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6/17/2008

Malaysia - What petrol subsidy?

Malaysia is a net exporter of oil. It is producing oil and selling oil at a highly inflated price due to speculations by western oil traders. The cost of production of oil is also relatively unchanged. So what subsidy is Malaysia talking about? They should be talking about profits, and huge profits. The only kind of subsidy is market subsidy, a uniquely Singapore experience. Because of the high market price, the Malaysian govt could sell their petrol at a much higher price. So to sell them at a lower price, it is called SUBSIDY! Does the Malaysian Govt understand this term? Singaporeans do and are very cynical about it when it is mentioned. And why cut the 'subsidy' and then decide to give back to the people in kind while at the same time incurring the wrath of the people? There are good things to learn from Singapore. But some things are quite silly and should not be copied without knowing what they meant and how badly they are received by the people. Low petrol prices in Malaysia is not subsidy to the Malaysians. It is lesser profits to Petronas, to the Malaysian Govt.

3 comments:

Anonymous said...

I don't agree with your analysis.

Malaysia has been spending US$14 billion every year subsidizing gasoline, diesel and gas. The country too is being projected to be a net importer of oil in a few years' time - that Barisan would reduce the subsidies so rapidly would've highlighted the fact that maintaining subsidies is getting painful.

And it's not as if Petronas is benefiting much from current market prices either - oil like most commodities is usually sold via advanced contracts.

Long-term subsidies are invariably bad. The amount which went into subsidizing oil could've been diverted to good public transport infrastructure, or to develop the economy so that we would be able to now afford oil at its market price.

From the cynic's point of view however, if the savings from the elimination of oil subsidies is gonna be siphoned off by corruption or white elephant projects - then yeah, by all means maintain oil subsidies. Better than getting nothing at all.

redbean said...

the subsidy is paper subsidy. unless of course the petrol and gas were bought imported. i believe all these are bought from petronas, which pumped from the ground.

the singapore govt can also use the same computation to claim it lost billions in subsidising HDB flats.

petrol and gas for the people, HDB flats for the people, at lower cost, are what govt will do to get them elected.

until malaysia becomes another indonesia which is very soon, and importing oil, it is not losing money but losing profit which it could make from its people. it can claim to sell what the people and industry used. but the people's needs and industry needs must be still be provided.

the advantage is to lower cost of living and cost of production with lower petrol prices. and that is good.

the lower cost countries like china and india are paying their workers lower pay, which is below market rate. are they subsidising these pay or should they pay their workers higher pay? they will become less competitive.

we are made to pay market price for everything. a little subsidy to market price for HDB flats. that is why our cost of living keeps going up and the people demand higher pay or else their miserable $2000 pm will not be enough.

this strategy will bring us to our downfall, and very soon. we will price ourselves out of the international business system. our high labour cost, high business cost, etc will harm us in double quick time.

Anonymous said...

Malaysia has been subsidizing imported gas for a while. Norway as far as I know has never had oil subsidies, the proceeds are locked in a Future Fund. Canada has a similar scheme apparently.

Subsidies come with a price - and there's an associated opportunity cost as well.