UPDATED: I am surprised by the performance of the Information Minister in the debate tonight. I had expected the Minister to fail to present his case against subsidy, losing to Anwar Ibrahim’s oratorical skill. Delightfully however, I found myself underestimating the Minister, at least, in the earlier parts of the debate. Unfortunately, despite my initial excitement at the Minister’s performance, as time progressed, his performance began to regress downward, veering to irrelevant issues.

The personal attacks done by the Minister are deplorable. He should concentrate on policy, not on personality.

While digressing, he made one sketchy economic point. He said something to the effect that subsidy encourages inflation, citing Iran and Venezuela as examples. I think inflation in those countries is caused by other factors, not subsidy. In fact, subsidy plays a role in moderating inflation, not flaming it, regardless the inefficiency involved.

But an indirect relationship between inflation and subsidy is possible however, though not quite sanctioned by mainstream economics. For one, subsidy increases expenditure which may increase fiscal deficit. In the case of Malaysia, a subsidy as massive as the fuel subsidy is definitely related to our government’s fiscal deficit by the virtue that we already have approximately 3% deficit out of GDP. That deficit encourages capital outflow and depreciate local currency because the expenditure does not encourage confidence as it is practically a type of spending with no returns. Nobody would want to invest if the government spends money but receives no returns. Through the weakening of the currency, goods of foreign origins would become more expensive. How that would affect the local inflation rate depends on the consumption composition.

While I have seen an example of budget deficit leading to capital outflow — Indonesia in 2006 if I recall correctly — I admit that there is a problematic explanation for this. In theory, fiscal deficit means higher interest rate since higher expenditure due to the deficit reduces saving. Higher interest rate leads to capital inflow.

Still, I think inflation in the two countries mentioned has little to do with this. It has more to do with the confidence for those economies in general which subsidy is only a tiny factor.

While the Minister continued attacking his opponent, Anwar Ibrahim started well especially with matter revolving around IPP. His suggestion is acceptable and it may be good to implement it. Yet, as I have pointed out earlier, savings from the suggestion should be directed to developmental purposes, not something that merely temporarily encourages expenditure.

The former Deputy Prime Minister’s economic reasoning on other matters is twisted. One concerns the definition of subsidy. He said investment in infrastructures to benefit corporations as well as incentives given are forms of subsidy, no different from the current fuel structure. Wow. Just wow. He just redefined the meaning of subsidy. According to him, investment is subsidy!

I just cannot accept that and I reject such redefinition.

That notwithstanding, Anwar Ibrahim compared bailouts costing billions of ringgit with the cost of subsidy. This is an attractive argument but I am in the position that we need to refrain from both bailouts as well as subsidy. The wrong of one policy does not make another policy necessarily good, especially where there are better options out there compared to both.

On the reduction of retail fuel price itself, Anwar Ibrahim proposed a RM0.50 reduction off the current RM2.70. Yet, fuel prices went up from RM1.92 to RM2.70 or by RM0.78 and the former Deputy Prime Minister promised to reduce the price prior to the price hike. Given that fact, I am not sure how Anwar Ibrahim would make good of his promise by just RM0.50 reduction. He would need to reduce the price by at least RM0.79. Shabery Cheek rightfully pointed this gap in Anwar’s reasoning.

By merely reducing fuel by RM0.50 from current price, Anwar Ibrahim would effectively raise retail price by RM0.28 from the pre-June 5 price.

Anwar Ibrahim did say that RM0.50 is only an initial step however. Fine but what would happen next? He presented figures to justify the RM0.50 but he did not rationalize for any further reduction. So, the main question was not answered.

In the debate further, he said he would not touch Petronas in order to reduce price. Yet, listen to this video:

Pay attention to around 2:25 when he mentioned about reducing the profit of Petronas. So, I am highly skeptical of what Anwar said about not touching Petronas.

As for the Information Minister, I thought his reference to how Norway managed their oil money is good. Anwar however dismissed it by merely saying that Norway is a country far richer than Malaysia. I am content to say that the difference between having a trust fund and fuel subsidy has nothing to do with living standard.

While Anwar Ibrahim refrained from replying to Ahmad Shabery Cheek’s personal attacks, the former Deputy Prime Minister did shoot his sparring partner down on a couple of occasions. One was about oil running out in 2015. The Minister said oil would run out by 2015 but Anwar Ibrahim corrected him by stating the assumption for that: if there is no new exploration.

But that digressed from a very legitimate question directed to Anwar: if Malaysia ran out of oil, would Anwar advocate for subsidy still since his argument for fuel subsidy is based on the fact that we are net exporter of oil, however small is that net?

Anwar did not answer the question.

Finally, Anwar Ibrahim’s patience is admirable. If the debate was purely about ethics, the Minister would lose out through and through but it is not. This is an economic debate and Anwar Ibrahim failed to convince me.

This is not to say that the Information Minister did better than Anwar Ibrahim though. I side with the policy endorsed by the Minister because of its economic rationale, not because of the Minister. I have decided my mind long before the debate. If I had been neutral without the luxury of any economic training, I think Anwar would have convinced me of his points.

But let us look at the bright side: at least, Shabery Cheek carried himself better than what Zainuddin Maidin possibly could.

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved

p/s — this entry at first praised the Information Minister. After watching the debate twice, I think I over-praised the Minister. I have to admit that I focused on Anwar Ibrahim more than the Minister because I support total elimination of subsidy. So, I do not need to be convinced by the Minister and am more interested in listening to what Anwar had to say. So, forgive me for being overly critical of Anwar but I could not help it.

After some thinking, I have rewritten the entry to reevaluate my position with respect to the minister and to get what Anwar said right before criticizing it.

After all, the entry was written on the go. There is always a trade-off between speed and accuracy of what was said and what I really think beyond the surface. I am only glad to be able to revisit this entry and revise it.

7 Responses to “[1722] Of Anwar Ibrahim-Ahmad Shabery Cheek debate”

  1. on 15 Jul 2008 at 22:29 Anak Bugis Johor

    Malaysia soo sad having such an idiot info minister. I dont see any point from the minister. Well i am also not a big fan of Anuar but at least he show his way for the rakyat.

  2. on 15 Jul 2008 at 22:31 mob1900

    Actually if you watch the debate again, SC never, not even once answer the question which is: Why does the Gov raise the oil prices so much at such short notice until it bebankan rakyat and would probably collapse the economy in coming months?

    Please show me SC answer it. SC goes around trying to ‘character assasinate’ DSAI with history lessons on DSAI’s younger days as a Rad. Infact DSAI took all in his stride and even try to show this young ‘Turk’ SC back to the original question.

    DSAI even gives examples on ‘how’ to get the 3-5billion needed to cut the 50c from the existing price. He showed the savings on reviewing the IPP one-sided contracts, cutting out rent-seekers/middle men in diesel distribution, etc. These ‘processes’ are so corrupted right now or ‘bocor’, the country will save billions neede for the -50c subsidy. Reduce curruption = Subsidy for the Rakyat!

    The most interesting revelation was the ‘Net Importer by 2015’ myth. This calculation was done 20-30 years back, so this means all the new oil wells were never accounted for and hence the ‘fact’ was never updated. The rakyat were media-spinned to believe we’re will habis telaga minyak by 2015!

    Syabas to the debate initiative as all can witness and judge for themselves. and thanks to Hafiz for letting me tokok here. heheheh

  3. […] Of Anwar Ibrahim-Ahmad Shabery Cheek debate […]

  4. […] 16th, 2008 by Hafiz Noor Shams You maybe interested in reading my review of the debate before voting. n Who presented his case better: Anwar Ibrahim or Ahmad Shabery […]

  5. on 16 Jul 2008 at 01:15 Cinta Laju

    Bagus. Bagus sekali hujah kamu. Adakalanya aku muak membaca artikel yang terlalu cenderung memihak kepada Anwar.

    Kadangkala aku tertanya, apakah media yang adil akan mati selepas Pakatan Rakyat membentuk kerajaan, melihatkan semuanya berpihak kepada Anwar?

    Kalau itu penghujungnya, alamat tak blossom lah fikiran aku.

  6. on 16 Jul 2008 at 09:47 zewt

    I missed the dedate yesterday and I hope to catch it some time tonight over youtube or something.

    If what you said is right, then I am also guilty in underestimating the Information Minister. I thought DSAI would bulldoze that fella down.

    Anyway, I am not a fan of reducing petrol subsidy, it is just not feasible in our economy at the moment.

  7. on 16 Jul 2008 at 19:26 Bala

    Your Article Has Been Posted Here Without Proper Credit

    http://www.wantedgal.com/2008/07/historic-debate-shabery-v-anwar.html

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