Will subsidy cuts hurt the poor?

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Apart from worrying about the effects of cuts in subsidies, the lower-income group and even the middle-class are feeling the effects of a sharp rise in fruit and vegetable prices, especially over the last quarter.

While Najib waxes eloquent about the New Economic Model, low-income Malaysians are struggling to balance their budgets. Fruit and vegetables that used to cost RM60 a few months ago now cost around RM90. If you paid RM25 for a basket of vegetables a few months ago, you probably would have to fork out around RM45 now.

Of course, Cabinet Ministers won’t feel the pinch from higher food prices and cuts in subsidies. But ordinary workers will, as their wages struggle to keep pace with the rising cost of living. (As an aside, we desperately need a move towards organic agriculture to make us more self-sufficient in healthy pesticide-free natural food.)

Here’s something I wrote for IPS:

The government’s proposal to remove and rationalise subsidies on essential goods and services continues to provoke a storm of criticism from ordinary Malaysians.

Idris Jala, who leads the government’s Performance and Management Delivery Unit (PEMANDU), has put it in stark terms: Malaysia will go bust in nine years if it does not slash subsidies and cut its government expenditure to curb spiraling debt.

His warning came ahead of Prime Minister Najib Razak’s unveiling of details of his New Economic Model (NEM) in Parliament on Jun. 10, which is when the Tenth Malaysia Plan, a five-year economic blueprint, will be tabled.

The NEM is a market-friendly programme that aims to transform Malaysia into a high-income nation while promoting inclusiveness and targeting aid to the bottom 40 percent of households.

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But many Malaysians blame the country’s financial woes on the government, with the general response being, if the government really wants to save money on subsidies, it should first plug ‘leakages’ in government expenditure and curb rampant corruption. Billions have been poured into unproductive government projects with little to show, critics charge. Full article here.

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Ganesh
Ganesh
11 Jun 2010 5.12pm

What about the biggest subsidy the rakyat has given the government? Cars.

Proton Waja in Malaysia is sold double the price sold in Saudi Arabia.

So, how can now the rakyat reduce their subsidy having given 25 years of car subsidy and free money to the government?

http://blog.limkitsiang.com/2010/05/25/proton-cars-price-in-saudi-arabia-raw-deal-for-malaysians/

If each rakyat overpays by RM30,000, calculate that by the hundred of thousands of protons being sold.

nkkhoo
11 Jun 2010 7.53pm
Reply to  Ganesh

Proton cars are much cheaper in all overseas markets, not limited to Saudi Arabia.

vflai
11 Jun 2010 3.48pm

…..sorry….correction ……””””to rave and rant’…….

vflai
11 Jun 2010 1.28pm

….aiya,(so pathetic) day in day out, we rave and rent, worry and tear our hair out, while people like those with pinked lips and some fat mammas without waistlines GORGE themselves with ‘opulent ceasar/roman’ table styled caviared food, a situation prevalent now BECAUSE all the time, our leaders have been deciding/implementing nem/neps, that are deliberately lopsided, just to appease some, who are not WILLING to strive, or to do a simple hard day’s work, adhere to meritocracy’……..in order to achieve their status/ their means of (high?) living by themselves honourably……………………stop for awhile, think who has brought on this heart breaking/wrenching… Read more »

Yang
Yang
11 Jun 2010 1.14pm

With subsidy gone and the intoduction of GST, the poor will be in living hell. The only way is for these poor people to wake up and kick out the corruptible UMNO/BN and Najib once and for all. One of the most important services that the poor people will need is health care and government hospital fee will soon increase. So kick (out) these (people) from UMNO & BN and of cousre the PM Najib.

dadu
dadu
11 Jun 2010 12.04pm

Poor? what poor people? does the government know what poor means?

Bigjoe
Bigjoe
11 Jun 2010 10.10am

Is this a serious question? Its not whether it will hurt the poor, the issue is can the govt mitigate the impact i.e., soften the blow. The reason why the opposition is so strong is because everyone know BN govt ability to mitigate impact of such things is really crappy. Talk to any rice farmer, fisherman or those that do social welfare service. BN have one of the worst track record of removing programs and susidies. The way BN govt have mitigate past failures e.g. with toll roads, electricity, telcos etc. is by getting high economic growth and huge spending.… Read more »

nkkhoo
11 Jun 2010 9.24am

RM10,000 cash rebate to 40% low income households is a better and more effective mitigation plan There is no dispute 61% people who answered Pemandu survey agree subsidies have to be trimmed down. The question is what is the best mechanism and how best to minimize its impact on our poor people and nation competitiveness. I would like to propose an alternative approach which I deem is benefiting targeted poor rakyat than selective companies and foreigners. Let see how this Turkey therapy approach works. IF government withdraws all subsidies except education and healthcare services immediately. Based on these assumptions from… Read more »

Sugar
Sugar
10 Jun 2010 11.41pm

Silly question! Should go & ask Mr Najib.

ANONYMOUS
ANONYMOUS
10 Jun 2010 10.04pm

Cancerous Disease Kill the cancerous disease and the patient will survive, likewise get rid of the root cause and the Nation will survive and thrive. It does not matter what they do because whatever they do will be to no avail. Like RPK said in London, it is no good attempting to treat the symptoms because it just simply will not work. It is the cancerous disease that should be treated. So therefore as long as UMNO is in the driver seat then absolutely nothing could be done. Before anything else, UMNO will first have to line their pockets, then… Read more »

Leong Yook Kong
Leong Yook Kong
10 Jun 2010 5.25pm

Of course lah. Everything will rise like hot air lah. No more peace of mind for the poor chaps lah. Got money never mind lah. No money sure die lah. The rakyat have to wake up PR by endorsing PR in the next general election lah. If the rakyat don’t do it, who to blame lah. Die lah.

Chong Kong Hui
7 Oct 2010 10.55am

It is about number game, how voters are divided…

Kampung folks is still BN fixed deposit and until they realise how bad BN is, chances are BN still rules this beautiful land.

Do our part. Share with others fact and information.
Good luck to all Malaysian.

nkkhoo
10 Jun 2010 4.09pm

First thing to do by the government is remove those wasteful and indiscriminate subsidies to rich people like sugar, petrol, textbook loan, etc. A real case, I became a textbook loan sponsor for a good friend who earned several millions in a year. His wife wanted to enjoy the government subsidy as many poor rakyat who earns less than RM 24000 a year. Second thing to do is stop all subsidies to IPPs power generators, toll operators, cooking gas, etc. Third thing to do is reduce the leaking of public funds due to corruption and poor planning. What the government… Read more »

nkkhoo
10 Jun 2010 10.29pm
Reply to  nkkhoo

I do the quick estimate for cash rebate scheme on total subsidies saving in the next five years. 1) First thing to do by the government is remove those wasteful and indiscriminate subsidies to rich people like sugar, cooking oil, petrol, textbook loan, university fees, etc. Below is statistics for year 2009 with total 74 billion subsidies. => Petrol and diesel price subsidy is RM 15 billion => Sugar subsidy is RM 720 million. => Cooking oil subsidy is RM 850 => Rice subsidy is RM1.34 billion => Flour subsidy is RM 140 million 2) Second thing to do is… Read more »

Yang
Yang
10 Jun 2010 11.31pm
Reply to  nkkhoo

nkkhoo,
You contradict yourself and become a hypocrite. You wanted to remove subsidy but on the other hand sponsored for someone. Worse still you committed an offence by sponsoring some one whose salary is more than RM700/= (Only those with less than 700 can apply for text book loan.) Even worse you sponsored a millionaire.

SunnyOoi
SunnyOoi
11 Jun 2010 11.21am
Reply to  nkkhoo

Very good suggestions. But those in power today joined politics to do the exact opposite. Its like lecturing a thief on how to look after your house.

nkkhoo
10 Jun 2010 3.52pm

During the public consultation, it was revealed that companies received 18 billion Malaysian ringgits (about 5.4 million U.S. dollars) out of total subsidies of 74 billion ringgits (22.2 million dollars) in 2009. In contrast, the poor received only 1.7 billion ringgits (511,813 dollars).

===

You have to check those figures carefully unless you fail your maths as many politicians.

1.7 billion RM is far more than 511,813 dollars.

Ganesh
Ganesh
10 Jun 2010 2.18pm

Of course it will hurt the poor. What the government fails to realise is that because heavy duty corruption, we have one of the lowest GDP per capita in the world. When we do a comparison with other countries, we must see our GDP per capita, Purchasing Power Parity and the Big Mac Index. For example, in Singapore, the GDP Per Capita is US$50,523. In Malaysia, its a pathetic US$13,769 http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita But stupid people will tell us that fuel in Singapore, which is about SG$1 per litre is more expensive than the RM1.80 per litre in Malaysia. They say SG$1… Read more »

Chong Kong Hui
7 Oct 2010 10.50am
Reply to  Ganesh

Bravo!