard to improve their lot rather than expecting handouts from the government.

Ungku Aziz, a towering malay whose intellectual thinking is way ahead of his time, has opened a Pandora Box's with his outright statement that there is no written 'social contract' among the various races prior to independence. Umno politicians will now cry foul about his daring statement as they will always use the Ketuanan Melayu bogey to win the hearts and minds of the malays to support their cause. .

But the malays cannot be in a denial mode anymore. We must accept the fact that in the brave new world that we live in where people and capital move to places where no restrictions are imposed, the old way of doing business by having quota systems will drive capital away from our country and the people will suffer in the end if business opportunities pass our shores.

The malays should look at their Singapore brethren who are no less the worse although unlike their Malaysian cousins, they does not have any NEP policy to get a leg up in society. There is no short cut for success unless you work hard for it.

coolooc said...

Malaysia is slowly and surely turning into a very sick place. We must finish off Umno and its cronies to cure the country from this acute sickness.

samp said...

Never in the entire history of Malaysia that its citizens feel so hopeless for having such a hypocrite sleepy prime minister! Time to vote Umno out in the coming election!

jiinjoo said...

Yay, we all crowd the comments on this post :) I have so many opinions about the fuel hike I'm just not going to bother.

Nevertheless, hope you feel comfortable sharing in public - I thought you started a blog eons ago... Think you'll need it, pursuing a PhD can be lonely at times, but can be rest assured people will read any nonsense/sense you put here. Happy blogging!

Ruben V Moorthy said...

Petrol price should not be subsidized in the first place. But the govt should increase it gradually to avoid irreversible spiralling inflation.

Tax benefits on environmental-friendly things is a good move like on electric cars. But the source of the energy (including the method to produce it) should be green too. Perodua should produce an environment-friendly version of the Kancil.

In Malaysia solar power is very much possible unlike regions away from the equator. But it's so untapped. Think about hundreds of thousands of roofs in KL. I also saw an article in Sciam.com about roads to be made of solar panels. 2-in-1 energy source and transport medium.

We also don't do enough recycling. In Germany, the people are required to sort their trash. And trees. In such a hot country, there should be big shady trees planted by every road in the country to provide shade and improve air quality.

Dr M is right that we should wean off depending on FDIs. After all, a company like Google started with only computers and the Internet. We have plenty of those in Malaysia. Only lacking the ingenuity.

High speed railways connecting Kangar, Alor Setar, Penang, Ipoh, KL, Seremban, Melaka, JB and Singapore is a great idea with bad ROI. Even regular tracks with electricity would do, like the French TGV. At least thank God we have Air Asia.

But we are lacking even in good local transport. How many bus lines in Malaysia have regular schedules (traffic is the excuse?), the route plans clearly displayed on buses and bus stops, an LCD display and vocal announcement of the next stop, ramps for wheelchairs, elderly, prams etc? How about travel planner websites (enter starting point and destination), LRT in Penang, combining the payment tickets for various types of transports etc. Many ideas from advanced countries.

A better quality of life is made up of many little things that add up together.