Many may spurn Pak Lah's tough sell

Many may spurn Pak Lah's tough sell

KUALA LUMPUR, June 5 — Midway through yesterday’s press conference, just after Datuk Seri Abdullah Ahmad Badawi had fleshed out the new subsidy regime for Malaysia, a journalist walked out of the room and uttered two words: political suicide.

His words are being repeated today in many places across the country. Many Malaysians cannot fathom why a prime minister who enjoys an approval rating of around 50 per cent (higher among Malays) and who is fighting for survival in Umno has increased the pump price for petrol by 78 sen per litre and RM1 per litre for diesel. Worse yet, economists warn that inflation could hit 6 per cent.

The last time the government increased the pump price by 30 cents in February 2006, the PM’s approval rating dropped 15 per cent.

So why is Abdullah committing political suicide? Probably because politics did not figure very much in Cabinet discussions on inflation and the way the subsidy scheme was structured. Those familiar with the discussions on Tuesday and during the four-hour Cabinet meeting yesterday said that there was unanimity among ministers that the time had come to pull the plug on the subsidy scheme which was benefiting everyone, regardless of their income levels.

The consensus was that the government could not sustain the subsidy bill which was in excess of RM50 billion. If nothing was done, it would drain funds needed for development projects and the mid-term review of the Ninth Malaysian Plan. The government also felt that it was time for Malaysia to have a more efficient economy, where businesses no longer relied on cheap fuel or electricity to be competitive.

Most of the RM13.7 billion which the government will save will be ploughed back as rebates and channelled to fund the food security policy.

Pushing the line the hardest were the economic ministers – Second Finance Minister Tan Sri Nor Mohamed Yakcop; Economic Planning Unit Minister Datuk Amirsham Aziz, Minister of International Trade and Industry Tan Sri Muhyiddin Yassin, Domestic Trade and Consumer Affairs Minister Datuk Shahrir Samad.

There were several options on the table. One called for the government to allow motorists to pay market rates at the pump. This was shot down because the ministers felt that the Malaysian economy would not be able to absorb such a shock to the system.

Another option called for smaller and more manageable increases in petrol prices, say 20 sen every few months. But the ministers felt that it made more sense in facing the wrath of Malaysians once rather than every few months. Finally, the Cabinet agreed that from today, petrol be sold at RM2.70 per litre and diesel at RM2.58 per litre. To ease the burden of those in the lower income group, owner of cars below 2,000cc will enjoy a cash payout of RM625.

Ibrahim Suffian of the Merdeka Center, a research and polling house, said that a straw poll just after the announcement showed that even government supporters were upset with the increase. Most of them are junior civil servants and they argued that the RM625 rebate would only help cushion the increase petrol price for three to four months.

Still, Ibrahim believed that the government had opted for the right strategy by announcing the increase at one go rather than incrementally. "You only face the anger once," he said, noting that Abdullah faced stinging attacks when his government increased the pump price by 20 sen in 2005 and 30 sen several months later.

On the flip side, Abdullah did not have to contend with a strong Opposition. Pakatan Rakyat are already organising protests and Datuk Seri Anwar Ibrahim tapped the popular vein when he questioned why the government was imposing such a severe burden on the public when Petronas was making record profits.

The view from the man in the street is that Malaysians should continue enjoying low fuel prices as long as the national oil company is flush with cash.

"The only person who knows about Petronas financial position is the PM. People are being denied information and can’t feel any benefit from the national treasury," said Anwar.

The Edge Financial Daily in an editorial noted that public disaffection at the rising cost of living will need to be managed. Evidence of profligate spending on unnecessary projects will only increase the resentment on the ground against the country’s leadership.

"Indeed the astute political leader would seize this opportunity to correct mistakes of the past by reviewing prestige projects of questionable utility. Now is the time to embrace a new pragmatism in the economic management of the country...A failure to grasp the nettle at this juncture may cost a heavy political price," it said.

Abdullah’s supporters noted that before the general elections the PM spoke repeatedly about overhauling the subsidy system in the country. But they thought that he would put it on the backburner after four states fell to the Opposition and the Barisan Nasional lost its two-third majority in Parliament.

A government official told the Malaysian Insider: "He has done what he thinks is responsible and believes that the public will accept the reasons. Maybe his faith is touchingly misplaced."

(Malaysian Insider)