Let’s do our part to help build Malaysia

ETP Talkback Thursday 11 Dec 2014


During the recent ETP Talkback Thursday, we discussed the following topic : “The country is becoming wealthier and there’s change taking place. But are you satisfied with the economic direction of the country? Do you feel ‘wealthier’? Is it enough?”

Charting Through Choppy Waters

The last couple of weeks have gotten the goat of some Malaysians. I have read comments by the well-intentioned on the Cabinet decision to implement the ‘managed float’ pricing mechanism for diesel and RON95 petrol which went into effect recently.
It is not easy to wean ourselves off subsidies after years of dependency. The event of subsidy removal is a historic move by the government to unwind our subsidy culture, especially when it comes to our sense of entitlement over petrol subsidies. I feel it is worth taking a step back to reflect on this.
Any ambitious nation in pursuit of growth must be anchored on rock solid fundamentals to succeed over time. As a society, we have a collective interest in Malaysia pursuing her high-income goals in a sustainable and inclusive manner.
Sustainability extends beyond mere concern for the environment. We must also equally address the country’s finances to secure the well-being of ourselves, our children and our children’s children.
As a nation of just under 30 million people, only one million (out of 1.7 million registered taxpayers) pay income taxes. Over the long-term such a narrow tax base is certainly unsustainable. After much debate over the past several years, we are now introducing consumption tax or GST in a necessary step to broaden the tax base. This is a bold bid towards more equitable revenue collection.
Securing sustainable growth also means this Government has the unenviable task of re-evaluating subsidies. The decision to rationalise subsidies was not made overnight or taken lightly. We understood the magnitude of its impact especially on the vulnerable and poor. Cabinet discussions on subsidy rationalisation were often robust and heated.
Internal meetings alone were not enough. We also took this conversation to the ground after concluding the six weeks subsidy rationalisation lab in early 2010. Members of the public and stakeholders were then consulted via an Open Day to seek views on how the Government should tackle the subsidy conundrum. This was further augmented by SMS blasts to open the dialogue as broadly as possible.
As a citizen, I was personally gratified with the response. About 90% of the 1,899 attendees and 61% of 191,152 text respondents accepted the importance of subsidy rationalisation – but asked that the process be conducted gradually to avoid shocks to households.
We listened closely, and in July 2010, kick-started the process by moving RON97 petrol to a managed float pricing mechanism. The subsequent four years have allowed plenty of time to understand public sentiment as well as retail dealers’ adaptation to the mechanism.
Maybe it was divine intervention that global crude oil prices have fallen over the last two months. Brent crude oil prices dipped to the average of about USD80 per barrel (from an average of higher than USD105 for the past two years). The day before the managed float mechanism for diesel and RON95 petrol was announced, Brent crude oil slid even lower at US$71.89 per barrel.
Under this new mechanism, RON 95 and diesel price will be market driven yet managed on a monthly basis per the Automatic Pricing Mechanism (APM). Consumers and industry have a one-month lag time to adjust without the hassle of a daily yoyo on pump prices if we introduced full float mechanism.
When we switched to managed float in December, RON 95 pump price slid to RM2.26 compared to RM2.30 in November whilst RON 97 pump price fell to RM2.46 from RM2.55. However, as the reduction in average global market price for diesel in December was lower than the amount of subsidy on this product in November, its price at the pump increased by 3 sen per litre.
Removing fuel subsidies will unlock RM19 billion annually from Government expenditure (based on 2015 Budget allocation of RM21 billion and after removing RM2 billion for liquefied petroleum gas), going a long way to further reduce national deficit and give us room to respond to the needs of poor households.
What can fall can also rise. Global crude oil prices can go up in a free market, although industry forecasts do not anticipate it happening anytime soon. A managed float mechanism gives us the time and space to dampen volatility, particularly upward volatility.
To make it easy for the public to understand how it works, Ministry of Domestic Trade, Cooperatives and Consumerism and Ministry of Finance will provide a detailed exposition on the managed float mechanism.
As an avid proponent of an integrated urban public transportation system, I am confident the line-up of commuter trains and buses, the LRT, monorail, as well as the upcoming MRT and High-Speed Rail network crisscrossing cities will make a palpable difference to our lives.
We will no longer need to depend on our cars or stress over fluctuating fuel prices. Families will have the options to live in suburbs where property prices are cheaper, and daily commute will not mean sitting choked in traffic watching your fuel gauge go down.
We are tackling head-on the challenges of maximising the well-being of Malaysians in a sustainable fashion. Staying afloat – while countries in Europe and Asia struggle with debt and instability – will go a long way in helping us chart through choppy waters for a prosperous and resilient Malaysia.

Going Beyond Pretty Pictures

Every once in a while, voices emerge out of the woodwork to raise scepticism on PEMANDU’s role and relevance. The last few weeks were no different. I would group the grumblings into these buckets: • What is Pemandu actually tasked to do? • Is Pemandu duplicating the role of civil service? • As projects are […]

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Getting Education Up and Roaring

2.	These SKTM students have really good performing arts skills and managed to wow the crowd during the visit

Eucation understandably is a touchy topic for many. We reminisce about better standards of the good old days and compare it with the state of public schools as we see them today. Getting education up and roaring is challenging but not impossible. Out of 10,000 schools in the country, 128 are labelled high-performing. These are […]

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Good times, good policies

In my travels, I meet with some of the world’s top economists, investment analysts, influential academicians, and movers and shakers in the business community. For example, last week, I spent a day with back-to-back meetings at the World Bank Headquarters in Washington to share Malaysia’s transformation story. I shared the stage as a panellist with […]

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Taking The ‘Jam’ Out Of Kl

Every morning my wife drops me off at the train station. I grab a hot drink, find a seat and settle down for a good read. This was pretty much was my daily routine for four years in the mid-90s when I worked at the Shell office located near Waterloo station. I chose to live […]

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Happy Malaysia Day

Pipeline investments 2006-2013

In the cacophony assailing many parts of the world today, and where ills, tensions, warring and strife dictate much of daily life, we are living a life of plenty. Our political climate is stable. We are at full employment, and our poor have enough to eat. Our children go to school and our graduates have […]

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Aging with Dignity

Like death and taxes, getting old, ill and dependant is inevitable. It’s an easily dismissed subject when you are a strapping lad but with the passing years, the realities of illness and aging cripple some of us who are not prepared. In trying to understand how we as a nation can better deal with managing […]

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Business Transformation Plan 2 (BTP2)

In one of my recent public engagements, I replied to a question on the future of MAS. I made a comment that the answer is stated in the Business Transformation Plan 2 (BTP2) document that was published back in January 2008 by the MAS team then. Scenarios that were projected and shown on page 26 […]

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Bringing Life Back to our River

At the Puah Pond information centre

At an era of our history, the muddy confluence of the Klang and Gombak rivers served mainly as a means of transport for the tin-mining industry. Its waters were so pristine people would throng to the river at Masjid Jamek to perform ablution before prayers. Over the years, with the steady erosion of the quality […]

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