Idris Jala & the Subsidy System

I have been wanting to comment on the subsidy issue since a couple of weeks, but it seems the matter is too complicated to be commented in short.  Both the pros and cons of the implications of abolishing subsidies outweighs each others.  So, I choose to wait and observe - at least for a bit longer.

However, I agreed with some of the opinions - especially on the suggestion that instead of removing the subsidies on the basic needs such as foods items and fuel, the corporate subsidies should be removed first.  This include the gas subsidy to the IPPs and tax break to successful corporates such as AirAsia and the AP system.  These are the profit making companies, and their shareholders enjoyed billions of ringgit on top of the subsidies given to their companies.

Some said the subsidies on basic items such as fuel and food items are irrelevant to the low income rakyat (the poor ones) as they benefited minimally from the subsidies. On the other hand the rich had maximized the gifts. Hence they should be removed.

Try to imagine this... let say Pak A, an office assistance uses a low-capacity motor vehicle - let say a Myvi to travel back and fro to his workplace which is located 10km from his house and requires let say five (5)  liters of petrol every days.  That translated to RM1.79 x 5 liters = RM8.95 of subsidized fuel per day or RM268.50 per month. (Market price for RON 95 petrol is RM3.59 as of 30th May 2010)

On the other hand, his boss the GM of the company - En. Y uses a high-capacity motor vehicle, let say a E280 Mercedes travels the same distance but due to the larger engine size uses let say ten (10) liters of petrol everyday.  That will translated to RM17.90 per day or RM537.00 per month of subsidized fuel (do the calculation yourself - only simple math).


But, hey wait a sec... Pak A is only a clerk and a clerk's got paid let say RM1k per month (i'm being too generous here) and his boss En. Y - the GM, may be paid up to RM15k per month... and please don't forget the petrol allowance, the company car, the company's driver, the corporate credit cards and lots more facilities that the boss could be enjoying.

With all that in mind, is it still logical for the government to subsidized the rich GM more than the poor hardworking clerk?

Let see the figures again shall we... RM268.50 (the POOR) 26.85% of monthly salary vs RM537.00 (the RICH) 3.58% of monthly salary

That is only a small part of how the whole government subsidy regime works. One point that can be summarized here is that, the rich due to their larger spending and consuming capacities, had benefited more from the current subsidies mechanism.  I am very sure that out of RM74 billion subsidies expenses, more than 70% are being enjoyed by the rich!!

And let say if the government decided to do away with the subsidies, the impact will very much likely to be immediately felt by the poor rakyat, not the rich one.  Consider the above scenario - Pak A will have to spend an additional of 27% of his salary to cover the daily petrol cost while his GM, En. Y will only spend 3.6% from his perk (if not from his own pocket).  That is petrol alone, what about other items - foods, education, medical, electricity, etc.  

Hey dato, still remember the bottom 40% of Malaysians' household that earn lower than RM1,440 DS Najib was talking about? So, how can this go align with PM Najib's "Rakyat Diutamakan", sila jawab Dato Idris Jala?  Perhaps you may want to recommend PM Najib to change the slogan to "Rakyat yang Kaya (dan Korporat) diutamakan".  That may suit the move better.

What I'm trying to say - the abolishment of the subsidy system must be handled with care (especially in regards to the low income group).  The move must be executed by phases and gradually as to give the time for the rakyat to prepare for the impacts.  Well that's another area to be discussed - maybe later.