KUALA LUMPUR, July 22 — Malaysia’s government today vetoed price hikes for electricity and natural gas, fearing a repeat of anti-government protests that saw its popularity slump in 2008.
Under proposals discussed by the cabinet today, the country’s influential Economic Planning Unit had suggested a 24.6 per cent rise in the price of natural gas and a 4.9 per cent hike in electricity prices from Aug. 1 to reflect the rising cost of energy.
That proposal was voted down in a cabinet meeting.
“They didn’t want a repeat of last year,” a senior government official told Reuters.
In July and August 2008, Malaysian inflation spiked up to 8.5 per cent on an annual basis as heavy fuel price rises hit consumers, exacerbating the unpopularity of the government that has ruled this Southeast Asian country for 51 years.
The government stumbled to its worst ever losses in national and state elections in March 2008 and ceded its cast-iron two-thirds parliamentary majority. It has since lost a series of by-elections to the country’s resurgent opposition.
“The majority of cabinet felt it is timely not to have a price hike,” Energy Minister Peter Chin told Reuters.
ECONOMIC RISKS
Proposals for the price hikes had given a boost earlier in the day to the stock Tenaga Nasional, which rose 2.38 per cent, outpacing gains on the wider Kuala Lumpur market.
But the prospect of price rises also ran the risk of higher inflation in this country of 27 million people and the risk of dampening any economic recovery in Asia’s third most export dependent economy, analysts said.
Investment bank TA Securities estimated the price rises proposed by the Economic Planning Unit would have added 0.1 per centage points to annual inflation in 2009.
Malaysia’s central bank expects inflation in 2009 to come in at 1.5-2.0 per cent and data released on Wednesday showed Malaysia in June suffered its first deflation since August 1986.
Malaysia’s consumer price index (CPI) fell by 1.4 per cent in June from a year ago and Asia’s third most export dependent country is expected to see its economy contract by up to 5 per cent this year, according to government forecasts.
New Prime Minister Datuk Seri Najib Razak, appointed in April, has clawed back popularity in opinion polls with his approval rating rising to 65 per cent in July from 45 per cent in May.
Since then however, the death of an opposition figure questioned by a government agency has raised the prospect of increased ethnic strife in a country where the majority is Malay but there are significant ethnic Chinese and Indian populations. — Reuters
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