KUALA LUMPUR: The government's move to raise electricity and gas prices will slow down economic growth in the medium term, but it is a necessary evil to ensure the country's long-term competitiveness- "Cheap electricity and gas rates have been used to subsidise our exports, which are mostly foreign-owned," said Jupiter Securities head of research Pong Teng Siew- The government yesterday announced a 7-12 per cent electricity tariff increase from June 1, while natural gas prices has been raised by RM3 per million British thermal unit (mmBtu) every six months until it reaches market levels- Pong said it made no sense in the long term to compete on the international front with subsidies- Nevertheless, he said in the immediate term, the increase will have a widespread impact on the economy- "Higher tariffs will have an impact on businesses, and it will drive up their operational costs," he added- Among the sectors that could be hard pressed by the new rates are those in the steel, roof tiles, rubber and cement industries- Mercury Securities head of research Edmund Tham, however, feels the increase will not have a profound effect on small businesses- "The increase on small businesses will be marginal, but for the larger ones, they will feel the pinch," said Tham, adding it will have a direct impact on se-veral industries such as the steel and rubber glovemakers- Pong said the increase will have a domino effect across the board- "When the steelmakers, roof tile makers and cement producers feel the pinch, costs will inch up, and this will eventually affect the property developers, who will have to pass down the costs to property buyers," said Pong- He added that the rise in electricity and gas rates will also have an effect on the stock market- "We have lowered our year-end target for the FBM KLCI to 1,576 points from our previous target of 1640 points," said Pong- He noted that the lower target was not solely due to the power rate increase, but was also due to other factors such as lower projected economic growth in China and the US- ...

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