Letter to the Editor
By Lating Minggang
In West Malaysia, the high surge in diesel price following the removal of the subsidy by the federal government is hard to be missed by the consumers there as any impact on fuel prices is always at the top of their minds.
Thus, the decision by the State’s Premier Datuk Patinggi Tan Sri Abang Johari Tun Openg for the State to be excluded from the abolishment of the diesel subsidy was indeed a relief for all Sarawakians.
Thanks to the farsighted-thinking of a visionary leader, Sarawakians continue to enjoy the diesel subsidy, of which, if the State had followed its counterpart in Peninsular Malaysia, a higher diesel price would inevitably have driven-up production and transportation costs throughout the food supply chain. Following the increase in diesel price, there would also be a cascading impact along the food supply chain on businesses, when transportation costs rise.
Ultimately, the diesel price increase will also effect the housing industry and will result in the rise of construction costs. This means that goods being transported by road will now cost you more. The diesel price increase will also have an impact on employees traveling to work.
A higher diesel price can also raise consumer and business expectations for future inflation that can indirectly raise some of the food prices.
The increase in diesel price can also depress the supply of other goods because it increases the costs of producing them.
Furthermore, there can also be a reduction in demand for other goods because of the reduction in their wealth, as they are thinking about the uncertainty of their future.
Small and medium industry players will also think about their production costs and how to sustain their business because their business will no longer be run as usual and their customers might look for alternative suppliers or alternative products.
The increase in diesel cost will undoubtedly affect a company’s supply chain, as vendors and suppliers will be forced to increase their costs to accommodate the diesel price surge. This will lead to a higher outgoing and a lower profit margin, especially for transportation businesses. Cost-cutting might also be in their minds.
Furthermore, for the people in rural areas, the cost of transportation by road to the towns has always been a challenge for them. An increase in diesel price will certainly have a detrimental impact on their transportation cost, as well as the cost of purchasing their goods.
For the economy, it can lead to an increase in inflation as the cost of transportation and production rises. This can also result in a decrease in consumer spending as people have less disposable income to spend on other goods and services.
The increase in diesel price can depress the supply of other goods because they increase the cost of producing them.
When there is an increase in diesel price the consumer price index will increase too, since transportation and logistics costs will also rise. Consumers may have to pay more for the final products and services due to the impact from high transportation costs. This generally leads to an increase in inflation and can reduce household purchasing power.
Sarawak is in the midst of its transformation journey to be a developed State by 2030. Thus, many projects are currently in progress as well as being planned.
Thus, to ensure that the transformation journey is progressing in a progressive manner, the last thing the State government needs is to think of ways how to bear the cost for the increase in diesel price. The increased in transportation cost would undoubtedly affect the progress of project implementation since progress will be ‘stalled’ while waiting for the request for additional funds to be approved.
Furthermore, for other projects that have yet to be started, some of them might also be put “on hold”, while waiting for the additional funds to be sourced, to cater for the additional increase in costs.
Even though the removal of the fuel subsidy will help to reduce the State government’s spending and promote more efficient use of resources, however, I think our State Premier was looking at the bigger picture when he was steadfast in his request to the federal government for the State to continue to enjoy the benefits of the diesel subsidy. He knows that this fuel subsidy removal will have a detrimental effect to the ruling State government as it means that the government will stop providing the financial support to reduce the cost of fuel for consumers.
Furthermore, we could say that most of Sarawakians are in the B40 group, and thus, any increase in the price of goods will certainly affect them badly.
Therefore, salute to our visionary leader, who is far-sighted and knows that if the price goes up, more often then not, it’s quite hard for the price to come down. If the price goes up, the quantity demanded goes down (but demand itself will still stays the same).
Thus, it’s hoped that the diesel subsidy will still be continued in the State, since it also does not make sense for the State to have a high price for diesel. After all, Sarawak is a major producer of O&G in the country. We could say that, this subsidy in fuel is one form of the State government’s social obligations for the rakyat.
Lating Minggang is the Walikota for Kapit District Council.
This is the personal opinion of the author and does not necessarily represent the views of DayakDaily. Letters to the Editor may be lightly edited for clarity.
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