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Malaysia petrol price hike ~ the good, the bad and the ugly





The Malaysian government finally made a decision to decrease petrol subsidies, thus affecting us directly since petrol prices will effectively increase by about 40% from the old RM1.92 per liter to RM2.70 per liter. The announcement literally caused a petrol pumping frenzy throughout the town. Petrol stations were packed with people trying to fill up their petrol tanks.

Most of us are probably hating the decision and complaining. Cannot deny the fact that we are all going to have tie our tummies and spend less. But lets face it, the decision to cut back on fuel subsidies is way overdue and should have been decided years ago. Call me crazy but, the money saved from cutting fuel subsidies can be used for the development of the country.

Basic economics theory, government spending contributes substantially to GDP growth. Subsidies are good in the short term to get the economy going but otherwise the money should and must be used for other development. 

For instance, with the growing rice prices, the money can be used to push agricultural projects. Economic growth does not only mean focusing on industrialization. Besides the agriculture sector, there are many bright and talented Malaysian individuals who cannot venture into businesses despite having wonderful viable business models due to lack of funds. The money saved from cutting subsidies can be used to finance these people for say, a lower interest rate in repayments. 

Many of us complain, it is the government's duty to subsidies our fuel for the betterment of the people. Quite frankly, I think that way of thinking is very naive and short sighted. If cutting back on fuel subsidies can bring back the times when Malaysia was getting a good 8 to 9% GDP growth, that will definitely be for the betterment of everyone. 

Besides, comparatively across other countries in the Asia Pacific we are still paying for cheaper fuel. In addition, with the planned discriminative fuel charges for foreigners, we stand to gain more. Across the asia pacific, Malaysia is slowly losing out in terms of economic growth and attracting foreign direct investments. If cutting back in fuel subsidies means growth and more development, I am in for it! Its a long shot, but its worth a try!




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