Rafizi says Mukhriz does not understand AP system

Rafizi (second from right) speaking at the public forum in Kuala Lumpur on September 13, 2012. With him are other members of the panel. Rafizi said people are forced to buy cars because of the poor public transportation system. — Pictures by Choo Choy May

KUALA LUMPUR, Sept 14 — PKR’s Rafizi Ramli last night scoffed at Datuk Mukhriz Mahathir’s rebuttal to Pakatan Rakyat’s (PR) plan to reduce car prices, mocking the deputy minister for his alleged lack of understanding of “how cars are sold” and the government’s Approved Permit (AP) system for imported vehicles.

The PKR chief strategist, when kicking off PR’s forum series for its “Reduce Car Prices” campaign here, said it was clear that Mukhriz, the son of former Prime Minister Tun Dr Mahathir Mohamad, “certainly does not understand the open market mechanism”.

“We have waited over two months for a response from Mukhriz to our proposal. He is the one who controls the AP system... two months and I had already given up hope.

“But now he has responded strongly on the basis of saying that our suggestion to auction the APs will not reduce car prices. I am sure Mukhriz does not understand how cars are sold.

“I don’t think he even understands the AP system and certainly does not understand the open market mechanism... he has been confined to a controlled environment for too long,” Rafizi told the public forum at the Kuala Lumpur Selangor Chinese Assembly Hall.

As a part of PR’s plan to slash the triple tax burden imposed on cars sold in Malaysia, PKR had in July proposed auctioning off APs for imported vehicles through an open bidding process in the first three years under PR’s rule before abolishing the system entirely in 2015.

Dzulkefly (standing, right) explaining a point at the forum.

When announcing the proposal, Rafizi had explained that if an estimated 70,000 APs are awarded every year, the auction should fetch more than RM3 billion in revenue annually for the government.

This, he explained last night, would help compensate for part of the RM7 billion in annual losses expected from PR’s plan to slash excise duties, which currently run as high as 105 per cent.

But in his response to the suggestion earlier yesterday, Mukhriz had criticised the idea, saying that it goes against logic as an auction would only cause the price of each AP to go higher than the current RM10,000 that the government currently charges.

Rafizi, however, repeated that the auction would help raise government income, which could in turn compensate for the potential losses from the PR plan to cut excise duties.

Explaining further later, his PR colleague from the DAP, Petaling Jaya Utara MP Tony Pua, pointed out that by auctioning off APs, the income from the sale of the permits would go directly into the government’s pockets.

“When we auction off the APs, those genuinely importing cars will still continue to purchase the permits and the government gets the money, instead of the middlemen who have special access to these APs.

“We all know that 80 per cent of APs go to 20 per cent of the companies applying for them,” he said.

During the forum, which was also attended by panellists Dr Dzulkefly Ahmad, the PAS Kuala Selangor MP, and IDEAS chief executive Wan Saiful Wan Jan, it was also explained that PR’s plan to slash car prices would not translate into a greater population of cars on Klang Valley’s already crowded roads.

Pua pointed out that the current “vehicle-to-individual” ratio in the Klang Valley has already surpassed one vehicle to a person, jokingly pointing out that “when a baby is born, that child already has a car”.

He explained that with this in mind, this meant that the reduction of car prices would not increase the density of vehicles on the road as an individual could only drive one vehicle at a time.

“So even if you decided to purchase another car, the ratio on the road is already one vehicle to a person... how many cars can you drive at any one time? You can only drive one car at a time,” he pointed out to laughter from the audience.

Rafizi had earlier explained this as “transportation elasticity”, which he said was a measurement of the likelihood that an individual would decide to purchase a vehicle or opt for public transport based on a variety of variables.

He pointed out that at present, the high rate of vehicle ownership in Malaysia was largely due to the poor public transportation system, making it a “necessity” for an individual to purchase cars.

Should public transportation be improved, Rafizi said it would no longer be a necessity to own vehicles and the reduction of car prices would eventually be translated into an interest to “upgrade” current vehicles.

“After all, we know that even though half of those in the Klang Valley earn incomes of less than RM2,000, they tend to own cars.

“Meaning, this has nothing to do with being poor or rich, they are forced to own cars because of the poor transport system. Therefore, lowering car taxes will not mean they will buy more cars, it only means they might upgrade,” he said.

Concurring with Rafizi’s view, Pua said the government could opt to spend some RM1.5 billion to increase the number of buses plying Klang Valley roads to reduce traffic congestion, instead of the estimated more than RM50 billion for the Klang Valley MRT project, the country’s most expensive infrastructure project to date.

He pointed out that in Singapore, which has a land mass that is smaller than the Klang Valley but a similar population size, there are some 3,300 buses on the streets, on top of its “fantastic MRT system”.

“Here, we only had 800 and this year, we increased to 1,000 buses... and we are a more dispersed population but we have a tremendous shortfall in buses,” he said.

Rafizi also earlier also raised a suggestion to introduce a “car scrap policy” in Malaysia once PR’s policies are rolled out, pointing out that the increasing volume of cars on the road (10.3 million in the Klang Valley) was largely due to a lack of such a policy.

Under a typical car scrap policy, a vehicle that is 10 years old would have to be sold off to be reconditioned.

“But at present, a car scrap policy cannot be implemented due to the huge microeconomic impact on the people because cars are now just too expensive for people to buy again every every five or 10 years,” he said.

During the forum, Dzulkefly also pointed out that PR’s plan to reduce car prices by slashing taxes would ultimately help reduce household debt, which currently stands at RM653 billion, or 80 per cent of the country’s Gross Domestic Product (GDP).