Malaysians Question Petrol Subsidy
Citizens Receive a One Time Postal Order as Petrol Compensation
On June 4, 2008, one day after the Malaysian government announced that there would be no price hikes in oil until August, the officials slashed the country's petrol subsidy by 41%.
The abruptness of this hike irked Malaysians but not as much as the government's attempt in mitigating the financial distress faced by the majority of Malaysians.
The government announced a one-time money order scheme that would be awarded via post, when road tax is renewed. Only cars that are below the 2.0cc engine capacity are entitled to this RM625 rebate (approximately USD200).
Why the Postal Money Order is Illogical
Despite the amount being so small (covering about a month's or six week's worth of petrol for the average Malaysian), there are other reasons why this sort of compensation comes across as illogical.
- Larger cars do not necessarily represent a wealthier person. In fact, larger cars are purchased in Malaysia in order to accomodate large families. It would be wrong to "punish" breadwinners who have to support 5 or 6 children in their household for driving a car with an engine capacity of over of 2.0.
- Travelling distances also differ. Some people are required to travel longer distance to work or their work entails extensive travelling. This person would gain nothing of the compensation as compared to a person who lives closer to the office.
- Fishermen who use boats as their mode of transportation or business endeavours do not receive the compensation, even though they too, are reliant on petrol.
Possible Backlash of the Postal Money Order
There are also potential problems that could affect economic and social harmony in the country, due to the implementation of the postal idea.
Since the money order is disbursed when road taxes are renewed, opportunistic or desperate Malaysians may attempt to forge road taxes in order to earn a little side income. This could even turn into an illegal business model if not adequate monitored.
Another backlash of this system is that wealthier Malaysians may engage in purchasing cheaper cars in order to enjoy a higher rebate this year. This would drive up the smaller market and cause further suffering to those in the viable income bracket.
Alternatives of the Postal Money Order
Malaysian drivers face multiple expenses when owning and driving a car in Malaysia. Instead of the postal money order, the government could have chosen alternate routes to subdue the problem of the price-hike in oil.
Excise duties on foreign cars are incredibly high in Malaysia, sometimes reaching up to 100% on the original price of the car. By eradicating the excise tax, the prices of foreign cars would be reduced causing local car manufacturers to slash prices in order to remain competitive in the market. This would mitigate the purchasing strain on consumers.
Toll concessionnaires are rampant in Malaysia and charge high prices for the use of ill-maintained roads. The government could have used the new revenue in retracted subsidy to buy out these companies and provide toll-free roads for Malaysians.
Besides toll expenses, Malaysians have to pay road tax. Instead of the money order, the government could have slashed road taxes by RM625 per car.
Also, the car insurance industry in Malaysia is a lucrative one because it is compulsory to subscribe to an insurance upon the purchase of the car. Insurance premiums are also very high. By changing this rule, Malaysians would have the option of not purchasing insurance at their own risk - but at the same time it would drive premiums down through healthy competition between service providers.
