Saturday, May 29, 2010

Malaysia Could Go Bankrupt By 2019

Saturday, May 29, 2010

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.
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