The government has announced that it would be reducing the amount of subsidies for petrol, diesel and liquefied petroleum gas (LPG) to offset its financial burden and funnel the money towards development projects instead.

The government said the money used for subsidies would go a long way if it were made available for more productive use like building schools and roads. Our second finance minister had said development projects would be selected based on economic and socio-economic considerations that would contribute to a higher quality of life and alleviate poverty.

The selection would also be based on a cost-benefit analysis and take into account high multiplier and spill-over effects.

While the removal and perhaps subsequent abolishment of the fuel subsidies would be consistent with WTO rules and principles of free trade (and we are after all a trading nation, aren't we?), it follows by the same logic that all taxes/tariffs/excise duties (whatever one wishes to call it) that have been imposed on cars should also be removed.

By my back of the envelope calculations, the multiplier effect from removal of car tariffs/excise duties would be much, much greater than that generated by the provision of fuel subsidies.

To illustrate, I as an average middle-income earning Malaysian spending about 33 percent of my monthly income on car loan repayments (fuel being a relatively very small expenditure item) - and I don't even drive a fancy car.

Not only do the high domestic car prices generate revenue for the government (not the most efficient user of capital), it also serves to generate windfall profit for the finance companies - imposing a double burden on the rakyat and simultaneously creating a huge deadweight loss to the national economy.

Note that this 'excess' or 'waste' amount of money would have been otherwise spent on productive investments (with much higher multipliers) or on numerous consumption goods and services involving many people - instead of on a single unproductive consumption item (cars) with only a few (priviledged?) people benefitting.

To our leaders, I would like to say that the rakyat has already paid a high price to support our national car industry all these 15 years and I and other Malaysians are beginning to feel the pinch (especially since the ringgit was devalued in 1997/98 causing car prices to shoot up).

It is time to remove all protection to Proton and Perodua so as to remove this huge burden from our national economy.