DAP To Hold Nation-wide Protests On Sunday 8 May 2005 Against The Fuel Price Increases Which Will Result In Inflation That Affects Both The Economy And The Livelihood Of The Poor

Press Conference Statement
by Lim Guan Eng

(Kuala Lumpur, Friday): DAP will hold nation-wide protests on Sunday 8 May 2005 against the fuel price increases which will result in inflation that affects both the economy and the livelihood of the poor. Inflation is generally defined as an increase in the level of prices causing a fall in the market value or purchasing power in an economy.

As fuel is a basic commodity, the 10 cents or 7% increase in petrol and 20 cents or 23% increase in diesel will definitely result in a chain reaction of price increases of other goods. Transport operators have already announced that they will increase fares by 40%; whilst many taxi drivers claim their cost will increase by 50%-; bus operators are angry that the 20% increase given to them on 1 May 2005 is more than taken away by the 23% rise in fuel prices; businessmen are angry at having to pay 23% more that can affect not only their profits but also the country’s economic performance.

The 2004 Bank Negara Annual Report estimates inflation to increase to 2.5% this year from 1.4% in 2004 and 1.2 % in 2003. Core inflation, comprising inflation but excluding price-controlled and price-volatile items, also increased to 1% in 2004 from 0.5% in 2003.  As the projections for inflation in 2005 of 2.5% was made before the rise in fuel prices, inflation can only be expected to go much higher.

Such inflationary pressures will affect not only real wages but also affect the profit projections of businesses. The projected rise in inflation and core inflation can further erode increases in real wages in 2005. Inflationary pressures had caused real wage to increase by only 1.8% in 2004 as compared to 2.8% rise in 2003. The impact will be lesser profits, reduced tax revenues and smaller purchasing power that lowers the living standards of Malaysians, especially the poor.

Why Can’t Malaysians Benefit From Petronas Exports Of Crude Oil And Liquefied Natural Gas Of RM 38,397 Million?

Malaysian crude oil production rose to the highest levels of 762,318 barrels per day or a total of 18 million tonnes in 2004 with an export value of RM 21,318 million. Natural gas production also reached historic levels of 5,196 million standard cubic feet per day or a total of 20.8 million tonnes in 2004 with an export value of RM 17,079 million.

Malaysians are questioning the need of the government to talk of the necessity of saving RM 2.2 billion in subsidies when Petronas exports from both LNG and crude oil amounts to RM 38,397 million. Whilst reducing dependency syndrome or subsidies can increase efficiency, the social and equity aspect of taking care of the poor can not be overlooked. Further what is the benefit of Malaysia being an oil exporter if Malaysians can not benefit in the form of a reasonable fuel prices. Finally, what is RM 2.2 billion in subsidies compared to Petronas huge exports of RM 38,397 million?

If the government wishes to reduce subsidies because the nation can not afford to sustain these losses, then it should be done gradually to reduce the adverse economic impact and not a sudden huge increase. Having a gradual increase over a year is less stressful in terms of economic impact but will also allow businesses time to revise their cost projections accordingly. Sudden fuel increases reduces business certainty and does not inspire investor confidence.

Call on the government to redirect the RM 2.2 billion savings from petrol subsidy to improve public transportation system

The Government has suggested that Malaysia’s petrol price is the cheapest after Brunei and diesel price is second to Brunei and Indonesia in South-East Asia. Such claims that Malaysia’s fuel prices are still fair or reasonable is a classic case of missing the woods from the trees.  .

We must remember that both Malaysia and Brunei are oil exporting countries. Malaysians are asking why Brunei could subsidies the petrol in the country but the Malaysian Government refuses to use the huge profits of Petronas as a buffer from the movement of international oil markets.

The Indonesian Government was forced to raise petrol prices to RM 1.70 per litter but yet kept diesel 70 cents per litres. The reason why diesel subsidy was kept at such a low level was because most Indonesians depended on diesel for their lives. The lesson is that if it is a necessity in the lives of the people, there is always a need for the Government to mitigate or reduce the sufferings of ordinary people out of equity considerations.

That is why DAP opposes the present price increases as unreasonable and not in the interests of 25 million Malaysians when Petronas can record huge profits. The DAP also demands that the Government undertake that this will be the last increases in petrol price for at least another two years.

For Malaysians, privately owned vehicles have become a necessity in our daily lives. The heavy dependence on automobile is the direct result of twenty years of “hard-selling” Proton to Malaysians. Malaysia has a total of 3.6 million registered vehicles in 1987. By the turn of the century, Malaysia has 5.3 million private cars, 4.1 million motorcycles and 1.1 million other vehicles including taxis, buses and commercial trucks, which worked out to a total of 10.5 million vehicles.

The total of registered vehicles now stands at about 14 million units. Every year, Malaysia sees about half-a-million new cars entering its already congested roads. It is extraordinary given that Malaysian population is only about 25 million people.  The vehicle per 1000 people rate in the Klang Valley is only marginally less than that of United States of America, Australia, New Zealand and Canada.

Klang Valley has more vehicles per 1000 people than that of Western Europe despite the fact that Malaysia is still a developing country. At the same time, the utilization of public transport has declined from 34 % in 1985 to 16 % currently.  Public transportation in most countries are subsidised by the government but it is clearly not the case in Malaysia.  

The DAP also calls on the Government to redirect the RM 2.2 billion savings from petrol subsidy to improve public transport system with the ultimate aim of reducing the dependence on private vehicles that consume so much of petrol products.

A Complete Package Of  Lower Road Tax For Diesel-run Vehicles, Lower Highway Toll Rates And Better Enforcement Should Follow The Fuel Increases

DAP calls on the Government to reduce the heavy road tax imposed on diesel car and lower highway toll rates as a way to reduce the impact of diesel price hike on car users. At the same time there should be better enforcement by the relevant authorities to reduce smuggling and hoarding of diesel.

The recent price increases is as much a failure of the Domestic Trade and Industry Ministry to take action against smuggling as the effort to reduce the cost of subsidies. The 60 cents difference between subsidised and unsubsidised diesel would definitely be a motivating force for smugglers. The failure of the enforcement personnel to act against smugglers precipitated a diesel shortage crisis and this price increase.

This shows that not only must there be better enforcement; the government needs to instil the values of democracy, accountability and transparency to check such abuses of government policies.

Currently, owners of private diesel-run vehicles pay a road tax that is four times of the rate of petrol-run vehicles. The expensive road tax was premised on the basis of a low diesel price, which stabilises at 65 cents per litter until 2000, when it was increased to 70 cents per litter.   When diesel price was at 65 cents, petrol price stands at RM 1.10, which means diesel users paid only 59 percent of petrol price, thus the justification for higher road tax.

However, diesel price has gone up seven times in six years (2000-2005) with its current price at RM 1.08, 71 percent of the new petrol price. Judging from the statements by government leaders, the government is most probably going to increase the price of petrol and diesel again if international oil prices continue to rise.

The time has come for the Government to introduce a complete package of abolish the dual pricing of road tax and introduce a uniform road tax price for all vehicles of equal engine capacity as well as reduce the highway toll rates to reduce the impact of fuel increases. DAP opposes the fuel increase because the failure to provide such a complete package will only place the full burden on ordinary Malaysians whilst huge companies like Petronas and PLUS record huge profits at taxpayers’ expense.

DAP hopes that all Malaysians angry about the fuel price increase and the lack of transparency, accountability and democratic values in the administration can join these protests held in major markets throughout the main towns in the country.


*  Lim Guan Eng, DAP Secretary-General