Sunday, June 08, 2008

Oil Price Hike and Inflation

Oil Price Hike and Inflation

There is so much unhappiness over the petrol price hike. Malaysiakini is full of report on demonstrations and protests. Some letter writer, like Dominic Pillai wrote good suggestion on subsidy for the low income group.

The glaring fact is, the current proposed rebate scheme does not alleviate the misery of low income Malaysian being hit in the pocket by this petrol price hike. True that it is done too hastily. When was it that Datuk Shahrir announce that Govt will increase the price of petrol to its full price in August and the price increase last week? Less than a week? Govt didn’t give a chance at all for wage earners to get their monthly salary and fill up their tank.
Two years ago, after the Govt increased price of petrol, I wrote to PM suggesting that the Govt remove petrol subsidy altogether. Two year is a along time, we have spent billions of ringgit already. Also don’t forget the billions of ringgit spent on mega projects. That money could be better spent on setting up a comprehensive welfare system for poor Malaysians to help them weather the inflation brought about by petrol price hike.

Now the Govt don’t have much in the kitty, unless we want to spend our foreign reserves of RM260billion. True that Petronas is profitable, and returning dividends to the tune RM40bilions last year. Question is, do we still have that money in the kitty?

Nevertheless, better late than never. I support Govt removing petrol subsidy.

Now what do we do to help the poor? Giving rebates to motorists means we are alienating Malaysians who doesn’t have motor vehicles who also feel the pinch of inflation.

As I said 2 years ago, Govt must take care of the welfare of low income Malaysians.

Minimum wage legislation.
This might take up to six month to study, write and put it through the parliament and passed into law.
This will spur the country forward to make more capital investment and increase per capita productivity, since employers would not employ employees to do low value jobs. It will also help employees on low income; higher income will ease their burden.

Social welfare payment (dole).
Social welfare payment for the poor, disabled old folks and pensioners, since their income are normally low and most of them cannot make end meet. Those people who are unemployed and have children to feed should also be included in this category. I would not elaborate further on this, since this should be included in our caring society concept adopted some time ago.

May I also suggest that the social welfare payment for main urban areas be set at RM1200 for two person household, (single person rate could be set at RM600) with increasing amount depending on the number of dependent in the household, e.g. RM100 for every additional child under 15 years old.
As for the minimum wage rate, I would suggest the rate is set at RM1200 for 48 hour week. That gives hourly rate of about RM5.70.

Why has the Govt throw away MTUC’s petition for minimum wage legislation to the rubbish bin? To protect the rich employers so they could continue reap huge profits? Its probably true that rich Malaysians make up the majority of UMNO lobbyists and backers. So it is not in UMNO interest to legislate minimum wage, which will dry up the political contributions.

This Govt also would rather spend billions of ringgit of useless projects so that the power brokers (read; UMNO to echelons) can farm out projects to cronies, who will contribute handsomely to some overseas bank accounts.

Ten plus years ago I heard Mahathir and Rafidah talked about ‘trickle down effect’. What a lot of crap. Still we voted these bunch into office.

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