Healthy and entertaining – that’s how the debate went on last night. Kudos to Shabery who had been able to explain the rationale for the fuel price hike, much better than Pak Lah himself, whom I could imagine would have fall flat on the floor gagging if he took the stage. He has done well, at least for an Information Minister, given his non-economist background, came in prepared with facts and figures. Despite some silly efforts having to resort to personal attacks on Anwar, he wisely opted for a bit of history lesson, telling how the Government had tackle this issue in the past. Some good points were thrown i.e. how subsidy given would have benefited other foreign oil companies too i.e. Shell, Exxon etc; the need to restructure the subsidy scheme etc. Unfortunately, he wasn’t listening, kept defending Petronas, when Petronas wasn’t the one under attack. The Government is.
Anwar, on the other hand, was more focused and made some easy rebuttals i.e. skewed comparison with Venezuela, Iran regarding inflation; and Norway and Sweden regarding subsidy. Frankly, it is forgivable not to expect Shabery to counter-argue and baffle the audience with his sudden knowledge on inflation and macroeconomics. That topic is way over his head, although he did made a blunder questioning the relevance of IPP with the petroleum industry. Some critiques expects Anwar to explain the detailed mechanics, but is there much that can be explained in less than an hour? After all, why would he unveil his “trade secrets” to the Government? But his idea is worth pondering – reduce the buffer in Independent Power Producer (IPP) power capacity from 40% to 20%. As it is now, the Government had simply ran out of idea of how to extract money from the IPP. Hence, they introduce the windfall tax, which was imposed on the earnings before interest & tax, for those IPP with Return on Asset (ROA) of more the 9%. IPP may choose to run “inefficiently” to achieve lower ROA so as to avoid the tax. Senseless. Anwar’s idea, in a nutshell, is to use excess capacity of energy to weather impact of oil price. As usual, most mainstream press fail to highlight this.
But the after-event analysis which took place on Astro-Awani last night was more interesting. The panelist, amongst others, was Saleh Majid –ex Bursa Chairman. He said, why can’t we sell oil in Euro, Yen or etc. We are oil-supplier, now why can’t we decide how we can sell our oil? Of which he proposed, Malaysia alongside with other oil-producing nations in this region, should create an exchange for us to have more power to dictate the market. On the point of IPP, he said IPP shouldn’t be making profit, but should run at break-even instead. Hence, Government need to review IPP agreements. This is much in line with what used to have in the 90s where GLCs should be run with optimum capacity. If they are profit-driven, cost tend to be passed down to consumers. Commenting on the inflation, Saleh said CPI in Malaysia is artificial, measured based on UN guidelines, which is not reflective of the real situation on the ground. Government’s control on essential items has kept the inflation low all this while. Hence, there’s also a need to revise CPI. Then, he simplified what inflation means to an average Joe. Inflation takes away your buying power. This means that if you have inflation at 8%, the value of RM1 in your hand is worth 8% less. Meanwhile, the idea to compare Petronas with big oil firms is unreasonable, he thought. Petronas operates more offshore drilling and operation cost is much higher than onshore drilling. Plus he asked to stop whacking Petronas. Petronas is not run by clowns, otherwise they won’t be in Fortune 500 companies.
Now let’s hope this kind of debate continues, although we would rather have our Finance Minister on the stand instead of another government public relation officer.