I attended a round table talk on subsidy yesterday. Although most speakers spoke about the need to do away with the cost of living subsidy, like the subsidy for sugar, petrol and so on, what a young man said about being cynical impressed me most.
This young man began by saying that even though all the speakers spoke about the need to do away with subsidy, he was against the idea because being a cynical person, he doubted whether the money saved from abolishing the subsidy (direct and indirect subsidy comes to about 80 billionRM a year), will go to development and helping the poor. He said that being cynical, he thinks that this huge amount of money will go to someone else’s pockets and if so, why should he give up his right to subsidy?
His reason is based on one point only, and that is the whole system is rotten. I thought about it and I think he has a very valid point.
With the rotten system and everyone out to make a fast buck, whatever mechanism of doing away with the subsidy and using the amount saved to channel to development and helping the poor would just not work . Remember that time when the pump price of petrol went up to 2.70 from 1.92? The government promised to use the savings to channel into public transport and make it more efficient. Did we see any money going into the intended sector? A big No of course.
I can’t help but think that if the money saved from abolishing subsidy (the 80 billions) goes into private pockets and results in a few more PKFZ, even though I am all for abolishing subsidy gradually ( with safety nets in place such as cash coupons and cash cards to be given to the poor) , I would want to change my mind and go along with the thinking of this young man.
After all, if you have lived in Malaysia for the past 20 years, you can’t help but become cynical.
Dr. Hsu's forum 
Feb 03, 2010 @ 13:50:57
The thoughts have gone through my mind as well. If the money is not going to be accounted for, then better to enjoy it amongst the people.
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Feb 03, 2010 @ 14:31:44
The same thing was said when Badawi raised the toll rates. The money saved from compensating the toll operators will be used to improve roads ,public transportation blah blah blah. I use the LDP highway which increased 60% from RM1 to RM1.60. Today the congestion at the toll booth is worse than two years ago. The congestion actually stretches as far back as Tesco today.
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Feb 03, 2010 @ 14:54:58
BN did make public transport more efficient I guess, instead of Mercedes for each child, now they change to Alphard and Elgrand for everyone in their own family.
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Feb 03, 2010 @ 16:10:42
Steps to cut down expenses instead :
Trim down the bloated civil service personnel
Reduce bureaucracy in delivery system
Abolish negotiated tender system, open it up
Sack the minister in charge and put him in jail when his ministry is proven to be involved in foul play based on AG’s report.
Initiate a thorough investigation on all the ex and current ministers and deputies to ascertain their source of wealth.
It seems naive but it will work well. But need to wait for a new govt lah.
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Feb 03, 2010 @ 16:48:14
My feeling precisely. I am not willing to give up the subsidies. I rather have it in my pocket than in someone’s pocket. I do see it as govt rebate and not subsidy. Yes to subsidy.
Try taking it away and see how I will vote.
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Feb 03, 2010 @ 18:07:08
Malaysianmirror.com
The Valley of Driving Hell article
Subsidies to improve public transport, to ease congestion, to improve road conditions>>>>???????
You all have been conned.
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Feb 04, 2010 @ 11:15:30
In this nation when those in power think that special priviledge means that they can take what they want via many proxies companies (RM 2 type etc.) we are spiralling down to a failed state faster than we can imagine.
Even before we can fully recover from the world economic crises, news of super duper buildings of over 100 storey had hit us. Creating structures for name sake boasting to the whole world that we are a capable nation when the poors are getting poorer in view of inflation. If the poor people of any nations can’t feel that they are being taken care by the govt of the day, that govt has failed them. What would it benefit a man if he has the whole world but lost his soul for eternity ?
When the entire system is rotten, naturally its downline will be similarly affected. Can’t agree with you in being cynical as we have had be conned too many times already.
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Feb 04, 2010 @ 11:29:49
He is not the first to think this way, Dr Hsu.
If the money saved is going into some dirty pockets, might as well continue with the subsidy so all of us can enjoy.
Until corruption in the gahmen and political parties are curbed, I want my subsidy for everything from sugar to petrol to cement to tolled roads. And if they don’t mind, please subsidise my Sony PlayStation 3 & Nikon lenses too.
And also lets not forget the crazy amount of tax we pay to buy a car (even if local ones).
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Feb 04, 2010 @ 14:15:42
Dear Dr Hsu,
Very good, thank you very much for sharing this coming out from the meeting to discuss the Petrol Subsidy issue.
It is very hard for me to find a malaysian youth age below 30 not similarly cynical as that young man nowaday and it is across the entire society in malaysia, Chinese youth, indian youth as well as malay youth.
I cannot blame them because after all the governmwnt mismanagement, corruption, security, PKFZ, TBH, Allah, sodomy II, jet engine, attantuya, Perak power grap, etc etc issues unfolding right infront of them everyday non-stop over the mainstream media.
Very very few youth believe in BN government anymore! The BN still have a chance come next GE? and what will Gerakan do to stay afloat?
spot red
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Feb 05, 2010 @ 07:25:06
It is a fact that the lowest income wage earners in Malaysia cannot survive solely on their incomes. Therein lies the need and reason for subsidies. Unfortunately, besides leakages and losses due to smuggling and other criminal activities, the higher income earners and the wealthy actually end up as unintended but legal beneficiaries who benefit more than the targeted low income group because being affluent they use more subsidised petrol and consume more subsidised food items.
I don’t know where the subsidy figure of RM80 billion per year mentioned in this article came from. The last time I read that it was about RM40 billion per year. Assuming that RM80 billion is correct, and based on about 6 million Malaysian households (extrapolated from Statistics Department figures) this means that the subsidy for every Malaysian household per year is RM13,333 (80,000,000,000/6,000,000). Based on the more conservative and realistic figure of RM40 billion, the subsidy per household is RM6,666 (40,000,000,000/6,000,000). Either way the level of subsidy per household is ridiculous, especially when we consider the fact that most of the subsidy actually go to the rich and higher income group.
If this entire subsidy nonsense is scrapped and replaced by a direct subsidy system the government can actually save ten of billions per year besides ensuring that the subsidy actually goes to those that need it.
Let’s assume that the government pays a direct subsidy to the bottom 20% of the households, based on the lowest total household income. 20% of 6 million households is 1.2 million households.
Let’s assume also that the subsidy per household should be not more than RM10,000 per year, with the actual subsidy for each particular household to be based on it’s total gross income. Again assume that the average subsidy per household works out to be RM5,000.
The total subsidy that the government need to spend per year will be RM6 billion or RM6,000,000,000 (1,200,000 x 5,000). RM6 billion may be a big amount of money but is still a fraction of RM40 billion which the government claims to be spending at present. More importantly, this money will go to the targeted beneficiaries instead of to unintended beneficiaries.
No doubt there will be fraudulent claims but even if such claims amount to hundreds of millions, it is still a lot less than the billions being lost under the present system of subsidies. In any case the perpetrators of fraudulent claims will be subject to criminal prosecution if caught whereas under the present system of price subsidy billions are going legally to unintended beneficiaries besides more billions lost to smugglers and other criminal activities.
The only serious setback I can think of for such a system is that the present BN government may make race, religion and political party affiliation as qualifying requirements.
Finally, to those who cannot help being cynical, please try harder. Otherwise change will never come.
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Feb 05, 2010 @ 10:05:07
ong
The figure of 80 billion was given at the round table talk attended by deputy minister of domestic trade , Navaratnam , Dr Oh (PM’s political sec) and so on.
It includes the indirect subsidy and perhaps that is why it is higher than most estimates.
I mentioned at the talk that my figure is around 50 billion, but since the official figure is 80 billion, i used it in the above article.
My input at the above round table talk was that subsidy should be scraped in stages, and part of the amount saved be channelled to the poor by a system of cash card and others to development including the public transport sector, , something like what you have mentioned. And that was when the young man i mentioned voiced out his objection and said that he would not want to give up his subsidy right since any new mechanism would result in more leakages and wastages, and very little will actually reach the poor.
Subsidy distorts the markets and the economy and comes with a huge economic cost , as seen in the case of our country. Subsidy also benefits those who need the subsidy least, that is the rich , as you have rightly pointed out.
That is why most economists and planners would like subsidy to be done away, and instead institute some forms of direct assistance to the poor.
But given that the system is so rotten and any projects and any mechanism designed by officials are so full of leakages and wastages, direct assistance would also be skewed to help those with connections and those who belong to a certain groupings only, as being pointed out by this young man.
So to do away with subsidy, we should perhaps seriously think of doing away with this rotten system first.
Last but not least, thanks for an insightful comment . 🙂
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Feb 05, 2010 @ 10:53:57
Until the time whereby the corrupt systems are completely overhaul, we will continue dreaming and be cynical. There is still some hope left as the enlightened Malays are slowly but surely rising up to take back this nation from those corrupt ones.
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Feb 05, 2010 @ 11:49:12
While you guys are talking about subsidy, the subsidy is keep burning away on the road due to ever increase in vehicle population, traffic jam becoming from bad to worst, etc, etc.
Improvement in public transportation, especially in Klang Valley, Penang, Johor Bahru and other major towns is a must to address this subsidy issue as I believe petrol subsidy form an significant part of total subsidy of RM80 billion.
Don’t look too far, just concentrate in public transportion.
Another one is the one-sided agreement with the IPPs. These must be addressed.
Meanwhile, don’t put any hope in Umno / BN, they can’t do the job. Malaysia only hope is still with PR, even if Anwar goes to prison.
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Feb 05, 2010 @ 12:24:03
Dr. Hsu,
Thanks for clarification. It appears that the total government subsidy varies when figures are supplied by different officers or ministers. Even the same officer gives different figures at different times and at different forums. My impression is that they pluck figures from the air like a magician.
Anyway assuming that the figure of RM80 billion is correct, this is equivalent to a subsidy of RM13,333 (80,000,000,000/6,000,000) for every Malaysian household per year. Does the BN government realise that if the present subsidy system is scrapped and the entire RM80 billion saved is used to pay a direct grant to say 3 million households (the lower-income half of the total 6 million households), then this RM80 billion translates to RM26,666 per household per year?
I am 101% sure that if half of all Malaysian households gets an annual grant of RM26,666 per year, then the BN government will win the next general elections easily without having to put Anwar Ibrahim in jail on disgraceful trumped up sodomy charges.
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Feb 05, 2010 @ 12:54:02
Ong,
Wonderful idea, but they don’t do it for sure.
Hope is still with PR. Can’t help being cynical… Unless they can perform like ‘Susan Boyle’, I learned the word ‘cynical’ there ….. poor in English vocabulary due to the system of our education…. What to do?
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Feb 05, 2010 @ 13:47:25
” So to do away with subsidy, we should perhaps seriously think of doing away with this rotten system first.”
I will the first to disagree with full foulness if the subsidy is done away now. I insist on the subsidy come what may to the country. I just dont care now.
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