Saturday, June 28, 2008

Potent mix of record oil price, inflation and politics

A comment by Joseph Chin
All parties must work together to help nation face challenges
THE surge in oil prices, rising inflation and political uncertainty, all cropping up at the same time, make for a potent mix, which has to be brought under control as the fire is being stoked further by the fallout from US subprime mortgage crisis.

Malaysia is going through a baptism of fire.

Just as the gold ore has to go through fire to come out pure, this is perhaps the crucial test for the Government, opposition parties and the people to set aside their differences and come together for the betterment of the economy and country.

When the Economic Planning Unit prepared the Mid-Term Review of the Ninth Malaysia Plan (9MP), oil was trading at US$100 per barrel. Since then, it is on an upward trend with the fresh record high at US$141 per barrel yesterday.

The oil price surge has widespread effect; ranging from higher transport costs to more expensive foodstuff, with no signs of abating.

This in turn is causing more inflationary pressure on all strata of society, especially poor families, which saw the consumer price index (CPI) for May hitting a 22-month high of 3.8% year-on-year.

The CPI is expected to surge by 7.5% to 8% year-on-year in June to December.

These developments are taking place during uncertain times in the political arena. Questions over the leadership transition from now until December are also a major concern.

We are also affected by the credit crisis, sparked by US mortgage defaults, which caused almost US$400bil in write-downs at the world’s largest banks and securities firms in the past year.
Under the Mid-Term Review of the 9MP, the Government has increased the development expenditure by RM30bil to RM230bil for the rest of the period ending in 2010.

With the scarce resources, the plan will now focus on people-centred social infrastructure projects instead of major infrastructure projects.

Most importantly, the projects must be executed well to ensure maximum impact on all the needy people.

There must be more transparency in the awarding of projects and also accountability in the execution of contracts. Leakages must be plugged.

The authorities must make periodic checks to ensure the projects are on track, the quality of materials used is up to mark and contractors paid on time.

There must be a fear of God in the hearts and minds of those who award the contract and also those undertaking the contracts that they will be held accountable. ... the star online Saturday June 28, 2008