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July 24, 2010

Subsidies:“the time has come”

Filed under: Public Issues — Pengayau @ 6:00 am
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Subsidies : “the time has come”

By Syed Akbar Ali

Dato Seri Idris Jala was kind and brave enough to meet the Bloggers on Wednesday June 2nd for over three hours. I say brave because some other Ministers are shying away from talking to the Bloggers. I cant blame them because the Bloggers frequently serve piping hot stuff about their Ministries.

The session with Dato Idris was quite blunt – the Minister held up quite well but the Bloggers did prevail on a few points.

The first thing Idris clarified was his statement that the Government would go bankrupt in 2019 IF it continued borrowing as it has over the past 10 years (12% per annum) and if the GDP also grew at the historical 10 year rate (3% – 4%). And ceteris paribus meaning everything else remaining unchanged. This is a basic ‘economists’ assumption.

The GDP is now at RM600 billion. The Government debt is about half that amount. Growing the debt at 12% per annum would take the Government debt to over RM1.0 trillion by 2019. But growing the GDP by say 3% or 4% may not match the Government debt by 2019.

The danger that Idris is pointing out is that when a Government’s debt exceeds the GDP of the country’s economy, then the taxes generated by a GDP of that size will not be able to pay the interest on the Government debt which exceeds the GDP.

Say you earn RM5000 a month, but you borrow RM8000 a month. You will be in trouble. Firstly you may not even be able to pay the interest on the RM8000 a month debt. Then most certainly you will not be able to pay the principle amount of your debt.

This is what Idris was trying to point out. The problem is that the Government (despite the presence of PR specialists at the briefing by Idris) has a very poor communications team.

Even Ministers have problem understanding other Ministers. Adek Awang – another one of those Deputy Ministers who is shy of meeting Bloggers – made a statement that the Government will not go bankrupt despite what Idris Jala had said.

“KOTA BAHARU: Malaysia will not go bankrupt in 2019 even if a subsidy totalling RM74bil a year is continued, said Deputy Finance Minister, Senator Datuk Dr Awang Adek Hussein.”

I think here Dato Seri Idris Jala is suffering an over reliance on his consultants. He has to touch base with his fellow Cabinet members first.

There is much rational for removing the subsidies, which according to Idris totals RM74 Billion a year. This figure is also disputed. Some folks say that a more realistic figure is closer to RM30.0 billion a year. But Idris’ main concern is that the Government needs to save its neck because there is not enough money available to the Government to pay for everything.

My view is that we should try to remove all subsidies because they distort the market and make us blind to the real cost of just existing in this world. The distortion created by lifelong subsidies will eventually come home to roost on us all. Firstly they create non competitve behaviour. Subsidies are a ‘silent killer’ like diabetes because until generations pass, we will not know how much initiative and competitive behaviour has been killed off by access to easy subsidies.

But how you remove the subsidies, after over 40 years of their implementation is very important. We cannot have the ‘cold turkey’ treatment. Yet we do need a deliberate but well planned exit mechanism.Read more here

Pengayau comment

Its not that we dont understans the Goverment position with the current economic downturn but this BN Government had somehow WASTE those money for unnecessary spending!!!

Planning to built a new Parliament Building with the cost of 800 Million and yet they can renovate it with only 150 Million.Waste of Public Funds to Corruption such as the PKFZ scandal.To spend hundreds of millions for F1 Team 1Malaysia and many2 more!!Read the Auditor General Report!!

When it comes to this situation,the Governmet would ask the Rakyat to change their lifestyle and spending!!Well,im ok with that but how much Rakyats can spends and change?

How much the Government has WASTED???

Who should change in spending actually?The Rakyats or the Government??

Why always put the burden on the Rakyat while the Government can save a lots more on their spending at the first place?

Bear in mind that this reduction of subsidy is in stages,meaning to say that it will reduced the subsidy from time to time

But then again,the Government has failed to control and monitor those controlled items such as Sugar.

Just a simple question,why non of our past and present Leaders has never ever has the guts to request for an increase for our Oil Royalty?Bear in mind,that 5% is 34 years ago but now it is not relevant.
On Government spendings,like i said,look at PKFZ Scandal,look at Auditor General Reports.It is there ,the wastages is there.By reducing the subsidy is some sort of damage control but then again,the damage could be avoided by spending the money wisely.Correct3x say Linggam,Betul3x say Upin&Ipin

But then again,it goes down to Political Will.Once again,PKFZ Scandal,who denied it?60% of Federal Fund which has kenak Tapau by some Contractors in Sarawak,who denied it?Komisen 500 Million for Perimekar Sdn Bhd for Scorpene Submarine(KD Atlantuya and KD Razak Baginda),who denied it?New Parliament Building(Cadangan) to cost 800 Million,who denied it?The scrapped bridge to Singapore,who denied it?

And the Mother of all Corruption,Taib Foreign Properties,who denied it?This is all Wastages and Leakages

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