The lower and middle-class urban dwellers in Malaysia are what I would refer to as people living a pseudo-first-world lifestyle on a not-so-first-world salary. This would be fine if everything they consumed was determined by local supply and demand but when exposed to global market forces, eg imported goods and oil prices, they inevitably feel the pinch.
The uproar over the 18.5% increase in petrol price is understandable but I see this unpopular move as part of the government's efforts to drastically wean Malaysians off a privilege which might become every Malaysian's crutch should pump prices be maintained at artificially low levels amid increasing oil prices. Let me explain.
The subsidy made economic sense when oil prices were lower because it spurred economic growth. However, this growth and the subsequent increase in average per capita income have not quite matched the pace of increase in oil prices in recent times. It is very likely that this trend would continue considering the fact that demands for this finite resource is not showing any sign of waning. If the rakyat does not share the burden, the government's subsidy bill will continue to burgeon and this will eventually hamper national development in many areas.
The argument that Malaysia is a net oil exporter and so Petronas' profits should be used to subsidise the people is true to a certain extent but, if spared more thought, might not be as simple as that after all. A portion of the profits needs to be reinvested while money that goes to government coffers should be used to develop all aspects of the country not merely for paying the ever-increasing fuel subsidy bill.
The key issue here is transparency and real action, and if the rakyat are actively given an account of where this money is going and are able to see and experience the resulting development for themselves then maybe they would not complain as much.
In line with the PM's current agenda, perhaps the government should think about modernising the national railway services and improving intra-city public transport. These plans would receive a significant boost from the billions of ringgit of compounded savings from the reduced fuel subsidy. A high-speed railway service connecting all major towns, cities, strategic airports and seaports in the Peninsula would bring huge economic returns in the long run.
The railways can also be used to transport goods when passenger trains are not in service. In the case of intra-city public transport, they should be safe (no tinted glass or F1-style drivers for buses), reliable, non-confusing and serve all popular routes and housing areas. If implemented, these projects would be best tendered openly for their construction and management.
Another way of alleviating the people's woes is to attempt to increase their purchasing power by setting a minimum wage either through legal means or through bargaining agreements between workers unions and their employers. There can be regional variations to the minimum wage to reflect the actual cost of living.
There are various shortcomings and benefits of a minimum wage system and the government, universities or independent think-tanks can commission long-term studies to look into the impact such a system would have on Malaysia. They could also research the effect this system is having on other emerging market economies, for example those of Brazil, Mexico, Turkey, Russia, Poland and Romania. It would be unwise for anyone to say that such a system would not work here before actually studying it in depth.