Monday June 16, 2008

ADB: Malaysia right in reducing fuel subsidies

KUALA LUMPUR: Malaysia was right in reducing fuel subsidies but some form of “targeted relief” should be given to the poor, said Manila-based Asian Development Bank managing director-general Rajat M. Nag.

If the subsidies had not been reduced, it would have “built up pressure” in the economy which would have led to a fuel price shock at a later stage, he said while speaking on the topic of “Global Risks on Asia's Agenda” at the World Economic Forum on East Asia here yesterday.

World meet: Abdullah at the welcome reception for WEF-EA participants in Kuala Lumpur yesterday. With him are WEF founder and executive chairman Prof Klaus Schwab, (second from left) and former Pakistan Prime Minister Shaukat Aziz (third from left). At right is Datin Seri Jeanne Abdullah.

Nag believed, however, that the largest risk to Asia in the current inflationary climate was income inequality, which needed to be addressed.

In many cities throughout developing Asia, one could see “the two faces of Asia” – the poor and the rich.

“There is tension developing and it is going to the streets,” he said.

He said the poor were better off than they were a decade ago, but the rich had got richer, he said.

Takeda Pharmaceutical Company, Japan, president Yasuchika Hasegawa said current issues facing Asians – food and energy prices and water quality – were interlinked.

It was wrong, he said, to ask developing countries to reduce carbon emissions when advanced nations like Japan and Germany produced more than three times per head than that of a developing country like China.

CH2M HILL Companies, USA, chairman and chief executive officer Ralph R. Peterson said there was too much focus on first cost and low labour cost in the region.

''Rather Asia should focus on the big long-term dividends it could gain from efficiency,'' he said.

Lloyd's United Kingdom chairman Lord Levene said compared to about 30 years ago, Malaysia was now very much “on top of the curve in South East Asia.''

''The country now has more skilled people with knowledge,” he said.

Former Indian Finance Minister Yashwant Sinha said the world needed a better response to skyrocketing energy and food prices and major institutions needed to play a bigger role.

“Global institutions such as the World Trade Organisation are inadequate to deal with global problems now,” he said, adding that producer and consumer nations needed to get together and discuss ways to tackle the issue of soaring commodity prices.

Khazanah Nasional managing director Tan Sri Azman Mokhtar said Asia did not waste a decade since the 1997/98 Asian Financial Crisis as numerous steps were taken to improve economies and corporate governance standards.

He said despite those efforts, growth rates in South East Asia had moderated from the pre-crisis period.