Minister in the Prime Minister’s Department Datuk Seri Idris Jala dropped a bombshell when he said that if the government didn’t cut back on its heavy subsidies immediately, Malaysia could go bust by as soon as 2019.
Relating to what has happened to the Greek economy which accumulated well over RM 1 trillion worth of debt recently, he said that at the current rate of 12% a year, the government would accumulate RM 1158 billion worth of debt by the year 2019, enough to take us into bankruptcy, Greece-esque.
Now, that’s something to ponder on. We Malaysians are surely going to feel the pinch as a result of this. However, is this step necessary? Many of us have that question in our mind. I’m afraid the government thinks so.
Their point of argument is that Malaysia offers the lowest rate for the sale of many subsidised goods in the Asean region. Take, for example, sugar. For every one kg, the price is RM1.65 here as compared to RM2.41 in Thailand, RM2.62 in Indonesia, RM3.15 in Singapore and RM3.78 in the Philippines.
I think the people are not really worried about the subsidies of goods such as flour, sugar and cooking oil among others. What they are really worried about is the fuel subsidy. Everybody is apprehensive over what the government is going to do about it, as a new subsidy structure for petrol, diesel and LPG is in the pipelines.
How bad is the situation?
But really, is the situation so bad that with the current rate of subsidy our economy could go bankrupt by 2019? Or is the government try to play mind games? We can never be sure, but it is best to play it safe. The government could have very likely exaggerated the figures there, but maybe this is a sign that it’s about time to do something about the heavy rate of subsidies dished out by the government.
Who is affected the most?
If the government were to slash all sorts of subsidies across the board ranging from sugar to petrol, those from the hardcore poor category will suffer the most, followed by the poor and the middle-class earning people. The rich and more-than-rich folks by my reckoning will weather through this storm unharmed, which is unfair I feel.
What can be done?
Therefore, with different classes of people who earn differing incomes making up the population of this country, the government must come up with a subsidy plan that burdens the hardcore poor the least and burdens the more-than-rich the most.
What I am saying here is that different subsidy structures should be implemented. To put it to perspective, the present fuel subsidy rates should be continued for those earning below RM2k per month, decreased by 5% for those earning between RM2k-RM5k, decreased a further 10% for those who earn between RM5k-RM10k and for those earning more than RM10k, the cutback rate should be 15%.
That would be a fair solution as it would benefit those in need the most. Of course, to implement these sort of subsidy structures need a whole lot of planning to be done. Having different prices say, for sugar, would be a headache for those in the supermarkets as they will have to have different rates for different people. And then there will be cases of cheating.
But hey, whatever it is, it’s the responsibility of the government to crack their heads and find a solution that plays to the needs of all. After all, that’s why we voted them into the office, isn’t it?
How do you find the news that Malaysia could go bankrupt by 2019? And how do you reckon the government could try to cut back on its subsidies so that we don't go bust? Feel free to share your thoughts by leaving a comment below.
How do you find the news that Malaysia could go bankrupt by 2019? And how do you reckon the government could try to cut back on its subsidies so that we don't go bust? Feel free to share your thoughts by leaving a comment below.
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Aziza Aini · 774 weeks ago
But still, the hardwork and risk the government will be taking when they opt to use your idea is tremendous. and so, would they do it?
and of course, cheating is and will always be inevitable!
Ryan Lim · 774 weeks ago
We have no idea whatsoever about how the country is owing a huge debt. Shouldn't we be informed on the details of the problem before been told of the proposed solutions?
I have the feeling that the debt did not arise due to subsidies but rather due to unnecessary spendings, corruptions and unfair awards of projects with inflated costs.
Back to the subsidies, I feel that the government is aware of the multi tier subsidy structures but reluctant to implement them.
As for food and medical subsidies, I am of the opinion that they should not be cut down or remove totally.
There are other subsidies which are of lesser importance that can be done without. Such as those given to privatized corporations which are making hefty profits year after year.
Corporate tax could also be restructured into multi tiers to increase revenue.
Petrol subsidy will be the most relevant because it will affect almost everything. I would propose that vehicle owners be compensated like a couple of years ago but this time has to be multi tiers too.
Perhaps the government can also consider collecting higher stamp duty for shares/stocks transactions and increase in Real Property Gains Tax as these are the trades of the well-to-do.
Conclusively, the government should generate more revenue (more from the rich, lower for the middle income level, none from the poor) instead of trying to save by reducing subsidies.
Shirleen · 774 weeks ago
azrinaziz 28p · 773 weeks ago
1milliondollarblog · 773 weeks ago
I agree with the suggestion to remove the subsidies entirely. Or course it will effect the inflation rate in the country but government should force for fair salary increment throughout all sectors. FAIR means that it should be adjusted according to inflation rate.
Ryan Lim · 773 weeks ago
I do not disagree with the withdrawal of the subsidies but help has to be extended out to the underprivileged.
As for the "forced salary raise", let's look at it this way.
With inflation rate increasing extensively due to the removal of subsidies, many corporations big and small alike are going to have difficulties to survive and to force them to pay more for labor will definitely push them nearer to the fate of winding up.
As for the government, to increase salary of 1.2 million civil servants is also costing a substantial amount.
What about those self-employed such as farmers and hawkers? They have to resort to increase the price of their produce/products which will reduce their sales quantity and profits if there is any left.
I would like to propose a couple of simple multi-tier samples for your comments.
1) Fuel Subsidy
Remove the fuel subsidy and let's say the price of a liter of RON95 will sell at RM2.82. Well, the government can compensate/subsidized in the form of rebate. Rebate will be given at different rate for different groups of rakyat (multi tiered) by the types/capacity of the vehicles they own ( e.g. RM0 for cars with capacity above 2000cc / RM300 for cars with capacity between 1300cc to 2000cc / RM600 for cars below 1300cc ) . To minimize abuse, rebate can be in the mode of a "prepaid petrol card" issued upon payment of road tax.
2) Food Items Subsidy
Remove the subsidies and compensate the rakyat in the following manner which can serves two purposes.
The government can formed a Trust Fund and distribute the the units to the rakyat according to their income levels (thus multi-tiered), e.g. based on the income tax payable to JHDN say 0 unit for those with tax payable above RM2000 / 200 units for those with tax payable between RM1000 to RM2000 / 300 units for those with tax payable below RM1000 / 500 units for those non-taxable. Use MyCard to identify/group these people.
Besides, cushioning the impact of the withdrawn subsidies, these trust fund units given to the rakyat will serve another purpose of eradicating poverty in the country.
In this computer era, abuse at the source can be easily checked. Abuse at the receiving end will not affect the government coffer and the abusers are only digging their own graves.
Please note that all figures used are not calculated and used for illustrations only.
Hope you can give us some ideas/suggestions too. Who knows we may be able to present it the lawmakers.
JaveedRM25 2p · 598 weeks ago