Idris presses his case on cutting subsidies

Cutting subsidies from essential goods is akin to removing a band-aid - it is painful to pull it out quick and hard.

As such when slashing subsidies, it has to be done slow and gradual - something which Minister in the Prime Minister's Department Idris Jala claimed was the wish of Malaysians.

“Generally in our conversations with the public, they all recognise the need to do away with it. But they say do it slowly lah, don't put in very big increases,” he said in an interview with Malaysiakini in Putrajaya on Thursday.

Appointed as the chief executive officer of the Performance Management and Delivery Unit (Pemandu) one-and-a-half years ago, Idris had gone to the ground with his message on the need for subsidy cuts.

And it was through various methods of communicating with the public which led Pemandu to conclude that Malaysians will eventually see the brighter side of the move, which the government would rather term as 'subsidy rationalisation'.

“We went through SMS, polls, and town hall sessions. There were fundamental comments. They say do it in small doses and stagger it over a long period of time. Essentially that's what we've done...

“We had a subsidy rationalisation roadmap... I think that is conditioning the minds of the people, so they say it's okay,” he said.

According to the proposed price structure for RON95 petrol, which is now the fuel of choice for middle- to lower-class vehicle owners, there should be a price hike of 15 sen to RM2.05 per litre by now and another increase of 10 sen by the end of the year.

The RON95 price was raised twice last year - by five sen a litre each in July and December. However, the government pulled back from hiking it further - according to the Pemandu plan, the price of RON95 by the end of last year should have been RM1.95 per liter instead of the current RM1.90.

If the roadmap is followed through in its entirety, the price of the RON95 petrol will eventually rise to RM2.60 per litre by 2015.

Promise of manna from heaven

Despite the escalating prices of petroleum products, Idris is still optimistic that government savings from the subsidy rationalisation will ultimately mean more money flowing into peoples' pockets.

But not just yet.

“When prices go up, people feel it immediately. But we are talking about changing the entire economy of the country.

“The economy is like another animal - we have to pull all the levers to make sure it goes in the right direction. The results are complex and it will take a long time before people feel it.

“But people will feel it. Money will go into their pockets. But that will only happen once jobs are created. That takes time. But the leading indicators are the investments. That's the key. When it comes, then we'll have the money,” he said.

Idris - formerly a corporate giant having helmed Malaysia Airlines and Shell MDS (Malaysia) - was especially thrilled when talking about the RM160 billion in the private sector commitment to investment over a span of just six months of this year.

And that, according to the numbers crunched by Pemandu, will generate more than 300,000 highly-skilled jobs - one of the essential components in turning the country into a high-income nation by 2020.

Living beyond one's means

When petrol prices skyrocketed from RM1.92 to RM2.70 per litre in 2008, then deputy prime minister Najib Razak told Malaysians to 'ubah gaya hidup' (change your lifestyle).

Now it appears that Idris Jala is calling for the same.

“Unfortunately, we are a part of the global economy. Commodity prices have risen. Oil prices have risen,” he said.

He added that the petrol subsidies for last year came up to RM10 billion.

To maintain the price at pump artificially low in the midst of burgeoning oil prices would mean an additional RM7 billion when the government had only budgeted RM11 billion for fuel subsidies this year.

“We can increase the subsidy to RM16 billion and pass the remaining RM1 billion to customers...

“But you know, we have to live in the real world. There are two things that the country has to make happen which is to grow the economy to six percent per annum (in gross domestic product) and not live beyond our means, which is to scale back spending,” he said.

The year 2009 saw a record high in government spending for subsidies, totalling RM74 billion for that year alone.

It accounted for 15.3 percent of total federal government operating expenditure in the 2009 budget when the deficit surged to a 20-year high of seven percent of the GDP.

Obviously as the government, they have to see the big picture, he said, adding that no doubt commodity prices are bound to rise, so one has dwell on the subsidy quantum that's going to go up as well.

“We just want to make sure it's not too big,” he said.