What would happen to us if Malaysian subsidy is removed?

Friday October 5, 2012 Subsidising the subsidies
Source: The Star
Roaming Beyond the Fence By Tunku ’Abidin Muhriz

The Federal Government’s subsidy bill for 2012 is now expected to hit RM42bil, which is RM9bil more than what was originally forecast for the year.

OF course, since Friday afternoon, everyone has been asking me what I think of the Budget.

My colleagues dissected it live on Astro Awani and NTV7, and then together with REFSA (Research for Social Advancement) we issued a statement expressing shock that the Federal Government’s subsidy bill for 2012 is now expected to hit RM42bil, which is RM9bil more than what was originally forecast for the year.

Although I had no input into that statement (the chief executive runs the day-to-day affairs), I endorse it fully.

Of course, it has been pointed out by others, our growing debt is also attributable to increases in government spending (often on itself).

In fact, I was rather surprised to learn that the sugar subsidy would be slashed by 20 sen per kilo. (Cake bakers feel bitterly sour that they now have to rub salt onto customers’ wounds.)

If the Government was really inspired by Adam Smith – or indeed the hadith in which the Prophet Muhammad refuses to fix prices in response to complaints that goods were too expensive, saying “Allah is the One who fixes prices” – then subsidy cuts could have been applied much more widely and in tandem with many other measures according to consistent principles.

It’s great that more people will be exempt from income taxes, but one wonders when the goods and services tax will be introduced (preferably softly and with plenty of zero-rating at first).

Of course entrepreneurship should be supported, but beyond specific measures to make it easier for businesses to start and grow, government intervention in the economy must be reduced across the board (in particular, the dissolution of monopolies and rent-seeking endowed under the guise of “privatisation” – an utter misnomer that has unfortunately repelled many Malaysians from genuine, competitive, inclusive privatisation).

The other absolutely essential ingredient is institutional reform so that stronger adherence to the rule of law and proper protection for whistleblowers can fight the scourge of crony capitalism.

It is measures like these that will eventually raise incomes for all Malaysians and wean us off subsidies permanently.

“Subsidies should be spent on sport,” remarked the non-tennis player sitting next to me as Juan Monaco and Julien Benneteau’s nail-biting first set came to a conclusion after twelve deuces at the Malaysian Open singles final at Bukit Jalil.

“Yes in terms of building infrastructure, especially in schools, but ideally competitions should be financed by the private sector,” I muttered, almost adding: “now hush and watch this world-class match”.

There were Malaysian entrants in both the singles and doubles draws, and if Datuk Nicol David’s virtuous campaign to have squash included in the 2020 Olympics fails for any reason (that would be a scandal considering the relative inanity of the other possible sports), then hopefully we will be able to count on our rising tennis stars supported by the Lawn Tennis Association of Malaysia like Ariez Elyaas Deen Heshaam, Mohd Assri Merzuki and Syed Mohd Agil Syed Naguib to deliver for Malaysia (though how about a Grand Slam victory before that?).

“Subsidies should be spent on culture,” said an old friend from the Philharmonic Society of Selangor after Professor Nigel Osb- orne’s compelling presentation on the power of culture in healing broken communities at Khazanah Megatrends.

Again I agreed in terms of building infrastructure, but it’s vital that the Government does not have a monopoly of what constitutes (especially “national”) culture: there must be freedom of expression and private sector support.

> “Subsidies should be spent on the disabled,” said a supporter after hearing about the IDEAS Autism Centre in Rawang, which is being constructed as I write.

“A pilot project for Taska OKU in six categories of disabled children” was announced in the Budget, but without further details.

I hope the Government will recognise that there are already a large number of private centres run by dedicated people (often parents of disabled children themselves) and they should be helped.

I suggest a voucher system so that parents can themselves choose the best provider for their child’s circumstances. Growing up with a younger brother suffering from a severe form of cerebral palsy, I know how important it is for parents to be able to choose the right environment and programme for their special child.

Tunku ’Abidin Muhriz is the president of IDEAS

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