A Tale of Two Subsidies

Last week, while engaged in some small talk, the owner of an Indian restaurant near where I stay lamented that prices of goods had gone up so high that her husband was urging her to close their lunch business and just open for breakfast.  Just a couple of years ago, this same restaurant was open till dinner.

She went on to describe how the much the price of garlic, chillies, and various other spices essential for Indian food preparation had shot up.  I also found out that the price of chicken and fish had ballooned at the market.  Oblivious to these hikes, I double checked with my other half and was duly notified that prices had been steadily increasing for some time.

Yesterday’s Star screamed “Subsidies cut”, and captioned its byline ‘”Gov’t move will have minimal impact on people”, says PM.’  I can’t imagine another sillier statement from the PM of Timbuktu!  Below that was a nice graphic detailing exactly how much more RM the public will have to fork out for the same amount of stuff.

According to the same paper, a statement from the Prime Minister’s Office mentioned that the “long-needed” economic reforms would help Malaysia maintain the strong growth it had achieved to become a developed and high income nation.”

Other “salient” points include:

  • The subsidy withdrawal will reduce Government expenditure by RM750 million this year;
  • The savings from this will be channeled to families, communities and business growth – such as the 1 Malaysia clinics, 1 Malaysia mobile clinics, scholarships for ALL 9A+ and deserving students – especially from lower income families;
  • The 3 main concerns that led to the subsidy rethink: wrong beneficiaries, wastage and abuse.
  • Sugar suffered the highest cut: the fact that 40% of Malaysians are overweight or obese, the high incidence of diabetes among the people, that businesses were using twice as much as households, and smuggling of the item to other countries;

Read the full statement at NST online.

Something seems wrong here. If the subsidies were removed only today, why had the prices of certain commodities been going up weeks before?  Was it just the normal case of supply and demand, or was somebody making some “profit” even before the subsidy removal was announced?

Meanwhile, Petaling Jaya MP Tony Pua proposed that Independent Power Producers (IPPs) should also be subject to the same subsidy cuts as the rakyat.  According to him, the IPPs were benefitting up to RM13 billion a year in subsidies.  He asked “why subsidies were not cut for the Fat Cats“!

Malaysiakini (if you haven’t got a subscriotion – get it now for just RM20 for 1 month – that’s 0.67 sen a day for the news that doesn’t appear in your MSM!) quotes the PM as saying the subsidies are not “hikes” but “adjustments

Khoo Kay Peng who blogs at Straight Talk asks “RM4 BILLION for the PM’s Department and the Government is talking about subsidy cut?”

The announcement was also “meticulously timed” as Malaysiakini reports – just hours after the Parliament adjourned and to avoid a major backlash at the Dewan Rakyat.

I can think of at least a few more points that need to be considered:

  • Before the government decides to announce the removal of such subsidies, it must first be sure to trim its own excesses – which it has failed to do till now; just check the PKFZ fiasco, the new Parliament building, and etc. etc.
  • Two years on from the 2008 political Tsunami, the government hasn’t learnt its lessons. It continues to preach and talk down to those who they govern.  The misappropriation of funds, cronyism, corruption and various leakages have not stopped but continued and even gained momentum. For the subsidy cuts to be taken seriously, the government must be seen to be serious in playing its part. You just can’t tell the people to “tighten their belts” and “change your lifestyles” while leaders continue to splurge and waste the nation’s wealth.
  • The PM keeps talking about a “high income nation” but as yet, there isn’t a blueprint on how exactly we are going to achieve this;
  • Wages in Malaysia are artificially low; perhaps that’s why two income families are the norm nowadays; If subsidies are removed, without wages being increased, how on earth are people who are already at the brink cope with these new increases?
  • The government has kept stalling on the RM900 minimum wage issue.  If workers are earning less than that now, how will they cope with the removal of subsidies?
  • This is merely the first of more cuts; if it is already difficult now, how much more can the rakyat take?

The issue is not whether to remove the subsidies or not but more of how the government should go about it.  To remove these without carrying out other crucial strategies such as those listed above would only spell disaster for both the people and the government.

The battle will rage on undoubtedly….. but for now I think George Bernard Shaw’s words sum up what I feel: “Democracy substitutes election by the incompetent many for appointment by the corrupt few.” In other words, we get what we ask for. It’s a wake up call for all of us.

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