>Fuel subsidies to cost US$300 million in 2008

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By Chun Sophal
The Mekong Times

With discontent growing over rampant inflation, the Cambodian government yesterday claimed it will spend US$300 million on fuel subsidies in 2008.
“We are trying to control inflation which is a phenomenon that influences [Cambodia] from outside by … subsidizing gasoline,” said Economy and Finance Minister Keat Chhon (pictured) yesterday. He predicted the subsidies would cost the state US$300 million by year’s end.
The government claimed last month it had spent US$29 million on gasoline subsidies so far this year.
Keat Chhon said yesterday the government still imposes the same tax on oil – US$309 per ton for gasoline and US$267 for diesel – despite the fact that imported oil has recently increased price to over US$1,000 per ton. “Currently, we do not take [tax] freight and insurance even though the oil price is rising,” he added.
Son Chhay, a Sam Rainsy Party parliamentarian, was unconvinced. He said the government’s claims were contrary to fact, noting that the government had previously taxed fuel at 100 percent, only lowering the price when international prices soared.
“I think that if the government taxed [fuel] at the same level as in 1999, gasoline would increase to US$2.50 per liter,” he claimed. “I think that the minister [Keat Chhon]’s speech was an empty claim that projects a technical image but falsely leads public opinion [astray] because the government has allocated no budget to subsidize [fuel] inflation.”
Chan Sophal, president of the Cambodian Economic Association, was also left cold by Keat Chhon’s claims. “We do not see the government subsidizing oil,” he said. “Now, Cambodia has imposed the highest tax on fuel [in the region], three times higher than neighboring countries.”
In any case, Chan Sophal said fuel subsidies “look good on paper”, but are “ineffective in curbing inflation.”
Opposition leader Sam Rainsy has frequently promised to lower fuel prices by cutting fuel taxes and regulating the sale of fuel.
Son Chhay yesterday jumped on the bandwagon. “[I]f the government intends to reduce inflation and boost local production, the government should cancel tax on gasoline completely,” he said.

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