Corporate doublespeak: subsidies vs “incentives”

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I walked into a petrol station along a busy road in Penang last night and engaged in some small talk with the cashier. I asked him what kind of impact the petrol price hike has had on his collection.

“In ringgit terms, it has gone up,” he replied. “But in terms of litres sold, there has been a drop.”

Hmm, so there has been a drop in consumption, at least at this station, I thought to myself.

“Maybe after a few weeks, once motorists get used to the new price, they will be back,” he volunteered. “But right now, we are being squeezed by the higher commission we have to pay on credit card sales,” he lamented.

So, it’s not all hunky dory for the petrol station owners. Already some people are talking about boycotting petrol stations – though how effective that will be remains to be seen.

Meanwhile, political commentator Wong Kok Keong sent me some observations:

One thing about the removal of fuel subsidies that apologists have justified is how it will not continue to distort the economy as the government can channel the tax ringgit saved from oil subsidies to areas more deserving of subsidies like education, health care, and, yes, even, public transportation. These apologists include analysts (of the academic and corporate variety), who typically quote western/US-based companies like Goldman Sachs and Morgan Stanley firms, uncritically, for their arguments.

Now, if the savings from the removal of fuel subsidies will indeed allow the government to channel them to areas more deserving of subsidies like education, my question is how come no one has come up with any kind of a plan now to show it? Wouldn’t presenting the plan make PM Abdullah’s steep hike in oil price a lot more easier to sell to the public?

The other nonsense from analysts is that without the steep hike in oil price, people will not know how to conserve petrol that is fast running out. Well, who are these people the apologists are talking about?

The poor? Certainly not, since they do not have much to begin with to consume petrol wastefully.

And certainly not the rich, who will hardly, if at all, be affected even with a steeper price hike.

The middle class? But is there any study to show middle class Malaysians are indeed consuming petrol wastefully? How many can afford to drive even without the oil price hike when there are tolls almost at every turn of the road especially in the Klang Valley? What is the income level of average middle class Malaysians so that the oil price before the recent hike had encouraged them to consume petrol wastefully? Singapore has a much higher petrol price but then their average middle class folk enjoy a higher income.

Those questions are typically ignored by apologists. Instead, they kept regurgitating corporate/capitalist propagandists like Goldman Sachs and Morgan Stanley, who typically are interested in the bigger picture of global corporate/capitalist growth and wellbeing.

Indeed, according to such corporate propaganda, “subsidies” are bad if it is for the public, but when they are dished out to the corporations, you don’t hear a squeak from our politicians and the corporate captains. Of course, they don’t call it subsidies then. They use other euphemisms such as “tax incentives”, “labour flexibility”, “waiver of import/export duties”, “soft loans”, “supporting infrastructure development”…. Get the picture?

Remember the mantra: subsidies bad; “incentives” good…. people-friendly policies bad; business-friendly policies good… That’s how people get indoctrinated.

This is an article I wrote for Asia Times, putting more of the spotlight on the billions of ringgit in subsidies that the government/Petronas hands on a silver platter to the highly profitable IPPs:

PENANG – Malaysians are reeling from a 41% rise in petrol prices and a 63% hike in diesel as Prime Minister Abdullah Badawi’s administration scrambles to ward off public discontent over his unpopular policy decision to remove fuel price subsidies. Read more

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Izkandar

Dear Anil Netto I refer to your article in Asia Times which were subsequently quoted by Malaysia Today and Malaysiakini on the ‘benefits’ enjoyed by IPPs on gas subsidies. With due respect, your understanding on the contractual mechanics of this gas subsidy to IPP is incorrect. For your information, electricity tariff comprises of the following components: (a) Cost of fuel which is gas. (b) Cost of the planting up of power plants which runs into billion of ringgit forked out by IPPs including TNB (c) Cost of maintenance of the plant during the operating period. Note that the cost of… Read more »

ahmad

Bro, We don’t need Goldsman and Morgan Stanley remarks on our hard living of the days now. They can talk c***… basic thing is everything else has gone up.. how to survive?? Salary remain.. no surplus for saving.. indeed we may borrowing for a living.. from Ah Long. Again sosial problem.do u think PM and BN goverment care about us??. See how Shahrir response in last night debate with Sallehuddin (PAS) on RTM.. no specific answer given. He only talk around the bush about subsidies to education, foods but do that already included in 2008 budget tabled in 2007?? may… Read more »

Phua Kai Lit

Three phrases:

“Privatisation of profits and socialisation of losses”

“Rent-seeking capitalism”

“Kleptocracy”

msleepyhead

the removal of subsidies may not be wrong, but the way it was carried out definitely is. if the leadership had paid attention to global economy and is sincerely concerned about the country, they would have announced the price hike beforehand, and allow the people to make preparations for the move. we have yet to see the onslaught that is to come. as the rakyat’s gaze is now shifted away from the leaders dramas and back to their daily lives, those people up there are once again free to let things slip. murder case, corruption, inefficiency, judiciary, etc.

esgreat

Well first I’ll point out that I’m on the side of free markets (i.e. no subsidy). But I’ll also point out that many ‘big greedy corporations’ are not the product of a truly free market. Many of these entities exist mainly because of government protection, cronies, lobbying, oppressive laws and licensing requirements for beginners, etc, hence destroying their smaller competitors and perpetuating greed. Free markets are usually the scapegoat, but they had never existed in the first place, due to government intervention. What this oil crises shows is how incompetent the government had been all this while (no planning for… Read more »

songsar

What is so great about Goldman Sachs and Morgan Stanley. There is no individual name to come up with anything. Its probably a leverage broker who happen to say something about Malaysia and the limited experienced malaysian commercial attache in Washington pick it up and think Goldman or Morgan had said something fantastic and report back and back home limited-brain-someone ah says Malaysia is in the news.

If the comments were made by Henry Kaufman renowned economist (ex Salomon Bros.) then it is something else, otherwise it is not even coffee shop talk