(Malaysian Insider) SEOUL, June 9 — South Korea announced yesterday it would hand out US$10.2 billion (RM33.2b) to its lowest-income citizens over the next year to offset the rocketing price of oil, joining the growing list of Asian countries scrambling to deal with a potentially explosive problem.
The move came after oil posted its biggest one-day price gain last Friday, which prompted the world's biggest energy consumers, including South Korea, China, India and the Group of Eight nations, to issue a statement yesterday expressing "serious concern" over soaring prices and urging a shift to alternative fuel sources.
Japan, which hosted the meeting, warned that the world could plunge into recession.
Announcing the government package in Seoul, Prime Minister Han Seung Soo told a news briefing: "We are facing great difficulty as the world's fifth-largest oil consuming nation while we do not produce a drop of oil. The government will do its best to help reduce the burden from rising oil prices on consumers."
The package, which will benefit about 13.8 million people, includes income tax rebates for the 78 per cent of the country's workers who earn less than 36 million won (RM115,593) a year.
The government will also pay 50 per cent of the increase in oil costs for bus drivers, truckers, farmers, fishermen and those on lower incomes.
Owners of trucks with less than a tonne capacity will also receive tax rebates.
Han said the government would use surplus tax revenues from last year and an expected surplus from next year's collection to fund the package.
But that surplus may be under threat, as officials have acknowledged that the country - Asia's fourth-largest economy - is unlikely to achieve its 6 per cent growth target this year because high oil and food prices have hit consumption. Annual consumer price inflation last month hit a seven-year high of 4.9 per cent, led by fuel costs.
South Korea's financial measures to alleviate the pain felt by oil users come as other Asian countries roll back oil subsidies that are proving too costly for governments.
Unable to afford big subsidies, India, Malaysia and Indonesia have already raised fuel prices, triggering protests in all three countries.
In the US, rocketing energy costs have fuelled fresh interest in the four-day work-week across the United States as a means to help employees as well as employers cope with the surge.
In Birmingham, Alabama, city officials have decided to implement a four-day week starting July 1 for some 2,400 municipal employees and later in the year for around 1,000 police and firefighters.
Strikes and protests have also been reported in Europe, particularly among farmers, fishermen and truckers, demanding a cut in oil prices which have doubled over the past year and risen 44 per cent this year alone.
US crude surged to a record US$139.12 a barrel last Friday in New York.
Analysts have warned that rising inflation caused by soaring fuel and food prices threatens to undermine many Asian governments facing elections.
"In any country that has elections coming up within the next two years, inflation and how the government wrestles with (it) will be important," said Robert Broadfoot of the Political and Economic Risk Consultancy.
"So therefore we're talking about India, the situation in Malaysia is still not finished yet, in Indonesia you've got elections next year, and the Philippines in 2010," said the Hong Kong-based analyst.
He added that the issue of rising prices was extremely difficult for governments to handle.
At the G-8 energy ministers meeting in the northern Japanese city of Aomori yesterday, the United States called for an end to continued heavy price subsidies in the region - which buoy demand - but China and India said they could only raise domestic rates gradually in view of their fragile economies.
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