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Sakmongkol ak 47

Tuesday 8 June 2010

A tale of two subsidies


In scent of a woman, Lt. Col. Frank Slade's played by Al Pacino favourite phrase is: Whoo-ah.
Right now, I feel like saying the same: whoo-ah! That is in response to Idris Jala being needled by his own administration about the amount of subsidies the government has been paying. It's the left hand doesn't know what the right hand is doing. By the way, that is a common phrase used in Shell.
So like colonel Slade said- when in doubt, fuck! Idris Jala fucked big time. He didn't know to differentiate transfer payments from subsidies. That's an insult to all people trained by Shell. Did Shell get the right candidate in the first place or was Jala a beneficiary of Sarawak Bumiputera's Bumiputera policy? Just get a passable guy to fill in.
My blogger friend Wenger J Khairy makes a better minister than Jala. This was what he said in a comment posted in my first article about subsidy.
So in truth - the direct subsidy is perhaps at the most RM 10 BILLION but that too is shared with the IPPs whom is the brain child of that the worst PM in history of mankind.

And to defray the cost, the Government collects Petroleum Income tax. I am not sure whether this is a pure Petronas account or a combination.

So bottom line - subsidy at the most inflated level is RM 10 billion, not RM 70 billion.


My friend's estimate of the actual subsidy was closer to the figure than Idris Jala. So when he says, the government needs about RM383 billion to take over all the 23 toll concessionaires, you must be wondering where he got the figure from.

In a briefing for the BN Backbenchers Club (BNBBC), Treasury officers said the country's total subsidy bill was only RM18.6 billion, and not RM74 billion as stated by Idris, for 2009.
What did Idris say? He said the country's total subsidy was RM74 billion, which is equivalent to RM12,900 per household. Many of m commentators ridiculed Jala for this figure. He is better off jamming his guitar in his sound-proof room in Kota Damansara.
What did the government use the subsidy cited by Jala for? Jala said the government subsidises RM23.5 billion for fuel, RM4.6 billion for infrastructure, RM3.1 billion for food and RM41.8 billion for social welfare (health, education and higher education).
But the Finance Ministry said today the country's total subsidy was RM18.6 billion or equivalent to RM3,246 per household. It said that RM7.1 billion was spent for fuel, RM0.8 billion for infrastructure, RM2.9 billion for food and RM7.8 billion for social welfare.
So folks, there we have it- it's the tale of two subsidies.


Anonymous,  8 June 2010 at 22:09  

whats the fuss all about?

diversion tactics again. while you argue about semantics on subsidies, another RM30b sweetheart deal for Gamuda/MMC. and who are the shareholders? beautiful man. UMNO/MCA/MIC! after the gala Fleece Trade Zone, now a more gigantic train of fleas and fleece. Darn, I should have join the gravy train of politics.

Donplaypuks® 8 June 2010 at 22:18  


The only conclusion we can come to is that the Govt of the Rosemajibs is in complete and total disarray!!

The left hand of Govt does not seem to know what the right hand is doing. In one day we have two boo boos from the Govt involving the Mof - the Vincent Tan betting licence issue and now this $18.6 billion subsidy vs Idris Jala's $74 billion!!

Whatever MOF and Rosemajibs said today, do remember that they first defended the betting licence as an effort to rein in illegal gambling. Whatever they say from now on, if it results in a 'tarik balik' of the betting licence approval/award, it will be CYA (Cover Your Ass) tactics to save Rosemajib's pink-lipped round face and ass!!

What is imperative now is the MoF and Govt come clean and tell us exactly what the numbers are and how they have accounted for it in the Govt's budget vis-a-vis:
1. Tollco subsidy
2. IPP subsidy
3. Waterco subsidy
4. Petrol subsidy
5. Gas subsidy
6. Infra subsidy (to whom?)
7. Rice subsidy
8. Sugar Subsidy
9. Flour subsidy
10. Education subsidy
11. Health subsidy
12. Social Welfare subsidy (detailed breakdown)
13. Any other subsidy they have hidden in the budget under 'Development Expenditure' or 'Miscellaneous Expenditure' and haven't told us about yet!!

A case for an RCI? I damn well think so, since we can't seem to get the truth from MOF or Govt and certainly not the tight-lipped and tight-assed Rosemajibs!!

we are all of 1 race, the Human Race

Donplaypuks® 8 June 2010 at 22:25  

One quick question: Where exactly is the $13.5 billion paid to IPP's?

I suspect it's in Tenaga's accounts and so it may be that MOF does not consider that as Govt subsidy since it's all borne by Tenaga!!

Similarly Jala's higher figure for fuel may include gas subsidies to IPP reflected in Petronas' accounts. I don't really know; I'm guessing.

we are all of 1 race, the Human Race

Anonymous,  8 June 2010 at 23:41  

Treasury kata social welfare is a subsidy.."RM7.8 billion for social welfare"..

And fuel subsidy only 7.1 billion?>>ini sudah joking sebab Tenaga dah nak naik kan tarif by 6.4 sen,petrol sampai 2.60>>kalau kita kira2 tuh pun gomen dapat 12 billion.Mati lah kita..Subsidy 7 billion..govt nak wallop 12 billion.

Welfare bukan subsidy..itu tanggung jawab gomen.Kalau potong gaji Ministers,jangan pergi jalan2 luar negeri,jangan ada escort2 bodyguard berpuluh,jangan makan di hotel 5 bintang >>baru lah boleh potong welfare orang miskin.Ini kamu semua mau hidup macam orang kaya..guna duit rakyat..tapi orang miskin kamu kata subsidi welfare .I think kamu yang lagi banyak makan subsidi.

Kita ada big problem lah.Semua tak boilh percaya.Hisham kata judi sudah pass PM kata belum.Idris kata subsidi 74 billion MOF kata 18 billion.Lagi mau bagi kontrek billion2..ada Swiss Bank lagi.

Jangan main2 lah.Ini masa depan kita.

Anak Pahang

Anonymous,  8 June 2010 at 23:50  

Ha,ha,ha ... Jala blundered big time in MAS BTP, now blundered again in Govt GTP and yet being highly paid (100K pm) by the Govt.

Not bad for someone who failed economics!


Anonymous,  8 June 2010 at 23:53  

There's too much "misinformation"..latest of all being the judi license.Hisham says its on..but PM say its not.

Meanwhile,Bursa says its ok..BJCorp didn't give misleading info.Announcement was pretty clear about some form of judi license being awarded..

So,the punters who chased BJCorp to RM 1.70 were not misled?

But why Bursa so quick on its feet for a change?I would say the CEO have to go for pre empting proper channels ..

Anonymous,  8 June 2010 at 23:59  

Why people think Jala did a good turnaround at MAS?Look at the numbers..financially he actually lost more money then anyone else.Operationally,company has shed all assets and routes.Capacity no wow except a lot of people happy to see him go.

Maybe he thot that the "shock and awe" tactic can work for this subsidy thing.Well..he himself got the shocker.

Rule No 1 : Define your terminology.

alan hiley 9 June 2010 at 00:52  

Pak Sak, I believe in you affirming wenger's subsidy figure of RM10 billion max, you screwed up big time....

Frank,  9 June 2010 at 01:16  

Dato Sak

Whether it is 74 billion or 18 billion. It is still subsidy and that is a lot of money for a small nation of close to 28 million. A nation whose agriculture is depended on plantation sector and a fast finishing petroleum resource.

It should be wake up call for all taxpayers by Jala. And he did the right thing of raising the subsidy issue, and it does not matter if the numbers don't match. They are all estimates anyway. Billion dollar subsidy is still 1 RM too much.

Say what we like, he worked in the private sector in responsible position in Shell longer those bureaucrats in the public service.

Habib RAK 9 June 2010 at 01:19  

Forget about legal teminology called Bankrupt. At the end of day, when you spend a lot more than you earn, you will be in serious trouble. All of you agree to this - right? There is every reason to believe what Idris Jala had said about the Malaysian Government's total debt. The Malaysian Government is clearly on course to get into very serious money trouble. Idris Jala presented the actual debt at year end from 1997 to 2009 (12years). Consistently it has grown, each year, at an average of over 12% per year. Since for the past 12 years, the current Government had led it grow, do you think they are going to change their ways overnight? No way!! In fact, at year end 2008 and 2009 it had grown 14.6% and 18.3% respectively. What Idris Jala has done is, he projected the future debt growth at the same 12% for the next 10years and said "Bankrupt". If nothing is done to arrest or reverse the trend, he is absolutely right. Lets not get sidetracked by the components. See the whole picture.

Anonymous,  9 June 2010 at 08:07  

Maybe he saw something first hand that we don't see i.e. figures that we pluck from the air and say that they are the actual figures,go figure jeng jeng jeng.

walla 9 June 2010 at 09:18  


In this perspective, what Idris Jala had done was not only brave but responsible, inaccuracies aside. Furthermore, he would not have made the announcement without clear sanction from the top. Therefore those at the top must also have been congruent on his findings and approach. It is a wake-up call.

What is going to happen next? Depending on how they see the arguments by the rakyat against the removal, the government may maintain some of the essentials in the list but phase out the others, of which petrol is the primary candidate.

Which comes to the second part of the main issue. Can the rakyat make more to cover the increase in prices? If almost eighty percent of the workforce have only an SPM, the answer is no. If the industrial and service sectors continue the way they are, the answer is no. If we don't change the way we look at things, accept the stark realities of a globalized world and proceed to do every thing needed to re-align for real success, the answer is no. And if our society continues to bicker and fight for political positions of no consequence to the future of the economy, or fight on all matters racial, for form over substance, the answer will be less than no.

That total debt is not going to be shaved tomorrow. In fact, even if no new debts are added tomorrow, it will still be growing on its own - because costs will go up, population will increase, people will get older, machinery will break down, and markets will become more competitive.

The dilemma which the government will face when it starts removing the consumption subsidies will be the questions it cannot answer from the rakyat:

what is it going to do about its own expenditures, policies and strategies?

how can it help the rakyat to make more money now?

what is the big picture for the future of the country without subsidies but also without their proxy in the form of a ballooning social net that will only serve to show the inefficiency of the whole attempted process at economic rehabilitation?

We may not be a Greece today but the Greece of today is joined by the likes of Spain, Portugal, Italy and Hungary. Those economies are going down. And because they can only be bailed out one by the others in the Eurozone, there will be a domino of cards ready to fall should any one stay unrecovered for too long.

Debts have a bad habit of growing really big when left unattended for too long.

Likewise, us. We say our total debt is internalized. That treasury owes to our EPF and our banks. So it's the right-hand left-hand mirror image problem. Really, no sweat? But have we forgotten the MAS shares and Valuecap fiascos?

It's become rule of law rather than rule by law. Laws are now being used to justify the government taking part in business without the transparency needed upfront that will tell the rakyat whether cronyism will be repeated all over again - but now at a time when reality is going to hit real hard.

In the end, the dilemma of the federal government that started with mahathirism has now become the dilemma of the rakyat for generations to come.

The rakyat are left holding the baby without the means to feed it.

walla 9 June 2010 at 09:18  

Habib and Frank are right. The total debt is too big and it is growing. At the same time the revenue is not growing fast enough. Meanwhile the rakyat are facing inflationary pressures while not having any options to make more.

There is one more subsidy not in the list. It's the effective tax rate for multinationals. Someone has done a calculation that said it was only four percent some years back, one of the lowest in this region. That's the price the country pays to get them to come.

The main issue is this - how has the government been spending your money, and how can the rakyat make more?

Answers to these two questions will pave the road ahead.

Some will answer the government has been spending your money more for socio-economic re-engineering than for pure keynesian effects to prime an open market economy for maximum economic efficiency.

As an example, what kuldeep had written in an earlier thread about cronyism rings true. Too often the private sector will not put in money to do feasibility study of a greenfield project in an emerging economy if it doesn't have a foot in the door for the final contract. Since a government which wants things done fast will want those projects kicked off quickly, there is a quid pro quo on principles, standards and norms.

But what is amiss is that in doing so, other things kick in. Corruption, price inflation, substandard work, and terms which tie down the treasury today and ultimately the rakyat for a long time until the final tab is way beyond what fair competition would have offered.

The government has not addressed this foremost. And this problem has been compounded by affirmative policies that only fuel the continuation of such cronyism besides adding many white elephant and abandoned projects that continue to bleed the economy inasmuch those who have had to be bailed out using your money.

That's where the biggest chunk of the total debt really went, hidden away from the subsidy list.

How the government has been spending your money is one of the two main issues.

When consumption subsidies were given, they were to slow down inflation. Just like the NEP, things were made cheaper and the situation more comfortable than what the real world dictates until people got used to not thinking about real costs of everything.

The price being paid was loss of competitiveness and ballooning debts.

Wenger J Khairy 9 June 2010 at 09:26  

Hi Dato'
Thanks for the mention. It pays to stay informed :-)

Wenger J Khairy 9 June 2010 at 09:30  

Habib Rak,
What Jala said about the debt picture was true. He was lying about the cause - he blamed the subsidies. Dato' and other concerned citizens rightfully condemned this act.

But Jala is "right" (but not accurate) on the eventual implosion if the debt is not reigned in. To do that, Govt has to be more efficient in controlling its costs, not the pittance that it gives to the people.

Frank,  9 June 2010 at 13:06  

Wenger J.Khairy,

I tend to share the view of Walla.

The question for citizens is not whether Jala is accurate or not or whether he is "lying" as you have made a value judgment to his ulterior motive in highlighting the debt and the subsidy. These are arguments are red herrings.

The issue is whether the debt of 74 BILLION or 18 BILLION is tenable to our national economy?

What Jala is warning the country is that we MUST move away from this subsidy mentality pretty quickly, because at this rate, time may not be on our side to stem back an economic implosion already faced by Greece and potentially by the other PIGS countries(Portugal,Ireland, Greece and Spain).

In addition, the debt is certainly too high. Far too high.

Or our subsidies and debt are anchored to a large part on maintaining partisan political interest and support from cronies in the guise of strengthening our national economic base.

As we all know, the US Govt's economic recklessness has led it to spending more than they can earn foreign exchange? Literally, China and Japan are subsidising the lifestyle of the Americans.

Which country or countries do you think will support our subsidised lifestyle at this rate of our debt? China and India? or Indonesia? Taiwan?

Our main earner in the agriculture sector ie plantation subsector has been challenged by Indonesia and Thailand for some years now.

A more relevant point to discuss, in my view, is the quantum of the subsidies that goes to support economic investment or the rate of return to the subsidies.

Welfare programmes are another thing. Surely it cannot fall within the RM 18 Billion .

This Govt must take the bull by the horns... face squarely the political pressures they would want the Govt to retain this high rate of subsidies that do not give a sustainable rate of returns and to return back to the basics about turning the economy around.

In that context, Jala is doing the right thing? Jala took the hard road to make MAS lean and mean and to stop the haemorrhaging. Yes jobs were lost and useless flight sectors were removed. That's the price to pay for the reckless management of MAS in the past.

As Habib RAK rightly said, the govt must stay on the BIG picture, while the hangers-on and cronies want the Govt to stay on the SMALL picture.

Suci Dalam Debu 9 June 2010 at 16:30  


Subsidized me to the tune of 2k plus? My fat a**ed. I paid a lot more in taxes.

Subsidized the UMNO goons, the MIC chiefs, the MCA Taikos, the Rambut putih Gang, so on and so forth.

Rakyat will wake up one day. If you are a descendend of one the PEROMPAKS and you are of legal age, you will have no where to hide your shame.

kuldeep 10 June 2010 at 08:28  


A good doctor ensures that u truly have a heart problem before doing a transplant.

Its no good telling the patient that he has a heart problem and will die in 3 months but most probably can be saved if he does am appendicitis ops.

So,please Mr MOF,Mr Koh,Mr Jala...agree on wats our problem first before giving prescription.

After all Mr Jala didn't do his kerosene forecasting right and Mr Koh didn't see the LGE lorry backing into his residence until its way too late.Not visionaries..both these guys.

Anonymous,  10 June 2010 at 12:14  

Dato AK47

The subsidy issue that is being debated is only looking at the areas of the subsidy and how to cut it out. But some ares are necessary such as education, since this is vital for HR development for economic development. all countries in the world support education and welfare. While i have criticised Jala before, hea has taken the holistic view without making a differentiation on the need for subsidy in some areas.

Two other issues are relevant. One is the national domestic debt whcih has been mentioned by some. If the economy is growing at a fairly stable level above 6%, domestic debt can be manageable. It must be remembered who are the main holders of our domestic debt, that is, EPF, Govt Pension Fund, Banks etc which represent the savings of the rakyat. It has to be placed in a safe investment and sovereign debt is a safe investment. the debt argument has two sides to the coin.

The second issue is the inflation factor. Neither Jala nor the other commentators have raised this since the removal of subsidy means higher prices. This needs to be matched by related national wages policies. Otherwise the people will suffer and our standard of living will drop drastically due the inflationary factor. Already the Ringgit is misaligned with not only the main international currentcies but also with the regional ones. If we do not control infalation, the value of the ringgit will also drop!

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