Pos Malaysia vie for fuel subsidy project

Malaysia, Indonesia and India are cutting down or halting fuel subsidies altogether.

Pos Malaysia's CEO, Iskandar Mizal

Pos Malaysia, the country’s privatised postal service provider, has confirmed that it is vying to manage the national fuel subsidy rationalisation programme. According to its Group CEO, Datuk Iskandar Mizal Mahmood, "We are awaiting the answer from the government. They are evaluating it right now.”

In the bid for the concession, Pos Malaysia is collaborating with Datasonic Group, a local ICT solutions company which has previously supplied hardware to the government for the production and management of identification documents, like passports and MyKad’s (Malaysia’s version of the identification card). Pos Malaysia-Datasonic joins six other parties that have submitted proposals to revamp the existing subsidied fuel distribution system.

The country’s fuel subsidy programme has been subjected to much censure recently (well, more than usual) after the government proposed a three-tier fuel subsidy mechanism: individuals who earn less than RM5,000 a month will continue to enjoy full subsidy, those who earn between RM5,000 to 10,000 would receive partial subsidy and the rest who earn more would have to pay the full price.

Back in July, the country’s Prime Minister, Najib Razak, had announced that the government was looking to revamp the subsidy to channel it to the lower-income group, rather than the blanket subsidy that is being practiced now. According to Najib, two-thirds of the fuel subsidy was enjoyed by the high-and-middle income group while only one-third went to the needy (of course, those in the higher income group are able to own larger and more vehicles). Critics and sceptics have of course pointed out the obvious flaw in the system, which supposedly will use the fuel purchaser’s MyKad to determine the subsidy portion (hence, Pos Malaysia’s collaboration with Datasonic), that is it is difficult and complicated to execute, not to mention easy to abuse. Many have accused the government of using this to placate the increasing discontent amongst Malaysians as living costs continue to escalate.

For the government, the move to reduce fuel subsidies is to shrink its annual RM24 billion (US$7.34 billion fuel bill and solve the country’s budget deficit problem, which is one of the largest in the region compared to its GDP. After two fuel subsidy reduction in less than two years and the upcoming GST implementation in April 2015, the government claims that the move will be able kill two birds with one stone – reduce the nation’s fuel bill yet still mitigate the cost of living for the lower income group. But a government report in August revealed that the median salary of the 9.3 million workers was RM1,500 per month in 2013, which means that more than half of the population will still receive fuel subsidies; in other words, there will be a whole lot of complicated procedures and new hardware and services required for the three-tiered scheme, yet it might not significantly achieve its purpose of reducing the country’s fuel expenses.

Malaysia is not the only country struggling with fuel subsidy issues. As we have written earlier, Indonesia is bracing for a speculated 50% fuel price hike as new President Joko Widodo stepped into office earlier this month. Indonesia’s fuel subsidy bill is three times Malaysia’s, at US$23 billion annually. However, Jokowi has said that he hasn’t decided yet on when to implement a fuel hike; some are expecting that his government will wait for welfare programmes for the poorest tiers of the community to take effect, so that they would not experience the full brunt of the effects of increased fuel prices.

India’s relatively new Prime Minister, Modi, also axed the country’s diesel subsidy last month. Taking advantage of the collapse of crude oil prices, the lowest in over three years, the effect of the removal of subsidies was significantly buffered for the millions of Indians and the government will now be able to channel the US$42.4 billion fuel subsidy funds to government reforms or investments instead.

image: therakyatpost.com