Monday, May 31, 2010

Subsidy Rationalization

Managed to get hold of the presentation materials by Idris Jala. The following is the highlights that I think is important for us to understand the rationalization. I reverse the sequence of his presentation to cut short all the chase.









His punch line was we can go bankrupt by 2019 at the rate of government debt grows at 12% per annum. The question was why the government debt growing at 12% per annum? Was the fuel subsidy the culprit? Yes, it is one of the problems.

The second problem was social development spending which is almost double of fuel subsidy or 56% of the subsidy bill. Why our GDP is not growing fast enough despite of huge amount of money gone into this category?



O Yes, students benefited the most, almost half of 2009 subsidy program. The question is why are we not getting our ROI(return on investment)? It's because Malaysian tax payers sending our best brains to Singapore, USA, Australia, UK, etc. These guys are not coming back after they graduated?

Corruptions and leakages are the same old arguments.

Don't get me wrong, I am not saying we should not get rid of fuel subsidy just because we have other problems. All I am saying is, low hanging fruits are easy to pluck.

Their plan to save 103 billion over 5 years is a good start but without rising in productivity, there is only so much you can take cost out of the system. In an old business fashion way, it's the sales man!. In this context, how can we get more revenue after cutting the cost?



There is another problem, if we are running subsidy program at 74 billion annually, cutting 20 billion will still leaving us a gap of 54 billion, how are we going to fund it? Assuming GDP is not growing much, are we still going to have a debt of 800 billion instead of 1,158 billion? Are we not still not walking down to an eerie path?

1 comment:

The J's said...

subsidy cut...tax hike could help increase revenue...furthemore...Petronas is making huge profit ...hehe... (personal opinion)

ur blog is good...cheer it...

feel free to visit my blog http://myinvest89.blogspot.com