Friday, May 30, 2008

Najib fuels inflation

What is inflation? It is either a rise in prices or a decrease in the value of the currency - the net effect is still higher prices.

It is something that Deputy Prime Minister Najib Abdul Razak knows about as he is tasked with battling inflation as a result of soaring global prices for commodities - be it food or fuel. So he is doing nobody any favours by cutting subsidies for the RapidKL/RapidPenang bus systems.

There are already rumblings about fare hikes, which leads us to wonder if there are ways and means to improve and mitigate the public transport system in Malaysia particularly the cities.

We think the solution is already in Malaysia and being used by our national carrier Malaysia Airlines which leases most if not all of its aircraft from state-owned Penerbangan Malaysia Berhad.

What does that mean? It means PMB takes the risk of raising bonds and loans to buy the aircraft and leases them to Malaysia Airlines at a fixed annual fee. The national carrier just have to pay for operating costs from salaries to fuel and try to make a profit.

The thing is, PMB can provide low lease rates and thus bring down a portion of MAS' fixed costs. Syarikat Prasarana Nasional Berhad, which now owns Kuala Lumpur city rail commuter network and both the RapidKL and RapidPenang bus systems, can follow PMB's model.

That is, to fund the bus fleets of various operators at a fixed cost (depending on fleet size) and letting the operators to pay for operating costs only for the various routes. And just like aircraft leases, the operators can have in engine options depending on their choice fuel.

There should also be competition along the routes as commuters will have a choice of operators depending on frequency and fleet size.

With prasarana being the Malay word for infrastructure, the government will just have to deal with the cost of infrastructure (notwithstanding its diminishing value) while the operators wage fare wars to make money.

Wouldn't that level the playing field? And provide a choice for commuters.

Unless of course the operators are just interested in profits. Public transport services is usually a volume business and profit margins are thin. State subsidies help to a certain extent but ultimately its a free market.

The alternative choice is to provide free bus services. And pass the cost to taxpayers by lowering the basic tax bracket to widen the net for more wage earners to pay tax. After all, they and their families are using the bus to go to work. 

Najib has a choice to not take us for a ride by taking the easy way out to cut subsidies without providing options.  The Siber Party of Malaysia (M) believes everyone should have a ticket to ride.


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