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The Highest Inflation Rate In 7 Years Of 4.8% In March 2006 Can Only Be Checked If The Government Imposes A Price Freeze On 12 Essential Goods And Services.


Media Statement
by Lim Guan Eng

(Petaling Jaya, Thursday): DAP expresses disappointment at March 2006 inflation rate of 4.8%, the highest in 7 years since January 1999 of 5.3%, and conveys sympathies to the hardships faced by many Malaysians. This 4.8% is much higher than the expected average 4% increase forecasted by seven economists polled by Dow Jones Newswires. The 4.8% inflation rate as compared the 3.2% rise in February 2006, is caused by government-directed increase in fuel prices of 30 cents per liter on February 28 2006.

Clearly the government’s expectations that the impact of the fuel hike will be minimal is wrong. Bank Negara’s forecast inflation of 3.5%-4% this year is unrealistic as inflation is likely to be more than 4% this year as compared to 3% in 2005 and only 1.4% in 2004.

This validates DAP criticism of the  23% hike in diesel price to RM 1.58 per liter and 19% hike in petrol price to RM 1.92 per liter in Peninsula Malaysia, as highly irresponsible and uncaring of the financial burdens of Malaysians including wage earners, low-income groups and small-time businessmen. With petrol prices and inflation rising, how are wage-earners going to cope when their salaries do not go up?

A price freeze by the government on essential items is the only way out for the government to check inflation and reduce the financial burden imposed on the people. DAP proposes a price freeze on 12 essential goods and services as follows:-

  1.  fuel and gas prices for next year

  2.  toll rates for next year

  3. quit rent as announced by some states such as Melaka, Negeri Sembilan and Perak;

  4. assessment rates;

  5. electricity tariff as proposed by Tenaga Nasional Bhd;

  6.  water rates after the privatization/corporatisation of water supply services is approved by Parliament in March this year;

  7.  insurance premiums of health card/medical care;

  8.   tobacco;

  9. alcohol and beer;

  10. university-related fees following the reduction of government assistance of 90% of government assistance to 70%;

  11. land registration fees; and

  12. bank’s interest rates.

Bank Negara had raised its overnight policy rate by a quarter percentage point to 3.25% in February to curb inflation. DAP expresses concern that at Bank Negara’s next monetary policy committee meeting on April 25, interest rates will be further increased and impose a heavier burden on businessmen.

Only a price freeze can stem the inflationary rise and the government has to show leadership by example by canceling increases in assessment rates and quite rent. The time has come for the government to share the burden and hardships with the people just as they should equally share the profits.

Our economy’s growth rate has performed worse in 2005 at 5%, as compared to 7.1% in 2004 whereas inflation increased to 3% in 2005 to 1.4% in 2004. Further, many businessmen have complained about the drop in business last year despite registering a 5% growth rate and paying higher prices above the official 3% inflation rate.

DAP urges the government to take the initiative by announcing a price freeze in essential items within its control as stated above particularly quit rent, assessment rates, electricity tariffs and water rates as well as fuel.  There can be no moral or ethical justification for people to pay and suffer from higher petrol profits just to allow Petronas to reap higher profits.

DAP considers it immoral that the people are not allowed to share in Petronas profits.  DAP would not object to subsidies being removed and petrol prices be increased to international market price of the record high of US$ 72.40 per barrel provided that Petronas is required to share its record profits with 25 millin Malaysians.

Removal of subsidies prevents market distortion in the actual prices of our products, improve efficiency, cut down losses due smuggling of our cheaper fuel overseas as well as forces the economy to be more competitive and Malaysian workers more productive. However such removal of subsidies carries a large social cost to the poor. Petronas profits of at least RM 35.5 billion for the 2004-2005 financial year and this year’s of nearly RM 50 billion would allow every Malaysian to take home at least RM 1,500-2,000 per annum.

Instead of giving to every Malaysian, such profits should be given only to the needy ones. If Singapore, which is not an oil exporter can give S$ 2.6 billion(RM 6 billion) in cash to Singaporean poor workers and lower middle-class in its 2006 Budget announced on 17 February 2006, why can’t Malaysians benefit from our oil revenue.  


* Lim Guan Eng,  DAP Secretary General

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