Protesters target Malaysian fuel price hike

AFP - 1 hour 52 minutes ago (5.6.2008) KUALA LUMPUR, June 5, 2008 (AFP) - Malaysia's government faced street demonstrations and public outrage Thursday over its decision to hike petrol prices 40 percent overnight, in a bid to curb its massive subsidies bill. Opposition groups held protests in downtown Kuala Lumpur and in the northern city of Ipoh, putting further pressure on Prime Minister Abdullah Ahmad Badawi who is fighting for his political future after disastrous March elections. "The effect is going to be a tremendous burden to people, especially the poor," said Democratic Action Party lawmaker Teresa Kok, one of about 100 people at the Kuala Lumpur rally. Police officers and riot squads armed with batons and shields dispersed the crowd, which waved banners reading "Petrol is hiked but salaries are not". Organisers said more than 100 people attended the Ipoh rally and that more demonstrations were planned for the coming weeks. Abdullah's announcement on Wednesday evening triggered chaos across the country as motorists swamped fuel stations to fill up before the measure took effect at midnight. Traffic snarls brought streets to a standstill in the capital as up to 100 cars queued at each petrol station which still had fuel to sell, while many others said they had sold out and turned angry customers away. The new pump price for petrol will be 2.70 ringgit (0.84 dollars) and 2.58 ringgit for diesel. Petrol previously cost 1.92 ringgit, among the cheapest in Asia. The premier indicated that further increases were in the pipeline as Malaysia moves to completely abandon fuel price controls that would have cost 17.4 billion dollars this year -- about a third of the national budget. Motorists who turned up at petrol stations Thursday to pay sharply higher prices to fill their tanks were furious over the decision. "We can do nothing about this government increase -- we have to buy fuel, otherwise how can we go to work?" said 56-year-old engineer K. Letchumanan. Aminah Rahmat, a 46-year-old streetside vendor who had set up her food stall outside a petrol station, said she could already barely manage on her monthly income of less than 1,000 ringgit (300 dollars). "The government does not care for our welfare, that is why they have made such a huge fuel increase," she said. "How can I afford to pay so much to transport my cooked food to my customers? I will go out of business." Bus operators said that a third of companies may have to close down and lorry firms said their rates would have to rise, in a move that will trickle down to higher prices for goods and services. Abdullah is taking a major political risk in removing price controls as he attempts to recover from general elections that dealt the ruling coalition its worst results in half a century. Rising prices of food and fuel were a major factor in the ballot, which has triggered repeated calls for the premier to stand down. Under a revamped subsidy system, drivers of smaller vehicles will receive a cash payment of 625 ringgit to offset the rising cost, equating to subsidising some 800 litres of fuel. But economists said the subsidy cut was deeper than anticipated, and that the cash payment was not large enough to compensate for average use. The stock market sank 3.0 percent at noon, after Abdullah said the price hike could suppress economic growth and drive up inflation as high as 5.0 percent this year, from levels of 3.0 percent in April. As part of the subsidy reform, industry and power producers will be charged higher prices for gas from July. Electricity tariffs will rise 18 percent for householders, and 26 percent for commercial and industrial users. But there was good news for Thais and Singaporeans who will now be allowed to buy fuel at border petrol stations after a recent ban was lifted in view of the subsidy cut.