Leader

NST Leader: Reducing subsidies

Last year, the government forked out RM77.7 billion in subsidies, but Malaysians took it so much for granted that some may think it's a lifetime commitment, from the cradle to the grave.

The allocation was reported to be the largest in history and among the highest in Asia. The only way Malaysians can truly appreciate subsidy benefits is if it suddenly vanishes.

They'd feel it: bills from government medical facilities would shoot up, they would pay a pretty penny for their petrol (RON95 is subsidised at 2,500 per cent), amenities would eat into their meagre budget and some people might languish in abject poverty.

In 2010, the government initiated reforms through cuts in fuel and sugar subsidies to shore up government finances and improve economic efficiency. It was inadequate, it seems.

That was peanuts compared with how the government spends taxpayers' money to make our lives bearable, notwithstanding the inflationary economy tearing away at our daily lives.

To put it in perspective, Malaysia's annual subsidies pale in comparison to China's (US$1.4 trillion), the United States' (US$649 billion), Russia's (US$551 billion), the European Union's (US$289 billion) and India's (US$209 billion), figures reported in recent years. But these nations haemorrhage subsidies, for the most part, for grandiose considerations and not so much for their people's wellbeing.

These massive subsidies are for their military or defence, the US especially, while China applies it as a bulwark to stamp its global economic supremacy.

Tiny Malaysia's annual subsidies are still over-bloated and in need of a trim, if not an overhaul. Perhaps not immediately, but gradually in the next few years, primed for contention in the next general election cycle.

Prime Minister Datuk Seri Anwar Ibrahim figured out this much as he laid out a plan to slash subsidies, the focus being on sums spread out to the rich, or in some parlance, the materialistic middle class.

Anwar first expressed this plan soon after assuming power last November and he is saying it again now, perhaps to prep Malaysians to accept a new mindset because the cuts will be unpopular but expedient.

In recent months, Anwar has stressed on reducing subsidies enjoyed by the rich, at the expense of Malaysians with lesser means. There's no getting around it: subsidy cuts will be so selective and targeted that the lower-income group will be spared the pinch.

The trick is in ensuring that whatever solution does not entail a financial predicament for the middle class. The perception is that the middle class is resilient enough to take a hit, but here's the trade-off: it may trigger a regressive chain reaction in the free market.

Once fully enforced, the people will notice it in a few years when there's considerably lower spending on luxury goods, gourmet dining, new vehicles and tourism. On the flip side, the government would have succeeded in its subsidy-reduction mission.

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