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Sakmongkol ak 47

Tuesday, 1 October 2013

What Subsidy Rationalisation?

The deputy finance minister, Dato Ahmad Maslan makes a big deal about his subsidy rationalisation initiative. It saves the country RM1.1 billion this year and RM3.3 billion next year. The 1.1 billion  saved this year will be spent this year. He went on saying how much the government spends on subsidies. The government spends around RM40bn a year for subsidies and that is a lot of money showing how much the government cares for the people. Out of that, RM24bn is for subsidies of certain fuels and LPG. Imagine if the government withdraws the subsidy – how much can be allocated elsewhere? There was one MP from BN who said, the RM40bn can be used to build 10 RM400m hospitals?
What then is the objective of this much touted subsidy rationalisation? Save money from one item to have it spent on another? Or cut down selected spending to reduce the overall budget deficit?
 How much did we overspend last year? The deficit last year was 5% and this year’s its targeted to be 4%. What is the amount of public debt? The public debt currently is around RM519bn and will reach RM546bn by the end of the year. So every savings and cut downs are important. The government has to reduce its spending and regain creditworthiness. Already Fitch Ratings has downgraded Malaysia’s creditworthiness from stable to negative.
My question to him was, if the amount saved from the subsidy is spent elsewhere, where is the saving? The same amount if spent elsewhere constitutes an amount contributing to the overall budget deficit. Similarly, if the next year’s amount saved RM3.3 bn is spent on something else, then it’s not saving. The same amount is injected into the economy causing the overall deficit. Savings occurs if the amount withdrawn is put away, not spent.
If the government intends to spend elsewhere, then the whole exercise ought not to be called subsidy rationalisation. It should be termed optimization of spending. Rather than spending x amount on subsidy, you spend it elsewhere where the benefits from the amount spent is deemed as giving more desired results.
What the government does is take money out from the left pocket and put it into the right pocket.
The other contentious point is the assertion that after a while the government realises that 30% of the people who enjoy the subsidised petrol and diesel are those earning RM3000 below. Although I am uncomfortable with the choice of RM3000 being the chosen benchmark as a measure of poor people- how many people in Malaysia are earning RM3000 a month? Isn’t 40% of the population earning RM1500 and below?  Anyway, the government suddenly realises that 70% of the users of diesel and RON95 earn more than 3000 a month, i.e. richer people- the government announces that this can’t do. The richer must be made to pay.
So, the subsidy is withdrawn because we want to stop the rich from enjoying subsidised diesel and ron95. We therefore punish them by raising the price of diesel and ron95? But by doing that, do we not also punish the 30% who are poorer but will now have to bear the punishment on the richer?
What is the objective of the subsidy renationalization? It should not be as the deputy finance minister implied the redeployment of the amount taken off for other uses. Then there will be no savings.
The government should stop hiding behind verbal semantics and obfuscation. If that objective is really to trim spending, look elsewhere for the remedy.
PETRONAS has subsidised IPPs, TNBs and others since 1997 for billions of Ringgit. Sometime ago, the president of PETRONAS lamented of its subsidies on TNB and announces it isn’t going to subsidise gas any longer. Cut down spending on these big budget items. Other big budget items are the mega projects. MRT, LRT extension etc.
The office of the PM spends around RM 14 billion a year. Cut it to half. The permata project and other child development programs cots is RM1.2 billion. Cut it by half. Cut down the repatriation of money by foreign workers. The Bangladeshis, Indonesians, Nepalese and others remit around RM20billion a year. The illegal workers who number the validated workers remit another RM20billion. Clamp the illicit outflow of funds that has amounted to more than RM1 trillion over the last decade. There are so many other big budget items other than the 40bn subsidies.


Anonymous,  1 October 2013 at 20:54  

Reading your analysis, I wish PR won PRU13 and you be made finance minister.

We need the return of sanity in the managing of the country's finances. We need an informed mind and a firm hand at the helm,not the "lembik" mind and limbs that are at the finance ministry.

Anonymous,  1 October 2013 at 23:33  

They're not listening
And not listening..still
I guess they never will..

Anonymous,  2 October 2013 at 01:31  

Our country are run by a group of idiots,clowns & half past six ministers.

kampong lad 2 October 2013 at 09:46  

the problem is the pemerintah doesn't know what are the real problems faced by the rakyat. they simply assume that masalah kerajaan juga masalah rakyat. menyelesaikan masalah kerajaan (yg sendiri bikin) memberi kesan negatif kpd rakyat - bila rakyat nak rasa senang sikit oi

Anonymous,  2 October 2013 at 09:47  


Many has lost the sight of seeing the real beef in the course of listening to hp6 politikus arguing/twisting the logic, superficially, to justify their verbal stupidities.

"What Subsidy Rationalisation?" Indeed!!!!

But, then many of these Joe M'sians r seemingly 'more educated' & urban! So, what about those gullible & simple-minded heartlanders?

Another case in mind, an apparently pink elephant in the china shop, PLUS has been collecting tolls for the past 20yrs. Profit aplenty, whether justify or not, is another looming question.

What raise the question is WHY the length of the highway has been getting congested, especially during holiday seasons? Can't they plough back some profit to upgrade (ie expand) the highway? See the key word - upgrade?

Instead of, we get maintenance - a 3rd world maintenance as a matter of fact, on the same old design that has outlived the original design criteria. Meanwhile, the toll payers r been short=changed to pay for an lousy service!

So, in the same argument mode - keep to the same operational procedure, even though that procedure has passed its usefulness. Never heard of out-of-box thinking? Or that concept has NEVER been coded into their genes, due to yrs of tongkat adaptation?

The country is facing real & possible financial/economical derailing, due to high GDP/debt ratio, & yet all the Finance Ministry could master is shifting limited fund from left to right pocket. The same old same old!

Fiscal genius or pure nincompoops? Pray tell!

Anonymous,  2 October 2013 at 10:05  

Dato, a diversion.


I think u should repost Walla's comments on Etheorist's economic policy blog on Certainty, Uncertainty.

This is in light of exMaybank's chief & Menteri Di Jabatan Perdana Menteri, Datuk Seri Abdul Wahid Oma's take on Malays r not been given chance on the private sector.

It's insightful

Anonymous,  2 October 2013 at 22:04  

Yaay ! DAP is heading towards taking care of Malays, Chinese, Indians and Orangaslis better than the past and present BN component parties.

After reading the Rocket, Oct 2013 issue, it is certainly in the right direction that MP Serdang Dr. Ong Kian Ming hears well, emphatises, analyzes, does solid reflections about the cicumstances and issues the youth in his constituiency are facing which he tackles with solutions by introducing the DAP Education Sponsorship Program. The selection criteria are absolutely fair and right - five or more distinctions in SPM and the household income less than RM 6,000 a month.

The empowerment program will equip the youth with quality employable industrial training which in turn will break the vicious cycle of poverty, unemployment and eliminate the selling pirated dvds and dubious goods. More importantly, it will create employment, increase tax contribution, more skilled workforce, and doing good forward. He and Seri Kembangan Adun, Ean Yong certainly are intelligent, sincere, exceptionally committed leaders who actively relate to the hearts and mind of the rakyat. And not being the norm MPs.

My young niece and nephews of Melayu and Msian Chinese parentage are hugely impressed by Dr. Ong's sincere kindness, recognition and encouragement for their young intelligence and pleasantness before they left for abroad years back.

Definitely I will keep them informed about DAP, Dr. Ong, and his team- mates’ latest program and fellow mindful MPs of PK regularly from my base in the southern continent. How and what is PK doing intensively and collectively with my favorite MB of Selangor for the Rakyat lately ?

Anonymous,  2 October 2013 at 22:08  


With many sincere senior and young leaders in DAP : Yang Berkhidmat Dato Sak ; Hannah quoted she was sad that some of the PK coalition partners’ prominent candidates such as Dr. Dzulkifli Ahmad, Saifuddin Nasution and Mohamad Sabu; and the whole team leading the Impian Sarawak campaign, Karpal Singh’s young lions, Charles Santiago MP for Klang, Zairil Khir Johari, MP for Bukit Bendera, DAP in PK will have to be doubly vigilant insieving out new suspicious members who act as sabotaguers.

This ongoing exercise will ensure DAP’s logistics, intelligence, far- sigtedness, better unity, time, limited finance resources, support and synergy are not politically dyfunctioned, however, in many big ways, DAP is heading towards taking care of Malays, Chinese, Indians and Orangaslis better than the past and present BN component parties. More pics and visual shots need to involve multiracial aduns, MPs and volunteers from colleges, universities and the private company donors doing things, BETTER together in renewed commitment as muhibbah multi-ethnic communities as a nation.

On a different note, DAP and the Chinese education groups must take a few steps further to educate the small percentage of Chinese in their media that it is necessary to have a change of mindset, be broad - minded to welcome and engage with Malaysian Chinese who are English educated, have inter-racial married ( Malay, Indian / Mat Salleh ), having studied and worked abroad, they may not speak Chinese dialects or speak any dialect as well as they wish to anymore, so please do not brand them as “ lan si … speak English !! ”( isn’t it a form of prejudice ? ) when they come back to homecountry, all they ( the mindful ones ) want is to support hawkers’ or entrepeneurs’ trades in challenging times as now, so why not treat it as an opportunity to learn English conversation for free.

This dilemma also applies to sesetengah Melayu kita yg dlm situasi yg sama, especially the children whose young parents have studied and worked abroad for years, so the acceptance and warmth is crucial, otherwise the extended family relationship loses touch over time. Siapa yang rugi , siapa yg tak rugi, atau sama- sama mendapat manfaat hidup dlm harmoni.

global citizen, homecountry Malaysia

Donplaypuks® 3 October 2013 at 00:32  

Even Obama does not have a $14 billion budget. In fact, given the USA government shut down, Obama has zero busget!

Most of the $14 billion is wasted on Pemandu, Con-sultans after Con-sultans, 1Apco Israel, 1Brim, salaries of backdoor failed politicians, Endless Possibilities of bankruptcy and other Goondoos. Not to mention $300 million to Permata to clone Einsteins!

Shut down PMO and we will not need GST!!

we are all of 1 Race, the Human Race

ordinary malaysian 7 October 2013 at 07:17  

Datuk, you are wrong in at least one area. The POM should not cut its annual budget by half if it has been spending 14 billion Ringgit annually! It should spend no more than even 40 million a year! What is this - is the POM running a standing army?!

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