Saturday, August 16, 2008

A different oil policy to encourage economic growth

by Dr. Chen Man Hin

The present oil policy to set gasoline and diesel prices at international market prices has caused a sharp decline of the economy causing hardships to the people.

This is the current policy adopted in developed economies which do not advocate subsidised oil for the people. Their experts contend that subsidised oil would distort the market, and people would not be encouraged to conserve the use of oil. In the end there would be a disastrous impact on the economy and on the environment.

The Prime Minister, Datuk Seri Abdullah Ahmad Badawi, who is also Minister of Finance slavishly followed the concept practised in developed countries. It has proved to be disastrous for Malaysia.

Because of the high pump prices of gasoline and diesel, the economy has slowed down considerably. The wheels of industry are not humming, and more people are laid off.
Consumers buy less because of lower income and inflationary prices of food and other essentials.
Every sector of the economy is affected, be it transportation, industries, consumerism, tourism or health.

The DAP has been advocating that Malaysia as an oil producer and exporter should use its revenue from oil to subsidise pump prices, in order to keep the economy going and ensure that the people do not suffer. Unfortunately, the advice has fallen on deaf ears.

The dap highly recommend a smart way to deal with rising oil prices, by adopting an oil policy that is centred to encourage economic growth at any cost.

It is the same policy adopted by China, whose economy is kept going at a fast clip. They were smart enough to adapt and innovate to ensure that the people were not made to suffer by raising gasoline and diesel prices to international. market rates.

China’s oil policy of ’subsidies and price-ceilings’ have proven to be the right formula to cope with rising oil prices. Their subsidies are capped at 1% of the GNP and at the same time they impose a ceiling on pump prices.

Malaysia should send a delegation to China and study the hows and whys of a tried and successful system.

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