Forget about the Stubborn Samy and the insolent Vel Paari, lets talk subsidy cuts

I think we do not need to further debate about when and how Samy will retire, MIC will have to decide for them self when and how Samy should retire, they choose him in a democratic election. MIC will also have to suffer the consequence of their action and remains to be seen whether they will still have a party after the next General Election.

Here is more serious bread and butter stuff from Minister Idris Jala about subsidy cuts which I think is inevitable.

I hope that subsidy cuts are done progressively so that the inevitable price hike will not cause too much hardship for Malaysians who live near or below the poverty line. The timings and the quantum of the subsidy cuts on each subsidised items must be decided by the Cabinet holistically, economically and politically.

In tandem with the subsidy cuts the Government should also tighthen its Procurement and Tender awards procedures so that there will be no wastage due to overpricing etc. Its no point having across the board subsidy cuts if there are still leakages somewhere in the system.

From the Malay Mail news portal:

Idris Jala reveals Malaysia's growing debt and the need to cut it
REENA RAJ
Thursday, May 27th, 2010 15:17:00

KUALA LUMPUR: If the Malaysian government’s debts increase by 12 per cent every year, the country could go bankrupt by 2019.

This was revealed by Minister in the Prime Minister’s Department Senator Datuk Seri Idris Jala at the Subsidy Lab Open Day at the Kuala Lumpur Convention Centre this morning.

Idris said Malaysia has a rising debt of RM362 billion, which is 52 per cent of the country’s GDP.

It was due to this concern that the government would be taking proactive measures to do away with subsidies gradually.
To date, Malaysia is one of the most subsidised nations in the world. Its total subsidy of RM74 billion last year is equivalent to RM12,900 per household.

THE government’s subsidy rationalism framework, as announced by Minister in the Prime Minister’s Department Senator Datuk Seri Idris Jala at the Subsidy Lab Open Day at the Kuala Lumpur Convention Centre this morning, is as below:

• Fuel — increment of 15sen for now and followed by 10sen every six months. For diesel, a suggested 10sen increment every six months for the next five years.

• Cars below 1,000cc will receive RM126 cash rebate while motorcycles below 200cc will receive RM54 cash rebate. This will help the government save RM14.3 billion by 2015.

• Households using less than 100kwh of electricity per month will get free electricity while those using 100kwh to 200kwh will continue to receive the subsidy. With this, the government can save RM35.9 billion over the next five years.

• Idris said, if tolls done away with, the amount of income tax will increase in the next 20 years. The best solution would be to increase toll charges on highways that have other alternative roads and heavy users shall be given a discount of 20 per cent. This will save the government RM 3.75 billion in the next 5 years.

• A suggested increment of 20 sen per kilogramme of sugar from now until 2012.

• A suggested increment of 20 sen per kilogramme for flour for now, and an increase of 25 sen from next year until 2012.

• A 15 per cent increment for oil per litre for two years, followed by 5 per cent until 2014. There will also be a rebate of RM20 per year which can be collected at the post office.

• To encourage fisherman, RM200 will be given for every fish load landed.

• Concerning agriculture, fertilisers should be designed according to the soil for better results.

• For the health sector, it was suggested the current RM1 fee when visiting public hospitals be increased to RM3 to save the government RM16.3 billion over the next five years.

"Subsidy culture has brought negative consequences where it has often gone to the wrong beneficiaries, are subject to leakages and abuses, promote market distortions, and encourage over consumption that results in over production,” said Idris.
He said subsidies in Malaysia was on a blanket basis – given to everyone regardless of income level. "For example, 70 per cent of fuel subsidies go to mid- to high-income groups. "People are also subsidised for primary, secondary and tertiary education, medical services, petrol, sugar and cooking oil, as well as welfare aid and sustenance allowance. "Abuse of subsidies is rampant. For Malaysia to move forward economically, the nation as a whole needs to rationalise its subsidy issue before it is too late,” he said.

RM12,900 per household..

IT is an undisputed fact that Malaysia is one of the most subsidised nations in the world, with a total subsidy of RM74 billion in 2009, equivalent to RM12,900 per household.

Minister in the Prime Minister’s Department Senator Datuk Seri Idris Jala said this whopping bill can be split into the following subsidy components:

• Social – RM42.8 billion
• Fuel – RM23.5 billion
• Infrastructure – RM4.6 billion
• Food (flour, sugar and cooking oil) – RM3.1 billion

Idris said according to statistics from the Economic Cooperation and Development (OECD), Malaysia’s subsidy expenditure as a percentage of nominal gross domestic product (GDP) between 2006 and 2009 is at a staggering 11 per cent, almost three times more than non-OECD countries like the Philippines and 55 times more than OECD countries like Switzerland.

He said Malaysia’s subsidy bill is not sustainable, especially in light of the rising budget deficit and government debts (as percentage of GDP).
This is higher than Indonesia at 28 per cent and closer to the Philippines at 62 per cent.