Thursday 19 May 2011

Pua: Subsidy cuts will cause further inequalities

What has happened to the government's proposal to ease the burden of subsidy cuts on poor Malaysians, which it mooted when initially announcing the subsidy cuts in June 2010?

In asking this question today, Petaling Jaya Utara MP Tony Pua said the measures proposed last year to enable the poor to cope with subsidy cuts have gone missing.

This situation remained despite several rounds of subsidy cuts on items such as petrol, sugar and diesel, putting prices on a sharp upward climb.

NONE"For petrol subsidy reduction, (the Performance Management and Delivery Unit) Pemandu has proposed a cash rebate mitigation plan for motorbikes less than 250cc and cars less than 1000cc, amounting to RM54 and RM126 per annum.

"As for the reduction in food subsidies, Pemandu had proposed a cash rebate of RM20 to MyKad/MyKid holders through post offices for the first year, and subsequently through the MyKasih card for those with incomes below a certain unspecified threshold," Pua (above) said.

According to him, those who suffer most from the subsidy roll back are the low and low-middle income groups, who make up the bottom 40 percent of society.

Increases to prices of essential goods, he said, were not marginal as subsidy cuts for sugar have pushed its price up a whopping 58.6 percent to RM2.30 a kilo in less than 18 months.
RON95 price expected to go up next month

Reduction in diesel subsidies for critical transportation companies has also bumped prices from RM1.45 to RM1.80, up 24.1 percent and thus affecting end prices of goods, he said.

azlanTo make matters worse, the RON95 petrol which is used by the majority of Malaysians has undergone two rounds of hikes and its price is expected go up again next month.

"Despite repeated denials and assurances from the prime minister, the inevitable outome of the subsidy reductions is to exacerbate inflation in the country, already suffering from rising global food prices," Pua said.

According to the National Statistics Department, the consumer price index for April 2011 is 3.2 percent higher than that for the same month last year, mostly due to a sharp rise in food and transport prices.

Pua said that despite consistently slashing subsidies, the government has failed to even reveal if it indeed has a plan to mitigate the pressures of higher prices on the poor.
Already, the World Bank in its report on inclusive growth in November last year placed Malaysia as the country with among the highest income inequality in Asia, with levels similar to that suffered in South America.

"In addition, the high levels of inequality remained stubbornly high over the past decade.

"The lack of concern from the government for the bottom 40 percent of income earners in Malaysia will only accentuate the already high-levels of income inequality in the country," he said.

The gini coefficient (measure of income disparity) for Malaysia in 2010 is 49, which indicates a higher income disparity compared with other countries in the region, such as Cambodia (41.7), Singapore (42.5) and Indonesia (34.3).

Denmark is considered to have the most equal income distribution at 24.7 while Namibia, at 74, is at the bottom of the rank.

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