The 20 sen per litre RON95 and diesel fuel hike is shocking to Malaysians because the international oil price is down to the lowest in nearly three years.
What then is the real reason for the Barisan Nasional (BN) federal government to make such a desperate unpopular decision to further burden the urban and rural poor’s socio-economic woes?
From a macro-economic perspective, the desperado BN is struggling to keep its administration going because it is managing the country with an empty federal coffer amid a federal debt of more than RM800 billion.
With such a huge debt, not only is the federal government managing the country on borrowings, it is also finding it more and more difficult to secure funds.
The debt-ridden administration is affecting the confidence of lenders, thus the desperate need to cut subsidies in the country, especially fuel.
Another round of fuel hike is expected this year-end, followed by the April implementation of the inflationary Goods and Services Tax (GST).
Today’s 20-sen fuel hike will no doubt trigger a round of inflationary domino-effects, raising the prices of almost every essentials due to costlier transport.
It won’t be surprising if coffee shops start raising the cuppa by 20 sen. Car park operators have already put up notices announcing an increase in parking rates.
Reuters reported from Tokyo today that the damage from an April 2014 tax hike by Prime Minister Shinzo Abe’s government has been worse than expected, and worse than an increase in 1997, which began a tailspin that ended the career of the then prime minister.
If history is a guide, a string of disappointing economic reports in Japan would seem to argue against raising the country’s sales tax again. But the risks for “Abenomics” are increasing whatever Abe decides to do.
A recovery in the world’s third biggest economy is faltering, despite Abe’s massive monetary easing and government spending over the past 21 months, and Japan may already be sliding into recession just as he must decide whether to raise the tax once again.
At the same time, delaying the tax hike is looking riskier. Some economists, investors and businesspeople say it could spook financial markets already worried about Japan's commitment to curbing its runaway government debt.
“If they don’t go ahead with it, that will shake confidence in Japan’s finances to some degree,” Takao Yasuda, chief executive of discount retailing giant Don Quijote Holdings Co, said.
“People would interpret it as evidence of just how weak the economy is,” Yasuda told Reuters on Sept 30. “If you ask me, it would be better to raise it to 10 per cent soon and get all the negative factors out there.”
Japan’s economy has also shrunk by an annualised 7.1 per cent in April-June, more than twice as steep as in 1997, when then-premier Ryutaro Hashimoto raised the sales tax.
It is expected to claw back 3.6 per cent in the July-September quarter, a Reuters poll forecast before the latest bleak data, a bigger bounce than 17 years ago but only because the drop was deeper this time.
Hashimoto’s recession was compounded by the start of the Asian financial crisis, but that will be scant comfort to Abe as he decides whether to hike again.
That’s really dismal news for regional economies, especially an economically and financially desperado Malaysia. The twin internal and external economic pressures are expected to inflict extreme socio-economic and political stress on Malaysia.
Japan has been Malaysia’s largest foreign direct investor since the 1980s.
Last year, approved investments in the manufacturing sector alone totalled US$1 billion.
According to a national news agency Bernama report, total approved investment from Japan for 2011 was RM10.1 billion which rose by RM2.79 billion the following year.
Japanese companies have made a strong contribution to Malaysia’s infrastructure development especially in the automotive sector, renewable energy, green and biotechnology industries.
Total trade between Malaysia and Japan in 2011 was at RM145.3 billion with RM80 billion contributed by exports from Malaysia to Japan, and imports from Japan amounted to RM65.3 billion.
There are about 1,400 Japanese companies operating in Malaysia, creating more than 11,000 job opportunities.
India has announced a drop in petrol price by 65 paise (four sen). The United Kingdom has also reduced petrol prices by 5 pence (27 sen). It is quite inaccurate to claim that there is absolutely no reason for Prime Minister Datuk Seri Najib Razak’s administration to increase the petrol price when countries around the world are reducing petrol prices.
The reason, and it’s absolutely valid, is that the administration cannot afford to continue providing subsidies to essentials because of a strained national coffer.
Source : http://www.theantdaily.com/Main/The-real-valid-reason-for-the-20-sen-fuel-hike#sthash.AtDSIRbO.dpuf
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