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The Prime Minister’s Best 2006 New Year Gift Is The Assurance That There Shall Be No Price Increases In Fuel, Electricity And Water Rates Unless Petronas, Independent Power Producers (IPP) And Water Companies Share The Burden First.


Speech In Ceramah On “Political Outlook For 2006 In Malaysia” Organised By DAP Penang
by Lim Guan Eng

(Penang, Sunday): Economic security, national unity based on a Malaysian identity and respect for basic human rights should be the 3 main priorities for Malaysians next year. Abuses of power must be seen as human rights abuses and not looked from the prism of race and religion. National unity will be enhanced if justice is upheld by abolishing police abuses through the immediate implementation of the 125 recommendations of the Royal Commission of Police Misonduct.

Why should government MPs be concerned about the race of the woman in the nude ear squat case when this revolves around abuse of women and her basic rights? Worse is the attempt to punish whistle-blowers such as DAP Seputih MP Teresa Kok and Parliamentary Opposition Leader Lim Kit Siang for exposing the scandal.

Malaysians who love our country must be prepared to stand up for our rights if we want Malaysia to become more prosperous, more caring, and fairer to all. The time has come to look not from a religious and racial perspective but from a Malaysian identity.

We must change the present emphasis of bangsa, agama negara to negara, bangsa dan agama based on Malaysia, Malaysian Race and a multi-religious society. No other country would put race and religion above the nation. The nation must always come first. Only then can we attain genuine national unity and identity based on one common vision, interest and community.

However the main priority for ordinary Malaysians would be economic security and enjoying equal opportunity. The Prime Minister’s best 2006 New Year gift is the assurance that there shall be no price increases in fuel, electricity and water rates unless Petronas, IPPs and water companies are required to share the burden first.

Economic security and equal opportunity for all

High inflation and the failure of economic growth to be enjoyed by all has caused hardship to Malaysians, especially the poor, workers and small-time businessmen. Such economic hardships has only serve to highlight how unequal our society is when the poor carries the burden of such price increases.  The United Nations Human Development Report continues to show that Malaysia has the worst income disparity between the rich and poor in South-East Asia where the richest 10% of the population controls 38.4% of income whereas the poorest 10% controls only 1.7%.

Inflation hit a six and a half year high of 3.7% in August 2005 before easing to 3.5 % in November 2005 against earlier predictions by Bank Negara of an inflation rate of only 2.5% for 2005. Malaysia's growth rate of 5.3% in the 3rd quarter improved from 4.4% in the 2nd quarter must be compared with the higher growth rate in Hong Kong's 8.2 %, Singapore's 7%, China 9.4% and India’s 8%. Unless Malaysia can compete near their growth levels, Malaysia will be relatively not attractive enough for foreign investors.

Prime Minister Datuk Seri Abdullah Ahmad Badawi has refused to extend his assurances of no fuel, water and electricity price increases up to the end of 2005 to the year 2006. Such failure to extend to 2006 has caused grave concern that there will be another round of fuel price increases and the government will finally approve TNB and the privatized water companies request for rises in tariff rates.

In an interview with the Jakarta Post last week, the Prime Minister talked of his leadership philosophy being based on fairness and justice. How can it be fair and just that 25 million Malaysians bear the burden of fuel price increases and yet allow Petronas to earn huge profits? Last year Petronas earned RM 35.5 billion in profits after giving RM 31.2 billion to the Federal Government. Even if every Malaysian were given RM 1,000 each, Petronas would still have more than RM 10 billion in profits left.

Since its establishment 31 years ago, Petronas earned more than RM 500 billion or RM 20,000 for each Malaysian. Not a single cent was received by Malaysians even though oil resources belong not to Petronas but to 25 million Malaysians. It is such huge wealth that allows Malaysia to have some development success despite extensive corruption. However our oil resources are not inexhaustible but is rapidly depleting. By 2009, Malaysia shall turn from an oil-exporting country to an oil-importing country subject to paying high fuel prices.

We may not be able to enjoy the past RM 500 billion in profits earned by Petronas. However in the remaining 4 years before Malaysia becomes an oil importer, the government has a responsibility to distribute the huge Petronas profits to the people. Better the money be spent directly by the people than allow it to be wasted through corruption scandals.

The privatized water companies and TNB should also not be allowed to increase rates until they bear responsibility for their costs.  Petronas has subsidised the power sector more than RM25 billion since 1997, of which RM14 billion or 55% went to the IPPs, whilst the remaining RM 11 billion is enjoyed by Tenaga. For Tenaga to seek a tariff hike when it has enjoyed direct subsidies of RM 11 billion is unacceptable, ungrateful, irresponsible and not in the national interest.

Apart from ensuring economic security for all, the RM 14 billion subsidies to the IPPs could be better spent on funding the capital expenditure and maintenance requirements of Tenaga so as to reduce the need to increase electricity rates. As the IPPs are private companies enjoying special rates for generating electrical power that Tenaga is forced to purchase, there is no reason for IPPs to enjoy such huge subsidies of RM 14 billion to profit at Tenaga and Malaysian consumers’ expense.

Payments to Independent Power Producers (IPP) comprising 40.5% of TNB’s total costs. The IPPs should be the first one to bear the burden of such costs before any rise in electricity rates. Futhermore, Tenaga has no justification for increasing electricity tariffs when it has increased its net profit by 57% to RM 1.28 billion in the year to August as compared to RM 813.7 million the previous year. 

Bank Negara Should Stop Its Misguided Policy Of Increasing Interest Rates.

On Nov 30, Bank Negara Malaysia raised the benchmark overnight policy rate (OPR) to 3% from 2.7% to curb rising inflation, the first interest rate hike 7 years. However such efforts will be fruitless and ineffective if the government does not prevent Tenaga Nasional Bhd from raising electricity rates or the water rates to rise once water supply is privatized. Bank Negara can keep on raising interest rates but would not have any effect in curbing inflation if water and electricity rates go up.

DAP expects Bank Negara to continue its misguided policy of increasing interest rates in its attempt to control inflation. Bank Negara must understand that using interest rates increase to check inflation is only effective when inflation is demand driven, i.e. caused by demand exceeding supply or excessive purchasing power of consumers. But there is no excessive purchasing power or demand exceeding supply situation in Malaysia causing inflation. Instead the principal causes of inflation are the rise in fuel prices, increases in duties on cigarettes and alcohol. Such causes are not affected or influenced by any rise in interest rates.

If Bank Negara is serious about controlling inflation and alleviating the hardships of the ordinary and poor Malaysians, then water rates and electricity tariffs can not increase. Otherwise the rise in water and electricity rates will only result in interest rates to rise along with inflation rate. This will have a double negative impact on businesses and Malaysians who have to make higher interest payments on their loans and pay higher prices for goods and services.


* Lim Guan Eng,  DAP Secretary General

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