The improvement in their status is to be accomplished by raising the price of petrol, thus re-distributing the wealth of all petrol users toward the lower income group. This is a form of social engineering which has much to recommend it, if only it moved more from the very top to the very bottom.

The proposed scheme is to work by diverting public money, now used to subsidize retail petrol companies, to new projects to be selected by the government. The money will eventually find its way into the pockets of the poor. Just how this trickling down is to work is not given in the overview. It is lost among the many unreported details of the proposal.

The subsidy money is in the treasury. It got there from various sources, but it is still all public funds. That means it belongs to the people of Malaysia. It could be given directly to the 'hard-core' poor. But they cannot be trusted. They have no economics training and might spend it inappropriately. Instead, the money is to be used wisely, by the ministers, being experienced in such matters, will spend it on 'selected government projects'.

When public money is used to subsidize the price of petrol, that means the money is given to the petrol companies to compensate them for losses they incur when a low price is fixed by the government. The government could just raise the price of petrol at the pump. But that's not popular, so first there must be 'economics talk' about the subsidy, and how the price of crude has gone up, and how Malaysia's petrol price is low when compared to everyone else's except Indonesia, and the smuggling that goes on at the border, how we are subsidizing our neighbors, how the amount of the subsidy has increased, etc.

Why all this confusing talk over a simple increase in the price of petrol? We don't hear this when the price of chicken changes. It introduces the 'I' word, that's why. The 'I' word is INFLATION. When the tolls go up, that's inflation. When there is a minimum wage, that is inflation. When lending rates go up, that is inflation. When the price of goods goes up, that is inflation. Is there inflation in Malaysia? The bus fares have been increased 30%. That is inflation.

But why is it inflation? It is inflation because wages must go up to maintain the same purchasing power. If consumers don't have purchasing power, retail sales go down. If wages go up to maintain the consumer's buying power, employers must increase the price of their goods, whether manufactured for export or intended for domestic consumption.

Goods cost more, the price of transporting them costs more, and sales taxes are more. This is what the 'I' word means. Furthermore, it is a spiral that tends to feed on itself. Once started, it is very difficult to control. I suspect it is an official secret, and a national security issue as well.

Bank Negara Malaysia, which controls the basic lending and savings rates, announced last week that savings rates would be increased. This is to attract savings money into the banks, because liquidity in the banking system is drying up [forcing the government to reach for this tempting pile of cash]. This would NOT affect the base lending rate of loans, the officer said. But just today another bank announced that it was raising its base lending rate an equivalent amount. That allows banks to maintain a profitable spread [bank terminology for profit margin].

This is bad news for the stock market. The low savings rate was intended to make the debt-heavy Malaysian companies look better to the investing public, and the prime minister and finance minister have been trying to bolster the market by advising the public to buy stocks instead of land. But now everyone sees that the companies must pay higher interest on their big loans, eroding further whatever chance they had to avoid bankruptcy.

The higher savings rates will tend to divert the public's equity buying money toward the savings banks at the expense of an already slow trading scenario. Watching recent events, it appears that the prime minister's cronies are reduced to selling back and forth to each other in order to generate any volume at all. Only the initial public offerings are getting any following.

But officially there is little or no inflation in Malaysia. At worst it might get to 4%. This information is readily available from government sources. But tolls keep going up. Bus fares are already up. Now petrol is to go up. Is there inflation in Malaysia?

Not a problem, according to the government. Remember, the petrol subsidy savings are to provide funds which MAY eventually trickle down to the hard-core poor through 'development projects' to be initiated by the government. But will the government be more efficient in the distribution of these now-diverted funds?

The record shows that everything the government does costs five or six times what it would if private parties did the same work. Why such exaggerated expense? Just take a drive around Kuala Lumpur and look at the multi-million dollar homes of the ministers. That will give you a clue. Look at the Anti-Corruption Agency cases involving official corruption and bribery. That will give you another clue.

Talk to businessmen who bid for government projects. They will give you the reasons. But you need not ask the ministers. They are sworn to secrecy upon taking office. Where they learn to speak 'economics talk' is a mystery.

Is there inflation in Malaysia's future? That is a dull question, a silly exercise left to make the reader smile. Now consider what the government plans to do with the RM1 billion or so.