Tuesday 19 February 2008

Is Petrol Really Cheap in Malaysia?

It is rather complicated to compare wages and prices between different countries, but let’s try.

In the UK the national minimum wage for a person of 22 years of age and above is currently £ 5.35 per hour; if we assume an 8 hour day, a 5 day week, and an average of 22 working days each month, the minimum UK monthly wage would be:

£ 5.35 per hour x 8 hour day x 22 working days a month = £941.60 or about RM 5,960.33 per month, when using a rate of exchange £ 1 = RM 6.33

As far as I am aware there is no legislated minimum wage in Malaysia, so if we use a minimum wage of say RM 7.00 per hour, the monthly theoretical ‘minimum wage’ would be RM 7.00 x 8 x 22 = RM 1,232.00 per month = £ 194.63

(Note: Many people in Malaysia earn very much less than RM 1,232 per month)

So using the above figures, a worker earning the minimum wage in the UK earns at least 4.84 times more than a worker in Malaysia earning the assumed ‘ not so minimum wage’.

Now let us compare the prices of petrol in the UK and in Malaysia.

UNITED KINGDOM PETROL PRICE IS ABOUT £1 [or 100p] per litre [= RM 6.33 per litre]


UK Value Added Tax: 17.50p = RM 1.11 per litre
UK Fuel Duty: 50.35p = RM 3.19 per litre
UK Production, retailers’ earning and delivery:
about 32.15p = RM 2.03 per litre
UK Total 100p = £1.00 = RM 6.33 per litre

Sources: UK Customs & Excise/BBC/Automobile Association/Retail Motor Industry Federation

Thus even in the United Kingdom the production cost of petrol and delivery, + retailers’ earnings comes to only RM 2.03 per litre
and all the rest, RM 4.30 is for fuel duty and value added tax.

There are no toll highways in the UK, so in Malaysia people are actually paying a high price to use the roads even when petrol costs RM 1.92 per litre, if you add on the Highway Tolls, the ‘real’ driving cost at least doubles to RM 3.84, or even more.

So in Malaysia motorists, in real terms, pay more than the citizens of the United Kingdom for 1 litre of petrol, however the lowest paid worker in the UK earns more than 4.84 times more than a 'not so low paid worker' in Malaysia.

The conclusion must be that Malaysian motorists are already paying far too much for petrol, if their wages are compared to the petrol price + toll charges, but I wonder what the fuel price increases will be after the Malaysian General Election March 2008?

Many tolls have already increased from 1st January 2008, and after the General Election further increases in toll charges are very likely..

The Malaysian consumers are going to be even poorer, that's for sure!

Tighten your belts for very hard times are ahead for the vast majority of

Malaysians, unless there is a positive development.

Down the Hatch!


Andrew Chan said...

dont forget, 25% income tax in the UK and x% (cant remember how much) national insurance contribution. But it's probably still more expensive in malaysia.

mindful mariner said...

Thanks for dropping in Andrew.
Well yes, but there is income tax in Malaysia too, albeit at a slightly lower rate, and payment of contributions to the Employees Provident Fund (EPF), & SOCSO, so all in all about the same.
Cars are cheaper in the UK however.
But of course it is impossible to equate things exactly.