Inexperience fuels fears towards the subsidy stratagem

Malay Mail
Malay Mail

JUNE 13 ― While over 200,000 people died on December 26, 2004 when the tsunami destroyed swathes of Asia, many of the 37 who died on Penang’s Miami Beach left a lesson for us to use today.

Since our geography protects us from giant tidal waves except that day, Malaysians did not know quickly receding water on a beach means mortal danger. Many walked out to see what’s up with the sea until the tsunami met them.

Japan’s beaches have signboards, tsunami alerts, telling people to run helter-skelter up and away from the water if the sea rapidly recedes.

There’s no blame here. Inexperience forced the outcome. Knowledge does not save people automatically, but it gives them a chance.

Governments should aid people with inexperience, not chastise them when they run the wrong way. After all, the government is elected to protect the people.

A man is seen refuelling his vehicle at a petrol station in Khantan, Perak June 10, 2024. ― Picture by Farhan Najib
A man is seen refuelling his vehicle at a petrol station in Khantan, Perak June 10, 2024. ― Picture by Farhan Najib

A man is seen refuelling his vehicle at a petrol station in Khantan, Perak June 10, 2024. ― Picture by Farhan Najib

Brave fuel world

Inexperience envelopes the current stratagem to end fuel subsidies in Malaysia, beginning with diesel on June 10, 2024. The prized RON95 petrol may go up more or sooner depending on how well the current diesel implementation is received.

The naivete is not with the bold step to nix subsidies — which is appropriate and long overdue — but in how Malaysians are set to cope with it and the role the government can play in the situation.

For the administration is too busy defending the subsidy scrap decision rather than leading Malaysians through the difficult and trust-reliant process.

Malaysians are not used to losing entitlements. There is how the world looks at benefits, and there is how Malaysians are accustomed to benefits which to a large degree reflects the manner they have been governed for decades.

Regardless of debates about Malaysia as a net importer or exporter of oil, as it would be marginal either way the critical point is that it is monumentally different from the highs of the Nineties and Noughties.

Factor that with a 15 and a half million population in 1984, to 33 million citizens today with higher adult percentage and vehicle ownership, the total consumption minus net gain on the sale of the commodity would weigh against the government of the day.

They pay much more today for subsidies.

The last three governments admit it is untenable. Coughing up RM60 billion per annum for fuel subsidies is the same as building three MRT systems in Johor Baru, Ipoh and Seremban.

Tengku Zafrul as finance minister under Muhyiddin Yassin (2020-21) and Ismail Sabri Yaakob (2021-2022) echoed it, and as international trade and industry today under Prime Minister Anwar Ibrahim remains with this position.

The 2022 general election result, even if it went the other way, would only have meant a different timeline to the same outcome. The diesel subsidy could have been terminated earlier in an alternate universe under Perikatan Nasional (PN).

As mentioned before, the diesel manoeuvre is a precursor for the more colossal petroleum RON95 price rise, where the serious pitfalls lie. As it would affect considerably more millions of the population and the multiplier effects even more pronounced.

All by ourselves

Malaysia has the lowest fuel prices in Asean. Our cheapness is why our land borders are rife with smuggling.

Is it wrong to subsidise fuel?

The question is misleading. Humans like things cheaper, not just Malaysians. The better question is, can we afford it?

And the supplementary question, should we put our scarce resources into subsidies and not into other options? This is the opportunity cost dimension. As stipulated above, major transport infrastructures may have been built with even a part of the subsidy Bill.

Sidling up to the issue is the perennial red herring, the accusation that if the money is not passed down as subsidy unscrupulous politicians pocket it.

No matter how money is spent, if transparency and rigorous processes of checks and balances are missing, then unscrupulous politicians invariably pocket our funds, with or without fuel subsidies.

Rounding up the parameters, the universal uncomfortable truth that most subsidies lead to — look at ration cards in India and wheat imports in Egypt — corruption and smuggling because by definition they distort natural price determinations, there are incentives to be bad, very bad.

Next, compare our upcoming predicaments with the region’s present and past.

Poorer Asean countries stomached fuel subsidy reductions and survived. Thailand and Indonesia have heavily reduced their subsidies and The Philippines did it more than 25 years ago.

And the average GDP per capita for Malaysians is US$11,000 (RM51,897) compared to Thailand’s US$7,000, Indonesia’s US$4,100 and The Philippines’ US$3,200. Further, those countries faced rising fuel costs without direct government cash aid, which Malaysia offers.

If they managed with less family income and government top up, then they are clarion calls to Malaysia to follow suit.

Forms evidence the Malaysian economy can also go past this without combusting. Or are we to assume Malaysians are way too fragile?

Be mindful, recent subsidy cuts in Thailand and therefore the greater price differential between our oil prices would embolden even more corruption at the border.

Debate less, lead more

The current subsidy rationalisation only seeks to charge those with incomes above RM100,000 per annum and punish smugglers. So many are exempted — school bus operators, express buses, transporters and fishermen.

The current diesel trial with a super soft landing is perfect for Unity Government ministers to draw broad support. Training for tougher measures later, and the later after that. This is a long game.

Yet, the tone chosen is adversarial rather than comforting.

The panic among Malaysians is not a trigger to rebut the confused masses in both media and through online platforms. Rebuttals seek to destroy opponents’ arguments. But these are not opponents, these are Malaysians not used to tsunamis, even small ones, and irrationally walk towards where the water recedes.

They need leadership in this matter.

They need hard truths explained to them, including the downsides. No one trusts a doctor who tells the patient and her family before surgery that there is no risk and the body will be exactly the same post-op.

A life without subsidy is more expensive — this all economists agree to — and probably difficult, but it does not have to be indefinitely so. On the same token, it might get worse.

That’s the whole thing about economic management of a country, there are no iron-clad guarantees.

But to leave the situation to remain as ignorant as it was before, is irresponsible.

Hard work, flexibility, communication and leadership can get us through this.

On Miami Beach, 20 years ago, 22-day-old S. Thulaashi was swept away by the tsunami from her cot and brought back by the sea half an hour later. The miracle baby turns 20 in December and studies accountancy at Universiti Sains Malaysia, according to her father when I met him last month. He still runs the eatery by the sea.

I would rather our leaders not expect miracles or further admonishments of inquisitive Malaysians to help Malaysia across the line on subsidy eradications.

Just like the accountant Thulaashi is set to become, they should rely on their skills to calm people and let them understand the numbers.

They add up to debunk subsidies but it is not immediately self-evident to all. Go to the rakyat. Convince them, not badger them.

* This is the personal opinion of the columnist.