Fuel hike causes more deaths on the road, and stagflation

Media statement by DAP National Political Education Director and MP for Kluang Liew Chin Tong on 2nd October 2014

Without improvement in our public transportation system, the latest fuel hike, announced on 1st October 2014, is an irresponsible move that will hurt the lower income group further.

On 22nd September 2013 when the fuel price was last increased, I said that “Research has shown that motorcycle fatalities shot up as a result of the March 2006 and June 2008 fuel hikes as the lower income group switched transport modes from cars to motorcycles. A new human disaster of more motorcycle fatalities is imminent, following the latest petrol price increase.”

According to World Health Organisation’s Road Safety Report 2013, which was released recently, Malaysia has the highest per capita road deaths in the world. (Road fatalities per 100,000 population: India – 18.9; Russia – 18.6; China – 20.5; Malaysia- 25).

Malaysia has the dubious record of having the highest road fatality risk, i.e. death per 100,000 population, in the world since 1996. Between 2000 and 2009, 4.5 million road accidents were reported with 58,582 deaths.

Motorcycle fatalities are 3 times higher than car fatalities, 6 times higher than pedestrian fatalities and nearly 50 times higher than bus passenger fatalities.

In other countries where public transport services are adequately and efficiently provided, petrol price increase will encourage private car drivers to switch to public transport. However, in the case of Malaysia, each fuel hike exercise means more deaths on the road.

The other worrying challenge is that of stagflation in the making due to ill-advised policy choices. The combined economic effect of the latest fuel hike and the implementation of GST on 1st April 2015 may be the concurrent occurrence of inflation and stagnation, or “stagflation”.

The Malaysian economy has been heavily depended on domestic demand as a growth driver over the past five years since the Global Financial Crisis which resulted in much lower external demands from advanced economies.

The Finance Ministry had conceded that there will be inflation in the first year of GST implementation and “subsidy rationalisation”. What is yet to be recognised is that apart from inflation, the economy may also grind to a standstill as the disposable income of ordinary Malaysians is reduced by GST and fuel prices, which in turn results in much slower domestic demand.

Stagflation is the worst nightmare for our economy. But no one seems to have an answer.

Liew Chin Tong