Malaysia to maintain fuel subsidies
Reuters (Business Times Singapore) - 17 Mar 2008
PUTRAJAYA (Malaysia) - Malaysia plans to maintain state subsidies despite record crude oil prices, the country's premier said on Friday, less than a week after leading his party to the worst election disaster in its history.
The election saw a backlash against Prime Minister Abdullah Ahmad Badawi's government over rising prices, and the opposition has promised to increase fuel subsidies and scrutinise some of the key development projects his government launched.
But Mr Abdullah, who had spoken before the campaign of a need to reform the subsidies, mainly on fuel and food, said his government would look for alternative ways to tackle the subsidies, which now stand at RM43 billion (US$13.6 billion).
At general elections on March 8, Abdullah's National Front coalition was ousted in five of Malaysia's 13 states and lost the two-thirds majority in parliament it had held for nearly four decades, but secured a simple majority to cling to power.
The multiracial coalition has effectively ruled Malaysia since independence from Britain in 1957.
Malaysia will also keep its ban on offshore trade in the ringgit currency, said Mr Abdullah, who shrugged off a demand for his resignation from predecessor Mahathir Mohamad to be sworn in for a second term on Monday.
The ban on offshore ringgit trade is the last major remnant of capital controls Malaysia imposed to protect its economy from currency speculators during the 1998 Asian financial crisis, and some economists say it still deters foreign investors.
'I'd like to say the ringgit is getting stronger,' Abdullah said. 'I'm happy about that.' Asked if he considered it was at fair value, he said: 'I would like to believe it is a fair value for the ringgit.'
On Friday, the ringgit initially rose more than 0.1 per cent, hitting an intraday high of 3.1520 against the dollar, its highest level since Oct 1997, but later fell back to 3.1650, alongside weakness in the Singapore dollar.
Mr Abdullah, undaunted by opposition threats to review his plans for ambitious multi-billion-dollar development 'corridors' in states now under their control, said the policy outlook for his government would be business as usual.
'It will be business as usual in terms of policies, in the sense of the need to implement those policies, in the sense that w e will abide by whatever commitments we have made to the private sector with regards to the projects that we have.' The
government would persevere with projects that had already received the go-ahead, he added.
'All those for which we have decided to launch, and for which they have already made their proposals to implement, that's business as usual. No cancellation of commitments.'
Malaysian states control land and water and thus can effectively scuttle federal development projects in areas under their governance.