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Monday, September 9, 2013

When 20 cents Are Not Just 20 cents

I guess every Malaysians should already know by now that the petrol price will go up by 20 cents, two days after the whole nation celebrated a subdue Independence Day. Malaysian celebrated the country's 56th Independence Day on the 31st August this year and the announcement of the petrol price hike by 20 cents was made by the Prime Minister on the 2nd of the September.

While the subdue Independence Day celebration clearly shows that the government is running out of fund, not many of us would have imagine that the government would increase the price of the RON95 petrol by 20 cents, and clearly this move brought criticism from almost every one. And while it is hard to swallow, everyone will have to accept the fact that the petrol price will go up by 10% no matter what.

There is an economic story behind the hike, although the "hike of the petrol price" should be more referred to as the reduction of the petrol subsidy - because that is actually part of the subsidy rationalization plan that was promised by the government even before the election. One very clear reason for the reduction of the subsidy is to reduce the government deficit to prevent further downgrade by Fitch. And yes, after the announcement, Fitch maintain the rating on Malaysia's debt and clearly stated that the government is on the right track but not doing enough.

Some are praising and applaud the move, and although I agree that the government should, I still think that petrol subsidy should be the last one to get reduced. The 20 cents petrol price hike might not seems much, but the 20 cents hike are not just 20 cents hike. Many of us will dropped the 20 cents coin without realization, but the current 20 cents are not just 20 cents. It will leads to more 20 cents increases and further reducing the purchasing power of the Malaysians.

In fact, by raising the petrol price, the prices of other goods and services will go up accordingly and finally Malaysians are the one suffering for the mismanagement of the Malaysians' money by the government. Just the day after the announcement, the Real Estate and Housing Developers Association (Rehda) announced that the property prices might go up 10% because of the material transportation cost. Service providers that uses petrol or diesel will increase the price of their services accordingly - the public transportation will charge the increase to the fares; while transporters will charge to their customers which will indirectly push their customers to increase the price of the goods.

We do not have much choice but to just lower down our expenses. While it is not the 20 cents that makes the people angry at the government, it is because the 20 cents will not just be 20 cents. It is whenever the government coming out the austerity plan, it is the people who has to bear the brunt  while politicians continue to enjoy their larger than life style. If the whole nation should face austerity, it should starts with the government not having their rights to pump the petrol using the nations coffer and they should be the one to have pay cut rather than increases; just like what the private sectors will do, should they have austerity.

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