Uproar over Malaysia's petrol price increase: 'Too much, too sudden'

Uproar over Malaysia's petrol price increase: 'Too much, too sudden'
6 June, 2008

Businesses warn of trickle-down effect on prices of goods, services

STREET PROTEST: Malaysia's opposition was quick to seize on the fuel price hikes, with street protests like this one in Kuala Lumpur. De facto opposition leader Anwar Ibrahim slammed the increases and there were promises of more protests. -- PHOTO: REUTERS

By Hazlin Hassan, The Straits Times

MALAYSIA'S overnight increases in petrol and diesel prices yesterday triggered widespread criticism by businesses, the opposition and ordinary people.

They called for a review of the steep hikes - 41 per cent for petrol and 63 per cent for diesel - announced on Wednesday and implemented yesterday.

The Associated Chinese Chambers of Commerce and Industry of Malaysia said the increase was simply too much, too soon for many manufacturers, and wished the government had raised prices gradually.

Malaysia's new fuel prices are still among the lowest in Asia, but the increases sparked immediate talk of a trickle-down effect on goods and services.

Among the first to warn that they may have to charge more were Cameron Highlands vegetable farmers who send their produce by lorry to other parts of the country and Singapore.

Lorry companies transporting farm produce said they will have to raise rates by about 35 per cent.

Bus operators moaned that they will be hard hit, but the government responded swiftly, reminding public transport operators that they are unaffected by the price hikes.

Entrepreneurial and Cooperatives Development Minister Noh Omar said public transport vehicles, including taxis, will get discount cards to buy diesel at RM1.43 per litre, instead of the new price of RM2.58.

'There is absolutely no reason for public transport operators to increase their fares,' he told reporters.

The fuel price hike is expected to push inflation to a 10-year high of 4.2 per cent this year, central bank chief Zeti Akhtar Aziz said yesterday. It was just 2 per cent last year.

Stocks tumbled 2.4 per cent yesterday while the ringgit sank. Government bonds plunged on expectations that the central bank would raise interest rates to curb inflation, although the bank insisted there was no need to do so yet.

But some institutions said inflation could go up as much as 8 per cent as electricity tariffs are also going up sharply.

Consumer groups yesterday urged people to spend wisely.

The Malaysian Muslim Consumers Association encouraged people to be thrifty, but the Consumer Association of Penang said the government should lead by example and cut down on expenses and waste.

There was also some support for the government's tough move to reduce subsidies and raise fuel prices.

'It's a short-term pain, but a long-term gain, in terms of better economic stability and reducing imbalances,' said economist Yeah Kim Leng.

'No doubt the 40 per cent increase is the biggest jump in history...but if it is properly channelled for development projects and for the improvement of public transportation, the public will be able to support it,' he said.