Friday, March 29, 2013

IMF urges countries to cut energy subsidies

A case in point:
Malaysia's high car prices and subsidised fuel.

A 1.8E Toyota Altis (Corolla) would cost RM119,000 in Malaysia but only $18,180 (approx RM56,000) in the US. The difference is RM63,000.

We know that the fuel price in the US is much higher than our subsidised RON95 but the point here is that, we the consumers pay upfront subsidy of RM63,000. Take the government subsidy of RM0.82/litre (in the pic) and say you refuel 50litre/week, you enjoy subsidy of RM41 a week or RM2,132 annually.

If that is your refueling pattern, how long do you think the RM63,000 will last you? More than 20 years I reckon. So, would you support subsidised fuel or get a better car at lower price and manage your own fuel consumption. I think it is smarter that way.

The blanket subsidy that is practiced in our country benefits not the poor but the middle-income and the rich population. I read in The Star that 71% of fuel subsidy was enjoyed by the middle to high-income level groups (Source: Pemandu).

If it is up to me, I'd rather buy an Altis at RM56,000 and pay RM3.30 for my petrol; I'm still better off financially 20 years later.


Do subsidies on energy hurt the economy? And ultimately the masses?

"We have been hearing about countries that are finding that the fiscal weight of energy subsidies is growing too large to bear. In some countries budget deficits are becoming unmanageable and threatening the stability of the economy."
- IMF first deputy managing director David Lipton, in Washington.



Source: International Energy Agency, World Energy Outlook 2012, Energy Subsidies via IER website.

Cut subsidies on energy - says IMF

WASHINGTON – The International Monetary Fund urged countries to reduce subsidies on energy, saying they worsen government’s fiscal positions and eventually create more advantages for the wealthy instead of the poor.

In a broad-reaching report, the IMF said subsidies of oil, petrol and electricity are aimed at helping consumers, but end up costing them as governments struggle to shoulder the cost burden.

Moreover, the study said, subsidies encourage energy waste, discourage investment in energy-efficient industries, and exacerbate pollution and global warming.

Worldwide the direct subsidies on energy — when consumers pay less than the basic supply costs — amounted to $480 billion worldwide in 2011, according to the IMF.

If post-tax subsidies are counted — when the prices do not cover such things like the negative impact on the environment — the government support worldwide measured $1.9 trillion.

Most of the subsidies are in oil exporters, where they contribute to speeded-up depletion of a natural resource.But energy importers suffer especially as global oil and gas prices have risen over the past three years.

Many have not responded by adjusting domestic energy prices to match the increases — and so expanding the fiscal burden of subsidies, according to the report.

IMF first deputy managing director David Lipton, in an address introducing the report in Washington said that countries that have offered subsidies to help struggling populations “now find they suffer both fiscal paralysis and energy shortages.”

Lipton said 20 countries in the world maintain subsidies that top five percent of their GDP.Such subsidies “remain a stumbling block to higher growth by squeezing out much needed health, education and infrastructure spending,” he said.

But the report points out that, if post-tax subsidies are counted, the largest offenders are the United States, China and Russia — together their subsidies reach nearly $900 billion worth.
Source: Business Inquirer


Thursday, March 28, 2013

Bosch stops RM2.2 billion solar project in Penang

Back in 2011, a global player in the solar energy industry, Sun Bear's plan to build a RM5.2billion solar glass plant in KKIP, Sabah didn't materialise due to power supply issue. Insufficient power supply to be exact.

Recently, Germany's Bosch announced it was shelving a plan to build a RM2.2 billion solar facility in Batu Kawan, Penang - for a different reason.



One of Bosch facilities in Penang. motortrader pix.


Bosch shelves RM2.2b investment in Penang

TheSunDaily, March 26

Bosch Solar Energy Sdn Bhd will quit a proposed RM2.2 billion investment to build a new solar facility in Batu Kawan as part of a decision by its parent to discontinue their global crystalline photovoltaic (PV) business.

In a statement last Friday Germany's Robert Bosch GmbH said it will stop manufacturing of ingots, wafers, cells, and modules at the beginning of 2014 and as far as possible, individual units are to be sold quickly. It said that its module plant in Vénissieux, France, is to be sold, while plans to construct a manufacturing facility in Malaysia will end.

In December 2011, after an extensive global site selection, Bosch purchased an industrial site in Batu Kawan.

They had planned to start construction of the new facility in Q1, 2012 and start operations by early 2013. These plans however did not take off but Bosch had paid the land purchase according to schedule to reflect its commitment to the project.

Early 2012 Bosch announced that due to global overcapacity, price declines and major shakeouts in the PV industry the project in Batu Kawan will be delayed.

"Despite extensive measures to reduce manufacturing cost over the past year, we were unable to offset the drop in prices, which was as much as 40%," Bosch Solar Energy AG supervisory board chairman Dr Stefan Hartung said in a statement, adding that losses for the solar division amounted to €1billion (RM4.04billion) last year.

In a separate statement, InvestPenang chairman Datuk Simon Wong said the state government's investment arm has noted the decision to stop the manufacturing of solar energy parts. He said the decision was unavoidable in view of the current state of the global PV industry.


TheGreenMechanics:
Hopefully, it is not the end of the road yet - at least in the context of FDI in Penang - as Business Times reported an industry source as saying "Bosch have conveyed to the state investment authorities that it is committed to the assets it possess in Penang and will need to rejig their plans."

Malaysian household income hits RM5,000

The average monthly income of Malaysian households rose from RM4,025 in 2009 to RM5,000 in 2012, an increase of 7.2% annually. This is according to the 2012 Household Income Survey.

Household income in 2012: RM5,000 (US$1,611). Daily Express, March 28


Kuala Lumpur leads with the highest growth of 14.9% from RM5,488 in 2009 to RM8,586 (US$2,770) in 2012. But Putrajaya took the throne with zero-poverty status last year.


Perlis, Terengganu and Sabah are among the low-income states. I wonder where Kelantan stands in the table.


Average Malaysian household income in 2009 was RM4,025 (US$1,300)


TheGreenMechanics' two cents:

The overall incidence of poverty last year was 1.7% which is below the 2% target by 2015. That's good, but in Sabah the poverty incidence is still at a whooping 8.1% (down from 19.7% in 2009).

The statisticians tell us that Sabah emerged as the best performing state in poverty eradication with its poverty rate. But almost every other states are below 2% and statistics do not tell us the absolute numbers. We have the most number of poor houshold. A 8.1% poverty incidence means that we have more than 250,000 people that are categorised as poor.


Average monthly Malaysian household income hits RM5,000
As reported in Borneo Post, March 27.
The 2012 Household Income Survey found the average monthly income of Malaysian households rising from RM4,025 in 2009 to RM5,000 in 2012, an increase of 7.2% annually.

In announcing the statistics here today, Minister in the Prime Minister's Department Tan Sri Nor Mohamed Yakcop said the urban household monthly income increased at a rate of 6.6% a year from RM4,705 in 2009 to RM5,742 last year, while the rural household monthly income rose 6.4% annually from RM2,545 to RM3,080.

"The significant income rise was achieved with the federal government's efforts in ensuring continuous, stable and strong growth in the economy. The impact was via widespread increase in economic opportunities which generated employment with business and industrial development in various economic sectors," he said.

Nor Mohamed said all states also recorded better average monthly household incomes with Kuala Lumpur leading with the highest growth of 14.9% from RM5,488 to RM8,586.

He said this was followed by Labuan with 12% from RM4,407 to RM6,317, Perlis with 10.1% from RM2,617 to RM3,538, Terengganu 9.1% from RM3,017 to RM3,967, and Negeri Sembilan and Sabah from RM3,540 to RM4,576 and from RM3,102 to RM4,013 respectively. On the ethnic breakdown, Indians recorded the highest increase in monthly household income at 9% from RM3,999 to RM5,233, followed by the Chinese at 8% from RM5,011 to RM6,366 and Bumiputeras, 6.9% from RM3,624 to RM4,457.

There was also a significant reduction in the overall incidence of poverty from 3.8% in 2009 to 1.7% last year, with the total number of household poor plunging 52.7% from 228,400 to 108,000 in the same period.

He said the overall incidence of poverty in the urban areas contracted from 1.7% to 1% while the rural area rate was slashed to 3.4% from 8.4%.