Monday, September 9, 2013

Fuel hike is just the beginning | Free Malaysia Today

Fuel hike is just the beginning

Narinder Singh | September 9, 2013
Where is the logic, implied and applied when Najib and his economic experts claim that a price increase in fuel will not have a negative reaction directly or indirectly?
Subsidy rationalisation. Two words conveniently blurted out by Prime Minister Najib Tun Razak to justify the 20 sen price hike for RON 95 petrol and diesel. It’s a deserved slap and a ‘gift’ to the rakyat who voted BN into power in the 13th general election. More than 100 days into office, all Najib could manage was a hike in fuel prices with justifications that fall grossly short of pacifying the general public and business community alike.

In jockeying the idea further for the justification, we have morons for economic experts in the government. Like well trained and neurologically deprived parrots, they can only sing the same song as their boss. Apparently in their own make believe world, they assume that the price hike will not impact inflation or the masses. How insane can they be or are they playing ignorant to the true sentiments on the ground?

Twenty sen increase per liter for fuel may not be much in isolation. Nevertheless, the same does not apply in relative applications to economic parameters. From a mathematical point of evaluation, it is a more than 10% increase, substantial for any goods or services rendered in open market. We must factor in the replicating consequences and co-factor the increase into the supply chain.

Malaysians are being fooled by the PM and his so called economic experts when they defend the rise as minimal and impact-less to the inflation engulfing the nation. Are we that naïve to be taken for a ride or are we just in plain sense, dumb to understand simple principles of financial economics?
In analogue, when investments are poured into a country or project, we look beyond the capital expenses per se. The expected and progressive multiplier effect is measured to gauge the viability and prospects of return of investments (ROI) by the principal in order to minimise risks.

These are basic principles in any business venture undertaken from the smallest to the largest corporations known to mankind.

Today, banks and business loan providers insist that such projections are made to evaluate an application. The details and intricacies may vary depending on the business concept but the basic economic philosophy is preserved. Or else you can forget about the loan.

So where is the logic implied and applied when Najib and his economic experts claim that a price increase in fuel will not have negative reaction directly or indirectly?

PM’s vision clouded
Fuel being the pulse of economies round the globe cannot be de-factored out of the equation for politically driven motives. The government has long ignored calls for an overhaul in its financial management methodologies and instead taken the bypass route of decreasing subsidies.

We have been made to look as though the government is doing a great favour by providing subsidies for some essential goods every time there is a price adjustment made to fuel. Najib forgets that the entire economic chain will be affected as a consequence of the price hike. The transport system will have added cost incurred overnight and it is pretty sure it will not be absorbed in standalone situations.

Eventually the added cost will be passed on to the consumers without any hesitation. Goods and services will gradually increase in prices as the multiplier factor seeps into the mainstream economy of the people. There is no mechanism in place to deter that from happening as free market forces will have to ride to the tune.

The bottom line is unofficial inflation rate is unavoidable no matter what the government may say in regards to the official inflation rate. There is just no more trust in the data provided by the government today. A simple check of prices for non-controlled items indicates a very different view from the often skewed official data. Official inflation data definitely does not jive with actual inflation.

Subsidies for long have been a pain in the backs of many governments but if managed in a professional, rational, transparent and corrupt free environment, they can be a boost rather a bane. Sadly in Malaysia, subsidies have been distorted in distribution and even the well connected industries to the government have been riding the boat.

Instead of rationalising the distribution of the country’s wealth among its people all along, cronyism and nepotism has clouded the vision of the Prime Minister. Pilferage, unaccountable losses, corruption, bloated pricing of supplies to the government, inflated civil service; blatant awarding of unjustified projects and dishing out monetary pacifiers during elections have caused the nations’ coffers heavily.

Eventually the buck falls onto the laps of the ordinary people. On the other hand, we have banks that put leeches and money lenders to shame. But the government takes a silent stance and ignores the cries of the borrowers.

There is a bigger economic canvas to be painted on but the PM sees only the edges and hopes that the rest will be taken care of by David Copperfield…and with time forgotten.

We have budgets announced every 12th month but hardly revisited on the 11th. It is amazing how short our memories are as Malaysians. The PM knows very well that Malaysians just like to cause a knee jerk din but immediately forget in no time.

Just the beginning
Beware, the fuel price hike is just for starters. The main meal is still being cooked along with the desserts. When the full unfolding of the menu happens it will be too late for the public to comment on the ingredients or to do anything.

Malaysians are still bracing for a hike in electricity tariffs and not to mention another round of increase in food prices as a direct outcome of the new fuel price. The hardest hit will be the small and medium businesses, closely followed by the lower and middle income earners.

Though some aid may be given to the lower income as claimed by the PM, we must not ignore the fact that the majority of the Malaysian population is trapped within the middle income group. A salaried man with a take home of RM3,000 to RM5,000 has little or nothing left by the third week of the month.

A decent home, a car, insurance premiums, children’s and parents care with other health care expenditure, clothing and the most important food will drain any pocket in today’s scenario. Many manage and tide over with credits or illegal borrowings from unlicensed individuals.

A speedy calculation on the back of a toilet paper can summarise our economy quite to the dot. You do not need the undeserving overpaid economic consultants to advise the Prime Minister who seems to be oblivious to the stark truth staring at him.

The Malaysian economy is bleeding and at a critical stage. The people are squeezed to the last available drop. A deficit national budget is nothing but a gospel truth mirroring a deficit household income. We, the ‘rakyat’ have been taken for a ride once again by BN at our expense. Najib has not only fooled the nation but also his diehard fans on his Twitter and Facebook. He never intended to give them face for all the truth you know.

It is interesting to see debates on issues like international ratings by independent agencies. Nevertheless the crux is – does it make much sense to the man on the street? They do not give two hoots about the so called rating and its repercussions.

What matters is getting life going and making ends meet. Najib and his people speak volumes on the rationalisation exercise but they have no gall to declare the amount of losses incurred due to corruption, leakages, cronyism and white elephant projects.

They have for long conveniently ignored the billions that have been siphoned out of the country via money laundering and illegal immigrants. Why is the ordinary person being penalised for their own blunder in entangling our economy? The BN-led government must put their houses in order first before passing the buck down to the people and camouflage their irrational spending spree.

They have failed miserably in collecting PTPTN loans, ‘sewaged’ our hard earned money in invisible cows, built ghostly free trade zones, bailed-out bankrupt government linked companies and sprinkling money showers during elections.

The rot must stop immediately. Najib must either overhaul the economy in entirety and excavate the irresponsible spending or concede that he has lost the battle miserably to his own men. No two ways about it.

Narinder Singh is a FMT team member.

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