By Yow Hong Chieh | May 19, 2011
The Malaysian Insider

KUALA LUMPUR, May 19 — Subsidy cuts will widen the gulf between rich and poor in Malaysia if the Najib administration does not cushion the impact of price hikes on lower income groups, DAP publicity chief Tony Pua has said.

He said the lack of measures to lessen the burden on the bottom 40 per cent of income earners would only worsen the already-high level of income inequality in Malaysia, which, according to the World Bank, was among the highest in Asia and close to South American levels.

Pua said despite repeated price hikes to key items like sugar, petrol and diesel, the government had yet to fulfil its pledge to implement programmes like a cash rebate for motorcycles under 250cc and cars under 1,000cc as well as one for those hit by reductions in food subsidies.

“It appears as if the government is trying to pretend as if no mitigation measure has ever been proposed in the hope that Malaysians will soon forget about it,” he said in a statement today.

He added that the increase in sugar price from RM1.45 to RM2.30 per kg, diesel price from RM1.45 to RM1.80 for “critical transportation companies” and the likely RON95 subsidy cut next month would lead to inflation and contribute to the income disparity.

Prime Minister Datuk Seri Najib Razak earlier this week reaffirmed his commitment to the gradual removal of subsidies — which he said was “like opium” — to help bring Malaysia’s budget deficit under control.

“Subsidies as a whole are like opium. Once you take opium it’s hard to kick the bad habit. Once you provide subsidies it’s hard to take them away without some political cost,” he told an audience at Oxford University’s Centre for Islamic Studies on Tuesday.

Just a day before, the government announced that the diesel super subsidy for nine categories of commercial vehicles would be abolished effective June 1.

The nine categories comprise prime movers, general cargo movers, Luton box vans, vans, rigid lorries for bottled beverages, rigid tanker lorries for flour transport, rigid lorries for refrigerated goods, water tankers and limousine taxis.

This followed a similar announcement last week that fuel subsidies for some 1,200 Zone C2 fishing vessels would be cut from the same date.

Domestic Trade, Co-operatives and Consumerism Minister Datuk Seri Ismail Sabri Yaakob has also said prices of petrol product — including RON95 — would be reviewed next month.

Ismail Sabri had explained that while he earlier promised that petrol prices would not rise, he could not guarantee they would remain unchanged indefinitely as the government’s petrol subsidy cost was expected to more than double from RM8 billion in 2010 to RM18 billion this year.