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Fuel prices at the pump in Malaysia are low compared to that in many major world economies, according to a recent study by international accountancy network UHY.

Bernama reported on the findings of the study, which indicates that subsidisation at 30% for petrol and 40 % for diesel makes fuel prices in Malaysia considerably lower than many major developed economies, in particular European countries.

Comparatively, the UK, France and Germany all levy taxes of at least 60 % on petrol, and between 40 and 60% for diesel. As an example, filling up a tank on a Ford Transit van with diesel in Malaysia adds up to RM159, a third of what it would cost in the UK, where diesel prices are highest, the study states.

Environmentalists may argue that petrol taxes are important in cutting greenhouse gas emissions, but the transport lobby and SMEs say that keeping the costs down is vital for all businesses, the global accountancy network adds.

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The study, UHY says, is a reminder of the importance of maintaining tight control on the levels of business taxation, especially as the recovery from recession starts to gather pace.

“Emerging market economies are much more focused on growth and providing assistance to businesses through lower taxation and subsidies where necessary,” said Alvin Tee, senior partner at UHY in Malaysia.

“Subsidising diesel prices is particularly beneficial for fast-growing small and medium businesses running fleets of commercial vehicles, especially in sectors like distribution and retail. These businesses can be key drivers of economic recovery,” he added.

Fuel subsidies in Malaysia are reported to cost the government an estimated RM46 billion per year. The subsidies have also led to issues with the smuggling of fuel into neighbouring China and Indonesia, which have a much higher cost of fuel, the Bernama report adds.

What do you think, do you agree with the study results?

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FOOTNOTE

Working on the basis of transcribing that reported in the original news piece, I didn’t put in an opinion on the matter, because it was news reporting, not an opinion piece. Obviously, the more astute reader will realise that the study and its findings is not definitive of things.

The price of petrol here may be cheaper than many developed economies in a direct conversion of fuel, and that of fuel alone. It is however not representative of the larger picture or scheme of things, and you don’t even have to look as far as the UK to do the math.

For example, the price of petrol per litre in Brisbane when I was there last week varied from AUD1.50 to 1.42, or RM4.54 to RM4.30 if you convert it, which is how most arguments are usually angled. We pay RM2.10 for RON 95, half on a direct conversion.

All good, at half the price, but if you’re going to convert one thing, then you convert the other, so a car like say the Ford Fiesta 1.0 EcoBoost (or the Fiesta Sport as it’s known there) goes for AUD22,595, which is RM68,180 when converted, and that’s RM25,708 cheaper than what we have to fork out for the same car here (before insurance). For a Focus ST, an Australian buyer pays AUD38,290, or RM116,288 – a Malaysian buyer has to add RM87,070 to get that same car. That’s almost a Fiesta in there.

In any case, conversion is a slippery slope and a poor indicator – the correct approach is to look at it specific to each market. You live in Australia, you earn AUD and pay 1.50 or so for each litre of fuel, and you also get to buy a Focus ST for AUD38,290. You live here, you earn RM and pay 2.10 for regulated, subsidised RON 95, but you have to pay RM203,358 for a Focus ST. Res ipsa loquitor, as that famous maxim goes.