The recent increase in the price of petroleum at an all-time high increment of RM0.30 was a major betrayal of the people's trust by Pak Lah who is supposed to be a fair and caring person. The current spate of upward revisions in the prices of petroleum products were preceded not only by the increase in the price of the said commodity in the international market but also by a major revision in the salary of our elected representatives from state councillors, federal councillors to cabinet ministers.
Meanwhile, inflation has made an upward trend. It is by now, I believe, is already well pass 3.5%. Interest rates have also been increased twice this year. These have given businessmen every reason to increase the prices of their goods and services. Unemployment among fresh graduates is at all-time high let alone those without tertiary qualifications.
I appreciate the fact that this hefty subsidy by the government is not sustainable as the opportunity cost is high and there has been a very substantial loss due to petrol smuggling to neighbouring countries like Thailand, Indonesia and even to Singapore.
What is to be regretted is the fact that the escalation in the price of petroleum, inflation and interest rates are happening at a time when there is still a tremendous supply of money in the inter-bank market and when the ringgit is still significantly undervalued. The government therefore appears to be managing the economy on a piecemeal and fragmented basis. The macroeconomic management objective appears to be very heavily skewed towards subsidising the exporters through a policy of an undervalued ringgit to the detriment of general consumers who have to pay higher prices for imported goods in general and petroleum in particular.
A more balanced macroeconomic stance should have been to allow the ringgit to strengthen further to say RM3.60 to RM3.65 to the US dollar. This would have allowed the government to increase the price of petroleum by RM0.15 at the most yet produce the same impact in terms of reducing the government's subsidy and discouraging cross-border smuggling of petroleum (as our exchange rate would firmed up against that of our neighbours).
The fuel price hike has fueled the cost-push inflationary trend in our economy. It is the common people who would suffer and not their elected representatives or Bank Negara officials as they all are well-paid or have been taken care of by the recent revision in their compensation packages. Indeed, it has been a well thought out forward planning on their personal level.
The fact that the government continues to be willing to subsidise exporters but at the same time reduced the subsidy for petroleum to the citizen at large on a progressive basis is something that is to be regretted. To be frank, both of these subsidies are not sustainable on long basis; but why create a double standard?
The government should have given more thought on how to manage the economy on a more coordinated and integrated basis rather than finding an ad hoc, fragmented, and simplistic way out.