Subsidies Rationalization, What will Happen?



subsidies

Malaysia is one of the most subsidised nations in the world. Its total subsidy of RM74 billion in 2009 is equivalent to RM12,900 per household or 4.6 per cent of GDP even higher than Indonesia (2.7 per cent) & Philippines (0.2 per cent).

Due to high subsidies, Malaysia’s fiscal deficit stood at 7% of GDP or RM42 billion in 2009. Malaysia will be bankrupt by 2019 as total debt would soar to a RM1.16 trillion if we do not cut subsidies now.

Below are the breakdown of 2009 subsidies,

  • RM 30.8 billion – Primary, secondary, higher education and scholarships.
  • RM 22.9 billion – Medical services, petrol, toll, foodstuff (paddy, sugar, cooking oil)
  • RM 18.0 billion – Gas subsidy for power and non-power sector, prefential interest rate.
  • RM 2.3 billion – Welfare aid for poor, farmers, fisherman and disable.

Prime Minister’s Department’s Performance Management and Delivery Unit (Pemandu) was giving the task to come out with the plan to rationalise the country’s subsidy scheme.

A nationwide SMS survey conducted by Pemandu found 61% of respondents agreeing to the subsidy rationalisation initiative, with the majority preferring for it to be phased out over three to five years.

Below are some of the recommendations on subsidies that are to be removed.

  • Fuel price be increased in mid-2010 by 10 to 15 sen, followed by 10 sen increase every six months until it reaches market price.
  • Reduction of gas subsidy, resulting in an increase in electricity tariffs. However, most households will not be affected as the move will only affect those consuming more than 200kWh.
  • Toll rates to increase in mid-2010 as per concession agreement except for highways without alternative toll-free routes.
  • Outpatient treatment at public hospitals to be increased from RM1 to RM3. In-patient treatment will also increase, depending on the wards (Class One, Two or Three), from between RM3 and RM80, to between RM6 to RM160.
  • Text book loan scheme and tuition subsidy aid to be abolished. Students will also have to pay for public examination fees.
  • Foreign students will pay full fees at public universities.
  • Local undergraduates and postgraduates to pay more in student fees, ranging from RM300 to RM800.
  • Study loans under the National Higher Education Corp Fund (PTPN) scheme would be tweaked to cover study fees only.

The Government’s plan to rationalise the country’s subsidy scheme but it will also mean a further rise in prices of goods and services. Malaysia’s consumer price index (CPI) will likely grow 4% between 2011 and 2012, and 3% post-2013.

What do you think on the effect to our life if all of these rationalization implemented?


Leave a Comment

  • Himmat 31st May, 2010, 11:17 pm

    Good article..you hv valid ideas.

    Reply
  • tuanbri 1st June, 2010, 12:26 am

    mmm…

    Our beloved country will be bankrupt?
    i doubt it….

    unless those people keep on taking bribes…

    can u imagine the cost of living after the rationalition?
    wow wow…unimaginable…

    Reply
    • 1mdb.com 1st June, 2010, 7:22 am

      Yes, it will be going to be difficult days for all of us if all subsidies are to be removed but seem like sooner or later government have to do it.

      I think we should have some plan now. I think it is good to buy property before subsidy removal as I think the price will be skyrocketing after that.

      Reply
  • ah meng 1st June, 2010, 11:17 am

    why the name of the gov start with the F capital letter never think of remove the 18 billion gas subsidy for power and tol subsidies? is all some powerful corrupted leader’s konco konco and linked co benefited from it…..

    Reply
    • 1mdb.com 1st June, 2010, 2:36 pm

      They did, for gas subsidy see bullet no 2 above. However, it will be reflected in high electricity tariff.

      Toll subsidy in items no 3.

      Reply
  • azamprudential 8th June, 2010, 1:11 pm

    We have been charged right and left all these years. Now they want to us to pay more.

    Healthcare : government healthcare like cap ayam . If you sick you can die first before the doctor free enought to see you.

    Toll : Everwhere got toll nowadays

    New car is damn expensive in Malaysia , why because the government already taxed the price.

    Education :You have to pay from standard 1 until you graduated from university.

    Other country they tax the peoples atleast , the benefits like healthcare and education is free.

    Now they want to cut off all subsidies , where is the money they ripped off from us ?a

    Reply
  • kicap masin 1st July, 2010, 7:57 pm

    insolvent caused by subsidy is unlikely, mismanaged of taxpayer fund… MAYBE !!! Those hard earned taxpayer’s RM has been wasted to those well connected via overrun cost “projects”, rubbish consultancies fees, etc… toll hike ??? ridiculuous !!! government should have nationalize all those toll operators many2 years ago !!

    Reply