Rationalising Subsidies For Real Growth

May 27, 2010 12:15 PM

KUALA LUMPUR, May 27 (Bernama) -- Malaysia needs to rationalise its subsidy issue to move forward economically, Minister in the Prime Minister's Department Datuk Seri Idris Jala said Thursday.

Idris, who is also the Chief Executive Officer of the Performance Management and Delivery Unit (PEMANDU), said in addition to encouraging greater conservation and less consumption, Malaysia also needs to keep abreast of the global trend of less subsidies.

"Imagine, even Somalians are paying much more for petrol than Malaysians," he said at the Subsidy Lab Opening Day at the Kuala Lumpur Convention Centre (KLCC) here.

The lab, open from 9am to 2pm today, is being held to get suggestions and feedback from the public on the government's plan to reduce subsidy.

Idris said according to statistics from the Organisation for Economic Cooperation and Development (OECD), Malaysia's subsidy expenditure as a percentage of nominal gross domestic product (GDP) between 2006 and 2009, was at a staggering 11 per cent.

This, he added, was almost three times more than non-OECD countries like the Philippines and 55 times more than a OECD country like Switzerland.

"Our subsidy bill is not sustainable, especially in light of the rising budget deficit and government debt (as a percentage of gross domestic product). It is higher than Indonesia at 28 per cent and getting closer to the Philippines at 62 per cent," he highlighted.

According to Idris, a subsidy culture has negative consequences, staing that subsidies often go to wrong beneficiaries and are subject to leakages and abuses while promoting market distortions as well as encouraging over-consumption that results in over-production.

He said approximately, 97 per cent of Malaysia subsidies are dispensed on a "blanket" basis.

"It is given to everyone regardless of income level, for example, subsidised primary, secondary and tertiary education, medical services, petrol, sugar and cooking, as well as welfare aid and sustenance allowance," he explained.

The government, in its subsidy rationalisation framework will among others, focus on big ticket items to achieve bigger savings as for fuel, gas and toll while continuing to subsidise education, as it is a human capital investment.

Efforts will also be made to reduce wastage and abuse.

-- BERNAMA