Fuel subsidies

From Wikiop

A poll about this topic has been created. Cast your vote after reading the arguments here. The initial arguments found in this page were obtained from the discussions in the Stanford Malaysia Forum.

Arguments for phasing-out gradually

• Fuel subsidy should not be looked at in isolation. We need to look at making efficient public transport available. The bus and trains are in a bad shape. Granting of new bus and taxi licenses are very restricted. Make public transport up to high level of standard first.

• Fuel subsidy is a kind of income redistribution, a very crude one.

• The refinery output price has a huge impact on the final oil price (not just the crude). Malaysia has no effective refinery and often export oil and then re-import it after it has been refined. Improving efficiency in this chain will bring price down.

• One can argue that Petronas and the oil reserve belongs to all rakyat and henceusing the revenue to invest in transport infrastructure is a fair and just and a beneficial thing to do.

• Some for of subsidy is needed for now to prevent undue hardship on the many.

• Being spoonfed for so long, to drop that immediately would be too painful. Phase out over 3 years.

• Farmers who transport agricultural goods and other logistic industry may well benefited much from these.

• Perhaps a fuel voucher scheme to phase this out? Say give RM1000 to each IC holder and certain industry on year 1. There probably will be trading of these vouchers, but let's accept that.
  • Year 2, remove commercial subsidy.
  • Year 3, reduce the individual subsidy.
  • Year 4, market price?

• Subsidies for commercial vehicle, it is actually not that difficult:
  • We have all those lorries with A,B,C licenses - these are commercial vehicle.
  • Vehicles registered in company names...these are commercial vehicle.
  • All others are non commercial. This is for a short transition period anyway.

• Gradual phase-out process in Indonesia:

Arguments for phasing-out within a year

• No reason to subsidize the high octane petrol at all, since only high performance vehicles use it. Likely that even the SUV and Luxury car users will switch to low octane gas, if there is a large price differential.
  • The government will be spending 35 billion Ringgit to keep prices at current levels.

• It just makes the local economy detached from reality, and becomes inefficient in terms of opportunity to better manage resources in long term.

• Another subsidy is silly because we are not letting the Ringgit float enough against the USD. Most Asian countries are literally importing oil gas inflation as they packed their currency to the Dollar, since oil is still mainly traded in Dollar.

• The longer we continue to subsidize fuel in Malaysia, the harder and more difficult it will be to wean us all from cheap fuel, and wasting of public funds.

• There is a lot one can do with RM 35 billion a year, especially in a country like Malaysia, and subsidizing a segment of the population, just because of perceived or real hardship, is hardly a worthy public policy goal over the mid to long run. Fuel prices, along with other forms of subsidies will be draining this country's coffers dry in the coming years as the costs of food, oil and gas will rise in the foreseeable future.

• We have been wasteful and not forced to innovate or adapt to the much needed changes just because we have been addicted to cheap subsidized fuel (and food). If Indonesia, a poorer country by most socio-economic measures, can remove much of its fuel subsidies, why not us? Such manipulation discourages innovation and efficiency.

• Indeed an income redistribution; only that it's redistributing the bulk of the benefits to the rich (since they drive bigger cars and hence use more fuel).

• To debate about fuel subsidy, we also need to know who benefits the most. The top 1% would not benefit the most and neither will be the poor. The very rich are probably at golf courses, offices or in the jets. The poorest don't have car.

• The pain and economic hardship will ensue, but one must note that Indonesia did cut back as did Thailand too more than 2 years ago.

• Malaysians in general, are wealthier than our southern archipelago neighbors and should be able to cushion such micro-economic changes with greater ease over a period of time.

• No doubt this will create pain and hardship for many, but then so are the horrible non-visible structural inefficiencies and price support levels that debilitate and distort the macroeconomic well-being of the nation.

• The proposed time table will work if one can discern between privately owned vehicles from those used for commercial basis. Not the easiest to carry out and the easiest to abuse. It would be easier and less disruptive if we phase out across the board; penalize not businesses nor the rich, but favor the truly needy and poorer strata of the population through targeted means (and accept the probable abuses that come with it).

• And along with that, a political consensus by all segments of the population that this subsidy is important and critical for the mid to long-term well-being of all. Lacking this concurrent soft sell approach can and will surely lead to further destabilization of the federal government, and worse, propagation of political populism that will enter the political vacuum that is neither helpful nor welcome.

• Distortion is not good a country in the long term, so is those unsubstantiated medicare, pension promises. Most people live for now. It is not Abdullah's problem for what happens in 2020, nor would most Malaysians think how competitive the country is in 2040, or would American drawing pension now cares what happen to SS in 2045 (when it would default). It requires a bold leader (like Margaret Thatcher) to do the right thing, otherwise pray.

• Using solely political right wing or conservative measures to undo the fuel (and/or food) subsidy in Malaysia through a leader like "Margaret Thatcher" is absolutely a recipe for social disaster. No matter where one stands on the political spectrum, an objective assessment of Thatcher's role (and method therein) in destroying the coal miner unions in the early 1980s and also the coal mining industry is something we should avoid. Indeed, in the wake of the coal mining union struggle, many communities in northern England were left decimated, and many still are. And this from a welfare state - can you imagine what it will do to Malaysia where the social welfare net is hardly worth mentioning?

• How technology innovation can solve these issues and how far companies can go if they have to - UPS has now program their SatNav system to avoid making turns to save fuel.

• Most of these subsidy (attempt to fight market prices) will eventually end up in bankruptcy in this globalised world..

• And yes, the Indonesians did demonstrate and some minor rioting did occur; and they came and passed.

• Not too sure getting rid of fuel subsidy is right wing or not. In some ways, not setting the incentives right for a greener environment could be called right wing. Perhaps, not getting rid of fuel subsidy is right wing.

• Implementing fuel subsidy is plainly an ineffective tool to help those needed help the most in a nation. The ones who will benefit most from the fuel subsidy will be the richest who has the most resources to consume so much of the energy. Think big manufacturers that needs to stay competitive, think rich families that drives huge SUVs.

• The poor needs to be helped the most in what they use the most. It just doesn't make sense that the biggest consumer of fuel will necessarily be the poor. Perhaps, a better way is to remove all sort of taxes for the poor, provide different sorts of governmental services for free for the poor.

• Fuel subsidy is just a political tool for politicians to gain popularity.