2008 Government To Spend RM 81 Billion- BN Using Subsidies To Buy Votes?

The issue of subsidies has been raised before and the government has agreed to reduce it, but it looks clearly now, it's use to buy votes!

TO GIVE OR NOT TO GIVE

KUALA LUMPUR, Feb 27 (Bernama) -- "To give or not to give". That is the pertinent poser on whether the government should continue subsidizing the cost of consumer goods and services in the country.

Second Finance Minister, Tan Sri Nor Mohamed Yakcop was recently reported by the media as saying that the government is expected to spend RM81 billion on all forms of subsidies this year "to help Malaysians cope with the rising prices."

The sum includes subsidies on petrol, diesel, education, healthcare and textbooks. The yearly subsidies on education and healthcare totalled RM29 billion and RM9 billion, respectively.

For economist, Professor Emeritus Datuk Dr Mohamed Ariff, the subsidy policy practised by the government for over 50 years cannot be a permanent feature.

"The rakyat needs to be educated on this issue. I am not anti-subsidy, as I believe there is a valid case for subsidies under certain circumstances and this is particularly true for health care and education.

"While subsidy generally makes good politics, it connotes bad economics not only because it has adverse budgetary implications but also because it causes market distortions and misallocation of resources" he told Bernama in an interview recently.


Massive Subsidy For Fuel Because Government Cares For The People - PM

PENANG, Feb 25 (Bernama) -- Datuk Seri Abdullah Ahmad Badawi said today the government allocated massive subsidies to offset the price of petrol in the market as it cares for and is concerned about the people.

The Prime Minister said the government did not want the people to be too heavily burdened by the rise in petrol price.

The government was spending RM43.4 billion currently to provide various subsidies to offset the petrol price increase and the allocation was actually much bigger than that for national development, he said.

"Despite having to bear the high cost, we do it because the Barisan Nasional (BN) government is public-spirited and is concerned about the welfare of the people," he said when launching a campaign organised by the Association of Malaysian Taxi/Limousine and Hire Car Drivers (Pertekma) at the grounds of Hotel Sunway, Seberang Jaya, here.

"If the price of petrol can be brought down, I'll be much happier but when we do this, it may affect other necessities," he said.

Abdullah said the government always looked for various ways to ensure that the people were not burdened by the rising cost of petrol and other goods, including providing free text books to school children, abolishing school and examination fees and reducing charges for treatment and healthcare at government hospitals.

In addition to reducing the burden borne by the people on expenses, the government also endeavoured to provide more job opportunities for them and to increase their income, he said.

Compared to the other countries, he said the prices of petrol, food items and health care in this country were much lower because of the subsidy element from the government.

"We ensure that these prices are under control, including adequate supply of food items and the burden is borne by the government. If the petrol price can be reduced, then all countries would want to do it.

"Of course we have Petronas, but it too has to spend hundreds of billion for overseas operations and if all the Petronas funds are to be spent, then it will be gone," he said.

At the function, Abdullah took the opportunity to clarify to the approximately 300 taxi drivers present the impact on the people if transportation cost were to increase.

"If transportation cost rises, the price of goods transported will go up, vehicle rental also rises and if the rental increases, the fare will also go up.

So, we have to control all these so that the people are not affected," he said.

The Prime Minister hoped taxi drivers would help the government in explaining to the passengers on the issue of higher petrol prices and the efforts taken by the government to protect the people from the adverse effects.


COMMENTS

Fuel subsidies removed to enhance economic growth rate. And cows can fly too

Referring to what our second Finance minister, Tan Sri Nor Mohamed Yakcop said about reviewing prices of fuel and making more productive use of the subsidy to improve growth rate --- this is where the proposal falls apart :

One, I dont want to see my fuel subsidy going towards yet another longest bridge, helicopters for airlifting cars from emergency lanes from that longest bridge, tallest buildings and repair costs associated with cracks and leaks from misappropriated engineering funds on those tall buildings.

Two, for the sake of argument, lets say the money is funneled into projects which really do fuel economic growth, which sector of the population does it benefit? Yes, it does bring benefit across the board but mainly to large corporations and individuals directly or indirectly associated with them. Weve had phenomenal growth rate in the past 8 years and our stock markets have regained and surpassed its position prior to the economic downturn. So, why are salaries and benefits severely lagging behind that growth rate and in some instances remain unchanged?

Three, I cant think of a better way to benefit the general public than to continue to fuel subsidies. It ensures that benefit is enjoyed across the entire rakyat regardless of geographic location or social standing.

Since fuel, like all raw materials belong to the country, and the country to the people, lets take a public poll to see who supports removing the fuel subsidy for dubious growth projects? To serve this study better, the government should probably put a proposal on how the additional 40B is going to be used, jobs it will create, greater educational and healthcare facilities etc.

I think the majority of the "thinking" public does not mind the removal of the fuel subsidy PROVIDING that the Government utilises the savings earned from fuel subsidy removal for projects that actually eases some burden on the Rakyat. But it is as what you said, if that actually happens, cows would fly.

Time and time again, we have witnessed how the Government waste the tax payers money on unimportant projects or ambitious projects that are out of our reach for at least another 3 decades. Of course, there are many supposedly people's projects that are meant to benefit the Rakyat, but as what you said, the bulk of the money channelled into these projects goes to "individuals" sitting in the board of directorship of companies being awarded these projects and not to the Rakyat. We already have Petronas "robbing" the people blind but perhaps the people themselves brought it upon themselves when they decide to vote blindly. Here's to the future of our country, if we have any at all!

I am in favour of gradual reduction of fuel subsidy. There is currently an imbalance between oil consumption and its production ( discovery ). Even though the tool of market pricing may be a blunt instrument, it remains however at this current world situation, the only effective restraint on wanton wastage. Withdrawing welfare is always going to be politically sensitive and electorally unpopular. Deferring measures of painful restraint will eventually make the adjustment in the future that much more hurtful and any move in that diection may tentamount to committing political suicide. Such political reality may cause government of the day to simply give up trying.

A good example is Venezuela where petrol costs barely 2 US cents per litre. Filling up a full tank of a huge 4WD there costs the equivalent of a cup of Starbuck coffee. The heavy subsidy was in place when oil was cheap. Even though this is no longer the case, no politician there dares to table any private member bill to effect changes. On the other hand, it is valid amd justisfiable to query as to how and where the savings are to be spent. It makes no sense to save wastage in one sector and have it (the saving) squandered in projects that benefits but a very handful of people. It is a question of transparency, and MPs are well within their jurisdiction to monitor the constituentinal parametres.