Saturday, June 28, 2008

Comparing Quality of Life After Fuel Price Hikes - QoL Index

Our continuous discussion on food and fuel price hikes gone unabated for the last two months. More so since the pump prices went up to RM 2.70 petrol and 2.58 for diesel on that faithful evening of forth of June the so called black Wednesday.

The government since that day has been trying to rob Peter and to give Paul to quell all the deafening noise from the Rakyat. They say they have to be people centric and thus have introduced methods to "ease their pain". They say subsidies have to go so that they can give the money saved to help the poor Rakyat. Mind you subsidies for fuel started only in 2004!! So where did all the money go all these year? That was just a rhetoric question.

The main stream media especially the print, have since tried very hard to explain that the fuel price in Malaysia is still the lowest among most country. Almost every day there is a comparative table or graph that tries to explain that we are indeed amongst the lowest and we should get on with it. I agree that we should get on with it but I do not believe a word of the tables, graphs and articles. They seem to have been doctored to a certain level. None has addressed the Quality of Life (QoL) of Malaysians who have been independent for 50 years.

What they fail, including the government to compare the situation fairly taking into account other factors that affect the QoL. Their standard operating procedure is a knee jerk reactions to situations and piece meal hand outs which are political in nature and it does not mean anything to anyone. New state governments included. Of course the Rakyat will accept it when given, what then after that.

In electronic trading last Friday the light sweet crude oil hit all time high of USD140/barrel. One of them is of course the infamous Tapis Blend of Petronas which is usually about USD7 higher the quoter rate for the light sweet. This Tapis Blend has brought great progress to this nation of ours since 1974 especially in the Mahathir's years of spending, wasting, cronyism etc. But what wealth or QoL has it brought to the Rakyat of Malaysia.

There are countries with nothing, but are way off better then us during this crisis. They have better QoL and the fuel price hikes do not really affect them. To prove this I have devised a way to calculate the QoL index. They may be other QoL indices but this one take into account three main components only;

1) Per capita income (the average income per person per year in any country)

2) Fuel Price (price of the liquid that goes into anything and everything and makes it more expensive)

3) Purchasing Power Parity (the power of a country's currency over another hence enhancing buying power). Do not get confused. Simply put why would a person buy a product from another country other than his own country. Because its is cheaper due to the exchange rate.

An important assumption here is that fuel price is the cause and effect of all other prices increases including food, transport and others. Over the last twenty years food agricultural land has been converted to crops that produce bio fuels. So the formula to calculate the QoL index of a country is:

Litres per Capita = Per Capita Income / Petrol Price per Litre

Purchasing Power Parity (PPP) = Petrol Price per Litre of Country / Petrol Price per Litre of Malaysia

Litres per Capita After PPP = Litres per Capita x Purchasing Power Parity

Quality of Life Index = Litres per Capita After PPP of Country / Litres per Capita After PPP of Malaysia

Please click link below or copy paste in navigation bar to view the Quality of Life Table.

http://wagthedog_malaysia.googlegroups.com/web/PPP.pdf?gda=Sd01eDgAAAB8nz-wchJGvsTvgAvcOHsPt0dzZPYT2n2oULKuOupmCGG1qiJ7UbTIup-M2XPURDT_53SW6OmsSZolPQJenHQU

How do you read the table? Malaysia is the base with the QoL index being 1.00. That means neutral and all other countries' QoL is compared to it based one the above three components to assess the state they are in currently. Remember Malaysia is an oil exporting country since the 70's and we are supposed to become a developed country by 2020. What a perfect vision!

The countries above Malaysia are better off than us and the ones below are worse off. So if you look at Singapore which has nothing is 4.32 times (5.32-1) better off in terms of QoL than us. In other words they have achieved much more than us since independence. Yes we have known this all along, but we never knew how much better off. In other words their standard of living is 432% better than ours.

Of cause we are better off then other countries but these countries have had much political and economic upheavals in the eighties and nineties. The 1997 financial crisis faced by us was nothing compared to what they have had. India and China were sleeping giants that awoke only in the late eighties.

If our leaders have managed this country better over the last 30 years we would be where Singapore is and we would not be fretting about the price hikes.

Please feel free to comment.

42 Comments:

Letting the time pass me by said...

I think this year, the government can help the rakyat by tax exempttion... For those earning less tahn RM4000 pm, maybe they can be exempted from tax... And maybe for those earning more, the tax structure should be revised...

The current tax structure maybe is not suitable at the current oil price and inflation rate,....

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said...

人們不缺少力量,他們缺少意志。..................................................

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