Friday, May 06, 2005

Our Pockets

Someone put forth to me a pertinent question : Why do we have to pay more for petrol & diesel? I couldn't justify it.

I'm no economic expert. To the layperson, it is hard to understand why we have to pay more when we are a net exported of petroleum. Yes, I've been informed that our petroleum isn't the thpe used for vehicles. That's fine with me. But doesn't it mewe see more than we buy, as a whole?

I don't know for sure how much tax our national petroleum company pat, cash wise (you can't be sure just by looking at the financial statements sometimes). Taxation is a percentage of profit, hence I guess the revenue only flows in partially into the government coffers. But the financial benefits should trickle down to the downstream industries, contractors, service providers, shareholders, employees, related businesses, et cetera and these stakeholders would fuel spending, drive our economy. That is how I understand it, in totality and theoretically, it should be beneficial, the whole petroleum industry. There must be some ineffeciencies along the way, as with any economic model in practice. Some will gain substantially more than the others, hopefully they add value to the resources used and not waste it.

But my personal question is, how can we be sure that the subsidy savings will be fully diverted and benefit the poor? Will the disbursement of funds be fair and efficient, and low or better still nil in terms of cost (frictionless)? I ask because at least with the subsidy, the benefit flow in full into reducing our cost of living. At least every ringgit is really a ringgit to us, safely in our pockets.

One may argue we are a pampered lot, not in tune with the free market, protected. Economic liberalisation isn't only about free movement of prices and products and services. It is also about equality. When the economic structure hasn't been tuned and improved to face the world, it would be foolhardy to rush in. I admit subsidies distort efficiency. But subsidy to the man on the street isn't quite like subsiding ailing or inefficient industries. Subsidy to the man on the street gives a better chance at living. It may look little on the microside, but 10 cents per litre of petrol is a lot in the long run and this isn't the only increase because we are staring at a domino effect. Here we are keeping interest rates low, trying to fuel investment and spending, yet we reduce the cash available in the hands of the consumer. Some say the subsidy not only benefit the less wealthy, but everyone. To me that is very skewed logic as we are already taxing the wealthier ones at higher income tax rates.

I admit I'm no skilled economist. I'm not offering any solutions. But I can't help but worry.


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