Subsidies to eventually be lifted - slowly
t is a rather curious conundrum for the government -- the matter of subsidies.
On one hand, the Performance Management & Delivery Unit (Pemandu) has successfully sparked off alarm and panic when the minister in charge of it, Idris Jala, revealed that the country could go bankrupt in nine years if the Malaysian culture of subsidies is not remedied.
It is a rather curious conundrum for the government -- the matter of subsidies.
On one hand, the Performance Management & Delivery Unit (Pemandu) has successfully sparked off alarm and panic when the minister in charge of it, Idris Jala, revealed that the country could go bankrupt in nine years if the Malaysian culture of subsidies is not remedied.
But on the other, some other ministers have claimed that the RM74 billion price tag placed by Pemandu has been widely inflated and is inaccurate.
In fact, the Treasury has pointed out that the total subsidies for last year was RM18.6 billion, in contrast to Pemandu's figures.
As of 2009, 22 percent of government expenditure was devoted to subsidies, with the allocation to petrol alone eating up 12 percent.
But whatever it is, there is almost unanimous agreement that subsidies must be scaled back.
And Domestic Trade, Cooperatives and Consumerism Minister Ismail Sabri Yaakob (left) will have the unenviable task of convincing the public that too much subsidies could eventually kill the country's economy.
In the second and final part of an exclusive interview with Malaysiakini, he explains how he plans to lift that particular burden, and yet keep the public's emotions in check.
"I think that if we were to increase (prices) gradually, they can take it," he said.
Although he has kept mum on the formula for the subsidies, it is understood from various government sources that they are looking into a float mechanism to follow the market rate, while not burdening the public.
"If everything goes up to drastically, there will be a domino effect on other things," he said.
It is already widely known that when subsidies are lifted, it is not just the price of a subsidised item that will go up, but also that of various goods and services.
In a move that could throw the entire economy into a frenzy, even employers themselves will feel the pinch once workers start demanding higher wages just to cope with the rising cost of living.
However, the government itself is aware that the current subsidy scheme is deeply flawed.
It is no secret that fishermen, have abandoned their trade to focus on selling subsidised diesel, sometimes to their counterparts from neighbouring countries such as Thailand and Indonesia, where the commodity is not subsidised.
It certainly is a more lucrative and easier work than to toil in the choppy seas for hours for a catch that may not even be consistent.
Link between subsidies and shortages
Even with subsidised sugar, which has grabbed the limelight, it is easy to see the link between subsidies and shortages.
"Let's just say that retailers say that they need 10 tonnes of sugar. It is entirely possible that their consumers only need a tonne, but the retailers would keep the remaining nine tonnes, and then sell it to food manufacturing industries which don't enjoy subsidised sugar.
"Sugar smuggling is a lucrative business," he said.
The price of sugar in Thailand ranges between RM2.50 to RM2.90 a kg as compared to a mere RM1.45 in Malaysia.
The price of sugar was also reported to be much higher in the Philippines, Indonesia and Singapore.
And while the government has tried to curb the leakage of subsidised items into neighbouring countries, obviously efforts have to be stepped up.
And Ismail Sabri is aware that the public's eye is on his ministry.
"We know that if we were to increase the prices, the public will think that we are punishing them, wondering why we are not doing more to curb smuggling," he said.
But whether he is trying to wean the public off subsidies with subliminal messages in campaigns to cut down on sugar (for health reasons), or a more direct way of raising prices a sen at a time, he has his work cut out for him.
"We will just have to study this very thoroughly before arriving at any decision," he said.
And while the tedious job of compiling figures has already been done by Pemandu's subsidy rationalising lab, it will still come down to him to convince the cabinet to find the will to make the politically high risk move.
