Fuel Price Hike May Derail Poverty Eradication Plans, Say Analysts

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.

By Noor Hayati Muda, Bernama
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.

In April, Minister in the Prime Minister’s Department Tan Sri Amirsham A. Aziz had expressed confidence that the government would realise its goal to rid abject poverty despite the spiralling oil price in the world market.

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.

Categorising people with monthly household earnings below RM1,500 as poor, Azrul Azwar pointed out that those spending between 40 and 50 per cent of their income for food had to stretch it thinner for other necessities.

“Even though we may not see a drastic jump in statistics, based on that simple calculation we can see more will fall figuratively into the poor category. What more with those earning below the poverty line of RM691,” he said.

Azrul Azwar opined that the current method of classifying the poor did not reflect reality and should be revisited.

“I don’t think the current poverty line income is relevant anymore as today’s cost of living is getting higher by the day. To me, it should be much higher, maybe around RM1,500,” 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.

To ease the burden of this segment of the population, Azrul Azwar suggested the government allocate part of the RM2 billion saved from the austerity measures for the poor.

“Monetary aid is not necessary. Instead, the government can identify this group of people, who in my opinion, are badly affected, and give them handouts in kind,” he said.

Nevertheless, he said, the government was currently moving in the right path in easing the people’s burden.

Alliance Investment Bank vice-president for institutional sales, Shahrul Kamal Ramli, concurring with Azrul Azwar’s view that more Malaysians would fall within the poverty bracket, said Malaysians should benefit from the riches of government-linked-companies (GLCs) they were now enjoying.

Describing consumers as “small players” in a big consortium, that is the country, Shahrul Kamal said akin to shareholders in listed companies, the people too should be paid dividends based on the companies’ profits.

“What I have in mind is GLCs which are mostly owned either wholly or partly by the government such as Petronas and Tenaga (Tenaga Nasional Bhd) should give out cash bonuses to the people. “Do you know in Singapore, the government pays bonuses to the people?. Last year, every Singaporean received around S$700 or RM1,800,” he said.

Rationalising his suggestion, Shahrul Kamal said although the price increase of 78 sen per litre for petrol and RM1 for diesel affected the masses from all walks of life, the poor suffered the most.

“Look at it this way…one has RM1 and the other has RM100. Forking out 20 sen more for the one with RM100 is nothing much compared with the one with RM1,” he said.

He said cash given out in lieu of fuel subsidy would not benefit all the deserving people as only those who owned vehicles were eligible.

“What about those who do not own a vehicle and rely solely on public transport. They are not eligible for the rebate whereas the hike in fuel prices has multiple effects and this group of people will also feel the crunch because prices of everything will increase as well,” he said.

He said the government should consider a better way to help this target group.

Shahrul Kamal also questioned the effectiveness of some measures such as the use of fleet card which he believed could be abused.

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.

Despite their hardship, Shahrul Kamal said the people should not blame the government for today’s predicament as the global oil price was beyond control and had shot up to unprecedented level.

“Oil prices are at its highest ever and this, among others, stemmed from the increase in demand from the emergence of new economies such as China and India. But bear in mind, there are other factors as well, including the higher cost of oil exploration,” he said.

He, however, lamented the fact that the government had not explained in layman’s terms the reasons for the fuel price hike.

“The government should call the right people to listen to it and let them disseminate the information to the people in layman’s terms,” he said.

Former Universiti Malaya dean of arts and social science faculty Prof Datuk Dr Zainal Kling said any assistance rendered should centre on three aspects, namely food, transportation and services such as health.

“These three aspects are vital for the poor as they need them for survival. Therefore, the government should come up with ways to ensure the target groups receive direct benefit,” he said.

“These three aspects are vital for the poor as they need them for survival. Therefore, the government should come up with ways to ensure the target groups received direct benefit,” he said.

Zainal said it was not the government’s doing that Malaysians were now facing hardship.

“We have been living in luxury for years and only now we are facing slight difficulties. Yet, the government did not abandon us and is doing its best to ease our burden,” he added.

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