Jun 9, 2008

PM announces cost-cutting package after fuel hike

To alleviate consumers' woes amid the spiralling oil prices, the Anti-Inflation Council announced several measures aimed at softening the effects of the last Wednesday's petrol hike.

After chairing the first meeting at Putrajaya today, PM Abdullah Ahmad Badawi said the council has decided that rebates to private vehicle owners via the post office will be expedited.

The government had initially set the rebate date for those who have already paid their road taxes in April and May as July 1.

KUALA LUMPUR - Malaysia announced Monday a 2.0-billion-ringgit (US$612m) cost-cutting package aimed at softening the blow after an unpopular 41 percent fuel price increase.

"With all the cuts the government is making, we are expecting to save 2.0 billion ringgit annually," Prime Minister Abdullah Ahmad Badawi told a press conference.

"I understand the suffering of the people and I hope these measures can help them," said the premier, who was clobbered in March elections when voters punished the ruling coalition over rising prices.

Abdullah, whose position is now even more tenuous after last week's overnight fuel price hike, defended the decision which has sparked protests and public outrage.

"Although the government does not want to burden the people, tough decisions have to be made because it has a duty to guarantee that natural resources are used in an optimum way, not just now but for future generations," he said.

"The government is now taking measures to reduce the difficulties that result from rising prices."

As part of the cost-cutting package, official overseas trips will be limited, purchases of assets will be deferred, and the entertainment allowance for ministers will be cut by 10 percent, he said.

The government will continue to review planned "mega-projects", including major infrastructure plans slated to cost billions, and only those deemed essential will proceed.

There will also be a partial hiring freeze in the civil service and a 10 percent cut on services and supplies provided to the government.

Abdullah brought forward by two weeks the date for a cash rebate for owners of small- and medium-sized vehicles -- designed to partially offset the fuel price hike -- to June 14.

And in a bid to head off threats of closures by public transport operators, he said they will be allowed to buy diesel at the old subsidised rate.

Abdullah said Malaysia will also increase the threshold of the poverty rate, which currently stands at 691 ringgit in monthly income, so that more people can access the government safety net.

Malaysia cut fuel subsidies as the bill for this year was set to rocket to US$17 billion. Even after the hike to 2.70 ringgit per litre, the country's petrol is still among the cheapest in Asia.

But opposition parties argue that as an oil exporter, Malaysia did not have to take such a drastic step, and have vowed to mount a series of rallies culminating in a July 12 demonstration they hope will attract 100,000 people.

The government expects inflation to reach as high as 5.0 percent this year following the hikes, while growth is projected at a slower pace of 5.0 percent in 2008, from 6.3 percent last year.


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