The latest cut in oil subsidies receives strong objection from the majority of the society. The same old question re-emerged to the surface: should the subsidies be reduced/removed? Given the fact the oil subsidies are unsustainable as Malaysia would turn into a net oil importer in the near future when our oil reserves run out, and the negative impact of over-consumption of oil to the environment, the subsidies should be removed eventually in order to correct market distortions which would lead to efficient use of resources.

Unfortunately, the argument is not convincing enough for Malaysians to agree with the removal of oil subsidies. We are not prepared to live in an economy with high fuel price. Not because that Malaysians have been long spoiled by subsidies but the absence of a well-planned and comprehensive public transportation system has forced Malaysians to rely on private vehicles for their daily activities.

This means the high oil price is going to cost a bomb to the Malaysians who rely on private vehicle for everyday commuting. Furthermore, as the production activities of our economy rely much on subsidised oil to keep our production cost competitive, a reduced or removal of oil subsidies would lead to inflation and less competitiveness for Malaysian exports.

This might be followed by sluggish domestic demand, unemployment and eventually economic recession. The consequences are going to be disastrous. Subsidies that aim at keeping prices low are not necessary bad policies and that they should not be introduced. Subsidies that are used properly can be very beneficial to economic development.

Good examples would be the agricultural and export subsidies introduced in the US, Europe and South Korea. If used effectively, subsidies can help to promote industrialisation and to maintain a stable living cost for the working population.

Judging from the current situation in Malaysia, a drastic reduction or removal of oil subsidies without good countermeasures against the possible negative impacts is itself a mistake. This is like stripping the dancers when they are not ready for a strip show.

Reducing the oil subsidies when there is no proper public transport as an alternative for drivers, no countermeasures for inflation and the possible rise in unemployment would only bring suffering to the people. The worst is that it might trigger a recession.

South Korea, being a non-oil producing country, cannot but let the petrol price fluctuate according to the world market price. And yet the government is able to freeze the price of public transport and utilities as part of the measures to counter inflation caused by the escalating oil price.

As an oil producing country which has been making billions of profits from oil, I believe we could do more than just freeze the price of public transport. As others have said, we should have built an efficient, accessible and comprehensive public transportation system with the oil money earned by Petronas. We should have spent the oil money in more productive ways.

There is also a call for building a ‘national social welfare programme’ in response to the drastic cut in oil subsidies. But the content of the welfare programme is not clear. It looks like a cash aid to the people.

If this is the case, the money might not be used in a productive way and the programme may not be sustainable in the long-run when we run out of oil.