Malaysia's petrol price hike when global crude oil prices declined to 3 years low, a reflection of poor financial management!

Timing of latest fuel subsidy cut a surprise

PETALING JAYA - The latest round of fuel subsidy rationalisation came as a surprise to researchers and analysts who, nevertheless, are positive on the implications of the move, which could translate into savings of an estimated RM1 billion for the government.

Effective today, retail prices of RON95 petrol and diesel are up 20 sen each to RM2.30 per litre and RM2.20 per litre, respectively. This translates into a 9.5% increase for RON95 and 10% for diesel.

"We estimate that this fuel subsidy cut will save the government around RM1.1 billion in 2014, thus helping to achieve fiscal deficit target of 3% by 2015 and a balanced budget by 2020," AllianceDBS Research economist Manokaran Mottain said in a note today.

Currently, the market price for RON95 is RM2.58 per litre and for diesel RM2.52 a litre.

Manokaran said the move to cut the fuel subsidy further came as a surprise ahead of the tabling of Budget 2015 on Oct 10 and amid the recent decline in global crude oil prices.

"Following the recent announcement of a delay in the introduction of a multi-tiered mechanism for fuel, we had expected something like this to come on Budget Day," he said.

Manokaran said the reduction in fuel subsidy was necessary as the government had committed to bringing down the budget deficit to gross domestic product ratio from an estimated 3.5% this year to 3% in 2015, and to achieve a balanced budget by 2020.

However, in light of the latest fuel subsidy cut, Manokaran is now expecting a delay in the announcement of a multi-tiered pricing mechanism.

"We maintain our view that the current blanket subsidy mechanism has to be changed to a multi-tiered subsidy structure based on household income level.

"This is to ensure that subsidies are only channelled to the lower-income group. We hope that the government will have strong willpower to initiate the fuel subsidy reforms soon in order to ensure the economy is more competitive," he said.

Manokaran expects inflation to spike again in the last quarter of this year following the hike in fuel prices. "We maintain our view that 2014 full-year inflation will be 3.5% and inflation to hit 4% in 2015 on the back of the Goods and Services Tax implementation," he said.

Meanwhile, HongLeong Investment Bank Research said that with the 20 sen fuel price increase, it sees no rush for the government to implement the multi-tiered subsidy scheme, which has high complexity in implementation.

"In line with the latest comments by the Ministry of Domestic Trade, Cooperatives and Consumerism, we now expect the new fuel scheme to be rolled out in early 2015," its economist Sia Ket Ee said.

Coupled with the recent weakening of crude oil prices, he said, the government's fuel subsidy per litre is now as low as 28 sen to 32 sen per litre.

"As we expect crude oil prices to remain weak in the near term, the government's subsidy bill is expected to be well contained," Sia said.

He said savings from the subsidy cuts will likely be channelled to other economic services and social spending, expecting an additional RM150 in BR1M payment for 2015, or an extra RM1.2 billion.

The BR1M payout announced in Budget 2014 was RM650 for households and RM300 for singles. A BR1M payment of RM450 was also given to households with a monthly income of between RM3,000 and RM4,000.

RHB Research said the hike in fuel prices will likely hurt consumer and business spending somewhat but it will likely be manageable.

It expects inflation pressure to hold up in the fourth quarter following the fuel prices hike today, which will spill-over into other end-product and service prices gradually.

"Given that the weights for petrol and diesel account for about 7.5% and 0.2% respectively of the Consumer Price Index, the hikes in retail petrol and diesel prices are expected to add 0.7 percentage point to the inflation rate in October.

"However, the impact on inflation will likely be more muted due to the higher base effect in the 4Q of 2013," it said.

In light of the fuel price hike, RHB Research now expects inflation to come in at the higher end of its forecast of 3% to 3.4% in 2014, compared with 2.1% in 2013.

While inflation is expected to hold up in the fourth quarter due to the higher fuel prices, it opined that the country will likely experience a more moderate pace of economic growth in the second half of this year. -Sundaily

Related:

 High petrol prices - YES, IT'S MAHATHIR'S FAULT! He thought he was a genius but ...
 Fuel price hike due to Putrajaya's poor management... 

Malaysia Chronicle

1. No reason to raise petrol price when crude oil price is at a 3 ...

   Barisan Nasional has decided to increase the petrol prices at a time when the people are suffering from rising cost of living. This is not only a ...

Modern-day living poses threat to finance, four steps to avoid

Four steps to avoid becoming a burden to your children 

WHEN we were young, people were very careful with their money. Frugality was the order of the day as all available resources was channelled towards just surviving.

Today, our First World problems sound like this: “Should I get the iPhone 5s or wait for the iPhone 6? Such a dilemma!”

I do think that our modern-day living poses a serious threat to our finances. If we do not do something, we may be heading for a personal financial crisis.

Here are four reasons why:

1. LIVING IN EXCESS

Perhaps it is a rejection of our parents’ frugality that we have the need for many things. We are likely to have more than one holiday a year, many expired goods in our pantry, 10 pairs of shoes and a fancier car than our parents.  

2. NO FEAR FOR THE FUTURE

We grew up in a time of plenty with no real threat of war. So there is no need to have "storage" for future calamity. This abundance mentality has allowed people to throw caution to the wind and be totally comfortable spending every sen they have or even what they don’t have.

 3. A RELIANCE ON OTHER'S RESOURCES

There is the safety net of FAMA (father, mother) who will rescue their distressed adult children. How long can FAMA sustain us before their lack of funds become our problem? Also, while EPF is a good retirement vehicle, perhaps it may not be enough to fund your cost of living over the long haul.

4. PRESENT WANTS OVER FUTURE NEEDS

In the 1950s, the lifespan was only a few months after retiring at 55. Now, people are living two decades longer but have not realised the implication of this. They are "enjoying" themselves too much rather than thinking about the future.

If we don ’t correct these four grave financial mistakes, the persons we are today will grow old to become poor tomorrow, dependent and a burden to our children and society. It won’t be anyone’s fault but ours.

Let us plan for the future, so that we will not be woefully unprepared for it.

Contributed by by Amelia Hong

The writer can be contacted at info@successconcepts.biz

The keys to China's success

  Female Honor Guards train for National Day celebration Video: http://t.cn/RhmCK8o

• 

  Female Honor Guards train for National Day celebration

The institutional system and decision-making capabilities of democratic centralism have proven to be the country's advantage

This year marks the 65th anniversary of the founding of the People's Republic of China, the 60th anniversary of the establishment of people's congress system and the 65th anniversary of the establishment of the Chinese People's Political Consultative Conference. In the past 65 years China has developed rapidly and has made great achievements. Democratic centralism is the core mechanism of the China model, the key to the China miracle, and China's advantage compared with other major developing countries.

Special coverage: People's Republic Turns 65

China is still a developing country, and it lags behind the developed countries in many aspects. But it would be wrong to always attribute the developed countries' achievements to their democratic system. It's also wrong to deny China's success because of some partial setbacks or mistakes and to blame these on China's democratic system.

Democratic centralism is an institutional system as well as a decision-making model. Democratic centralism is an organization principle of the governing Communist Party of China, as well as national organizations, which links the CPC and the national mechanism based on the people's congress system.

Under democratic centralism, the decision-making process is first democratic discussion and then consensus on opinions on a democratic basis, which guarantees the decision-making process responds to public opinion to the greatest extent.

Currently there are two major political systems in the world: democratic centralism and representative democracy. If we want to make a comparison between the two systems, we should first make sure the premise of "comparability" holds. In other words, China should be compared with those developing countries that also have a long history, huge population and suffered a long time as a colony or semi-colony.

We can divide all the 12 countries with populations of more than 100 million into three groups. The first contains developed countries such as the United States and Japan, whose development is not due to representative democracy, but freedom of speech, rule of law, a market economy and exploitation of other countries.

The second group contains countries that have turned to representative democracy such as Russia. In the 1990s, the former Soviet Union fell apart and terrorism was widespread. The public called for Vladimir Putin's "controllable democracy", which has enabled Russia to revive.

The third group contains those developing countries that were colonized for a long time, such as Bangladesh, Brazil, China, India, Indonesia and Pakistan.

Representative democracy is the bottleneck for most of these countries' development and their people's welfare because of strong social forces and weak national power. The political organizations and family forces behind representative democracy make local social forces in these countries ever stronger, while national power is often too weak to turn national will into reality in this political system.

Some Western people compare India with China and expect India, the largest democracy according to the West's definition, to surpass China someday because they believe that representative democracy is the biggest advantage of India.

Yet in the Human Development Index, China has risen from the rank of 101 in 2001 to the rank of 91 in 2014, while India has dropped from 122 in 2001 to 135 in 2014. In the Poverty Population Index, 11.8 percent of China's population is below the international poverty line, while the percentage of India is 32.68. In the Corruption Perceptions Index, China ranks 80th while India ranks 96th. In the Ease of Business Index, China ranks 90th while India ranks 134th. In 2013, China's per capita GDP was $6,629, which is more than four times the $1,592 of India. The gap of per capita GDP between China and India is larger than two decades ago.

Why has the gap between China and India become larger? India is a democratic society but still has some feudal legacies, and the unfairness under feudalism can hardly accelerate market economy development. As to its "superior" political system, Indian-American political commentator Fareed Zakaria describes it as "bandit democracy". That means, a candidate who committed a crime yesterday may be elected today. India has about 2,000 parties. The country's high degree of fragmentation means it fails to propel public policies that benefit its citizens. The representative democracy of India is fragmented democracy that lacks authoritative policy execution.

Compared with the major developing countries that practice representative democracy, China's centralized democracy guarantees freedom, autonomy, a market economy and also authoritative governmental organizations. China has a lead in governance compared with other major developing countries mainly because of democratic centralism.

Democratic centralism has gone through the first stage during the revolutionary period, the second stage during the first three decades after the founding of New China, and the third stage during the three decades after reform and opening-up. From history and reality we can clearly see the advantages of this political system.

By Yang Guangbin (China Daily)/Asia News Network
The author is a professor of political studies with Renmin University of China.

Related posts:

China successfully tested new ultra hypersonic missile vehicle seeks to calm US fears

China cutting edge technologies: Naval Missile Def...

China on road to depeen reforms

The Communist Party of China (CPC) has to acknowledge the market's decisive role in allocating resources as it is proven to be the mo...

Related: 

17th Asia Games 2014 Medal Tally - 30/9/14

Rank	Country		Gold	Silver	Bronze	Total
1		China	120	76	58	254
2		Korea	50	53	59	162
3		Japan	37	50	54	141
4		Kazakhstan	15	16	24	55
5		Iran	12	11	10	33
6		DPR Korea	8	10	11	29
7		Qatar	8	0	3	11
8		Chinese Taipei	8	8	14	30
9		Thailand	7	4	14	25
10		India	6	8	31	45
11		Uzbekistan	5	5	13	23
12		Hong Kong	4	6	20	30
13		Mongolia	4	4	10	18
14		Malaysia	3	9	9	21
15		Bahrain	3	5	1	9
16		Indonesia	3	4	7	14
17		Myanmar	2	1	0	3
18		Vietnam	1	9	20	30
19		Singapore	1	4	7	12
20		Kuwait	1	3	2	6
21		Saudi Arabia	1	1	0	2
22		Tajikistan	1	1	0	2
23		Pakistan	1	0	1	2
24		UAE	1	0	1	2
25		Macau	0	3	0	3
26		Kyrgyzstan	0	2	2	4
27		Philippines	0	2	2	4
28		Turkmenistan	0	1	2	3
29		Laos	0	1	1	2
30		Bangladesh	0	1	0	1
31		Lebanon	0	1	0	1
32		Iraq	0	0	2	2
33		Sri Lanka	0	0	1	1