Agenda Daily


While the Government may see the subsidy cut on petrol as a boon for the free

market and globalisation, it has untold effects on the people and the country. In any

case, it’s certain to further alienate the voters.


ALL THINGS CONSIDERED, THE WHOPPING 41% petrol price increase announced by Datuk Seri Abdullah Ahmad Badawi on June 4 was the deepest and the unkindest cut ever delivered by any Prime Minister in history.

No matter how noble and divine his intentions are, Abdullah’s free market initiative will have far-reaching effects and consequences on the people and the country.

Coming as it did just three months after the disastrous March 8 polls, when the Barisan Nasional’s promise of ‘Security, Peace, Prosperity’ failed to ignite the voters’ confidence, the decision was politically suicidal.

One of the factors that drove voters away from the BN was the 2006 fuel price increases and the inflationary effects they had on the prices of goods and services. But in comparison, the 2006 hikes were modest.

Whether or not Abdullah survives the widening campaign to force his resignation as Prime Minister and Umno President is immaterial; Umno and the BN have further alienated the people with this latest action.

Abdullah may, on the surface, be enjoying the support of the mainstream media, the free marketers and the armchair economists for drastically reducing the fuel subsidies and allowing market forces to determine fuel prices, but for the majority of the people, he has done them great harm.

Unfortunately for Abdullah, the free marketeers and the proponents of globalisation who populated his economic advisory panels are in the minority. Many are not registered voters and for good measure, a good number of them went abroad during the last general election.

In recent years, the same people had taken out, with the approval of the regulatory authorities, billions of ringgit to Singapore, resulting in the two-way FDI flows tilting in the republic’s favour.

(For the first nine months of 2007, Singapore investments into Malaysia totalled RM7.7 billion while investments from Malaysia into Singapore were higher, at RM10.1 billion.)

To start with, Abdullah did not even get his act right.

His own ministers and media supporters were giving conflicting messages and making opposing promises.

The award for the worst blubbering has to go to the newly appointed Domestic Trade and Consumer Affairs Minister, Datuk Shahrir Abdul Samad, who, just days before Abdullah’s shocking announcement, said price adjustments would not happen until August.

Our prices among the highest in the world, actually

ON June 7, The Star newspaper carried the following headline: PM: Get true picture of global oil price hikes. It quoted Abdullah as saying that the people should get the correct information about the problems facing the nation.

He said every Malaysian has roles and responsibilities towards the country and the future generations during these difficult times.

But as I wrote in my blog, the general reaction of the people was one of anger and disdain. They cynically said that while it was the role of the Government to raise the price of petrol, it was their responsibility to carry the burden.

At RM2.70 a litre, the price of petrol (and also diesel) is among the highest in the world on a purchasing power parity (PPP) basis.

(The PPP theory uses the long-term equilibrium exchange rates of two currencies to equalise their purchasing power. It was developed by Gustav Cassel in 1920 and was based on the law of one price —the theory that, in an ideally efficient market, identical goods should have only one price.

PPP is accepted and widely used by the International Monetary Fund and the World Bank.)

To understand where we are today after the 41% hike, we have to compare ourselves with other oil-dependent economies.

At RM2.70 a litre or RM10.20 a gallon, our price is lower than in the United States where it has shot past the US$4 (RM13.08) mark. In US dollars, a gallon of petrol in Malaysia is US$3.12, which is much cheaper than in the US.

But we must bear in mind that the US enjoys a much higher purchasing power. According to the Central Intelligence Agency (CIA) Fact Book, the per capita purchasing power of US residents last year was US$46,000, against Malaysia’s US$14,400 – more than three times higher.

And not every Malaysian enjoyed US$14,400 worth of purchasing power. What the majority had was much lower. So a gallon of petrol at US$4 is cheap to American consumers compared to US$3.12 a gallon to Malaysia consumers.

Our ministers are also quick to compare prices with Singapore, where a gallon is priced at US$6.28 (according the Shell Singapore website).

But the per capita PPP of Singaporeans last year was US$48,000 or 3.4 times higher, it has a small land area and its public transport services are good and relatively cheap.

In addition, they have the option of buying petrol in Malaysia at a fraction of the price, given the higher value of their currency. Thanks to the generosity of our government, they can get a gallon for S$2.63 or a mere US$1.92.

And I think our government should also stop comparing prices with our less developed neighbours, unless we do not mind heading in their direction.

Yes, it was fine for the PM to remind us about the need to consider the welfare of the future generations.

But what prospects can they count on when even now they are at risk of not having enough to eat, to wear, and to be educated due to the spiralling cost of living?

We may recognise subsidies as distorting the economy and rising fuel prices as a global phenomenon, but the fact remains that the hefty domestic price increases will have negative effects on our purchasing power, inflation and the overall performance of the economy.


AMBASSADOR-at-Large, Ministry of Foreign Affairs Malaysia and Adviser for Foreign Affairs to the Prime Minister, Tan Sri Abdul Kadir Mohamad, had sent a letter via my weblog to respond to comments in this column in the June 1-15 issue.

Since the letter was sent via my weblog (www.akadirjasin.com), I took the liberty to publish it there on June 5. I had also commented on the subject of the loss of Pulau Batu Puteh in the blog.

Abdul Kadir wrote: I refer to your article ‘Lost the Island, Won the Rocks’ (Malaysian Business June 1-15, 2008).

Please allow me to make certain corrections to several points in your article where you have linked my name, Abdul Kadir Mohamad, and highlight certain facts about the ICJ decision which you also alluded to in the same article.

First, you quoted a Bernama Report (no date given by you) which I am unable to trace until now.

To the media representatives present on that day (May 21, 2008) in the Parliament lobby, I definitely did not say that the Government of Malaysia was not as serious as the Government of Singapore on the issue of Pulau Batu Puteh.

I was answering a question, from one of the editors present, about how the people of Singapore would react. I said that in Singapore the people were not much concerned about the ICJ case concerning Pulau Batu Puteh, Middle Rocks and South Ledge, unlike in Malaysia where the people showed huge interest and have actually made it into a people’s issue. On the Singapore side, the ICJ case was essentially an issue of only the Government.

Second, I was not the person involved in the ‘Crooked Bridge’ talks with Singapore in March 2006. The person concerned was the Secretary General of the Ministry of Foreign Affairs. I had ceased to be the Secretary General of the Ministry from July 2001.

Third, the Singapore Team to the ICJ hearings in November 2007 was not led by Deputy Prime Minister S Jayakumar. The Leader of the Singapore Team, ie, the Agent in the case, was Tommy Koh, Ambassador-at- Large, MFA Singapore. Jayakumar attended as one of the Counsels and Advocates, to speak during the Oral Hearings. Be that as it may, the official rankings of the Speakers have no bearing on the substance of the case, nor do they serve to influence the ICJ Judges in any way. In the World Court, what matters are the facts and arguments presented, both orally and in writing. That is all that counts.

Johor fishermen have now the right to fish in the waters around Middle Rocks. The exact maritime boundaries of Middle Rocks will be determined when the Malaysia/Singapore

negotiating group completes its demarcation exercise. Nevertheless, I believe Johor fishermen can return to fish there in the very near future, even before the completion of the maritime demarcation exercise.

Regarding South Ledge, the Court decided that sovereignty over this low-tide elevation belongs to the State in the territorial waters of which it is located. South Ledge is closer to Middle Rocks than PBP. Using the equidistance principle, the Malaysian negotiators should be able to establish that South Ledge lies in the territorial waters of Middle Rocks, and therefore belongs to Malaysia.

Incidentally, the surface area of Middle Rocks (two separate rock formations about 600 metres apart) including other low tide elevations in the area is greater than the surface area of PBP.

The people of Malaysia may know little about Middle Rocks and South Ledge. But the result of the ICJ decision must be put in its proper perspective. The extent of territorial waters belonging to Malaysia around Middle Rocks and South Ledge, part of the traditional fishing grounds of Johor fishermen, is substantial.

Since Middle Rocks belong to Malaysia, and in all probability South Ledge as well, Singapore’s plan to reclaim land and join all the three rocks together has now been thwarted. True, Singapore has gained some territorial waters around PBP but so has Malaysia around Middle Rocks and South Ledge. The ICJ decision did not result in a total loss for Malaysia.

Although we in Malaysia refer to Pedra Branca as Pulau Batu Puteh, that feature is actually not an island but merely a rock in the sea which cannot sustain human habitation or economic life of its own (Article 121, UNCLOS).

I hope you will kindly print my reply in the next issue of Malaysian Business .

Abdul Kadir Mohamad (Tan Sri) Ambassador-at-Large, Ministry of Foreign Affairs Malaysia and Adviser for Foreign Affairs to the Prime Minister.

Abdul Kadir, in part, said: ‘First, you quoted a Bernama Report (no date given by you) which I am unable to trace until now.’

I would like to point out that the report was dated May 21 and released by Bernama at 11.36pm under the headline ‘RTM to telecast live Pulau Batu Puteh Judgment Friday.’

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