OCT 3 — The huge amount of subsidies in the Budget 2013 has triggered a question over the effectiveness of the existing subsidy system. The rich and corporations have benefited the most from it, rather than the poor.
The day after the Budget was tabled, sugar refineries have notified
retailers to raise sugar prices by 20 sen. The move to slash prices is
always slow but when it comes to raising prices, it is lighting fast.
Would subsidising necessities benefit the people, or business operators?
It was rumoured that some industrial operators have taken advantage
of legal loopholes to buy large quantities of diesel from petrol
stations, causing shortages in Johor, Malacca and Perak. Subsidised
diesel and petrol have been smuggled and abused. Rich people with big
cars can enjoy more subsidised fuel compared to the poor with small
cars. Many sport utility vehicle and four-wheel-drive cars are also
The government will allocate RM386 million to introduce the price
uniformity programme and ensure the prices of essential goods in Sabah,
Sarawak and Labuan are sold at lower prices through the opening of 57
Kedai Rakyat 1Malaysia (KR1M).
Domestic Trade, Co-operatives and Consumerism Deputy Ministry Datuk
Tan Lian Hoe pointed out that the government might provide subsidies to
shipping companies. Why don’t they just repeal the cabotage shipping
policy to directly ship goods to Sabah, Sarawak and Labuan without going
through Port Klang?
In addition, Energy, Green Technology and Water Minister Datuk Seri
Peter Chin Fah Kui said that with the rising international fuel prices,
including coal and natural gas prices, tariff adjustments will be an
inevitable trend in the future.
The government gives many subsidies to independent power plant
operators to maintain “cheap electricity tariffs”. However, the tariffs
will still have to be adjusted eventually. The rich and the poor have to
pay the same tariff rates. The poor might not afford even an air
conditioner but the rich might have installed a dozen of air
conditioners. The subsidies have eventually given to the rich.
From 2010 to July 2011, the government had allocated RM36.7 billion
under the National Key Results Areas (NKRAs) for various subsidies and
assistance, including the establishment of the KRIM, the Menu Rakyat 1
Malaysia and the 1 Malaysia klinik. However, these benefits can also be
enjoyed by the rich.
The government also provides subsidies to other companies. According
to Proton’s financial report as of March 31, 2011, it had received RM175
million of R&D incentives. The government has not studied whether
these kinds of subsidies are effective or not, as well as to what degree
the people can enjoy the benefits.
Since there are many loopholes in the existing subsidy system, the
prime minister said when delivering his Budget speech that the
government will change the bulk subsidies into targeted subsidies.
I believe that the government will implement the subsidy
rationalisation programme and goods and services tax (GST) after the
general election to cut subsidies and increase tax revenues, and use the
money to assist the poor and disabilities. The assistance for these
targeted groups will be increased to help them cope with the increasing
cost of living.
The minimum wage policy is meant for the same target. However,
raising salaries while prices are rising will eventually raise
commercial and industrial costs, causing the final products to lose
their competitiveness in the international market.
Moreover, strengthening the people’s assistance scheme might lead the
country towards the European welfare state system, which could turn the
country into a lazy state.
Malaysia should learn from Hong Kong and Singapore to first manage
well the national finance and return the fiscal surplus to the people. A
set of fair social policies is also essential to help the poor buy a
house and solve education problems.
The existing subsidy system has failed to lead the poor out of
poverty while the resources have flown into the pockets of the rich.
Subsidies are easily misused or abused and it is now the time to change
the course. — mysinchew.com
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