Umno Prepares Public For Hike In Fuel Prices

Malaysia's ruling party prepared the country on Thursday for a possible hike in fuel prices, a move that could erode public support for the government ahead of national elections.

Malaysia spends about 15 billion ringgit (US$4.5 billion; €3.0 billion) a year to subsidize retail prices of gasoline and diesel. The country is a net fuel exporter, but escalating global oil prices are pressuring the government to reduce the subsidies for the first time since February 2006.

Officials in the United Malays National Organization, the country's dominant political party, called Thursday for a review of subsidies to ensure that state funds can be channeled toward impoverished people who truly need financial aid.

"I believe the rich can pay the market price or slightly lower than market price" for gasoline, Khairy Jamaluddin, deputy chief of UMNO's youth wing, said in a speech at the party's annual congress. Khairy is also the son-in-law of Prime Minister Abdullah Ahmad Badawi, who reportedly told party delegates in a closed-door meeting earlier this week that fuel subsidies may soon be lowered.

Retail prices of gasoline, diesel and liquefied petroleum gas were raised by as much as 23 percent in February 2006, sparking a rise in inflation and a series of small-scale, opposition-led demonstrations.

Malaysia's retail fuel rates remain among the lowest in Southeast Asia, but authorities fear another price hike could provide political ammunition for the opposition in the next general elections, which are widely expected before the middle of next year, even though the government's mandate only expires in mid-2009.

Khairy said the government subsidizes a wide range of necessities, including water and agricultural goods, and the total subsidy bill this year could have been used to build 500,000 low-cost homes. "If subsidies are lowered, people will curse the government. But if we maintain the subsidies, we never hear a word of thanks for the government," Khairy said. "Whether we realize it or not, we have been subsidized from birth to death."

Khairy said it would not be feasible to abolish subsidies, but the system should be revamped so that poor people can continue to purchase necessities at lower prices, while those who can afford it should pay more. "The current system promotes wastage. Because we know fuel prices are so low, we tend to waste fuel," he said. (International Herald Tribune)

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