Friday, July 23, 2010

Subsidy Rationalisation Gets Various Reaction

July 16, 2010 00:55 AM

KUALA LUMPUR, July 15 (Bernama)-- The subsidy rationalisation for several items such as sugar and fuel which was announced Thursday was welcomed by several non-governmental organisations (NGOs).

The president of the Malaysian Medical Association (MMA) Dr David Quek said the reduction in the sugar subsidy by 25 sen per kilo would give a positive effect to the people's health with the ensuing reduction in sugar consumption.

"There has been a significant increase in the number of diabetic patients. A study in 2006 found that between 14 and 15 per cent of Malaysians suffer from diabetes compared with seven to eight per cent 10 years ago," he said when contacted.

He said the increase clearly showed the declining state of health and that the people were less concerned about health care.

"As such, we support this increase for the sake of public health, and we hope the people can reduce sugar consumption," he said.

Federation of Sundry Goods Merchants Associations of Malaysia's president Lean Hing Chuan also expressed a similar sentiment like Dr David.

"When the government increases the price of sugar, people will consume less sugar and that will reduce diabetes cases," he said.

He added that despite the 25 sen 'adjustment' sugar price here is among the cheapest in the region compared with Thailand and Indonesia (RM3/kg) and Singapore (RM3.60/kg).

FOMCA president Datuk N. Marimuthu meanwhile, said the 5 sen increase for RON95 petrol would not really burden the consumers.

"We must welcome such initiatives if the money saved from subsidy is used for other beneficial purposes," he told Bernama when contacted here Thursday.

Marimuthu said Malaysians are still fortunate since petrol price in the country was still among the cheapest compared with India, Singapore, the Philippines or United Kingdom.

Persatuan Pengguna Islam Malaysia (PPIM) executive secretary Datuk Paduka Nadzim Johan said a transparent subsidy system must be put in place to ensure only those who are eligible for such benefits.

"We do not agree if subsidies, especially for gas, enjoyed by the rich too," said Nadzim.

Nadzim said the people must not continue to depend on subsidies for basic essential items and start looking for alternatives.

"We (Malaysia) and Thailand are almost equal. But why can't we grow our own vegetables like cabbage, chili or others instead of importing such items from other countries," he said.


Malaysia CPI for June jumps 1.7pc

By Rupa Damodaran

MALAYSIA'S Consumer Price Index (CPI) for June grew 1.7 per cent year-on-year, in line with expectations, indicating the central bank may be done with raising its key interest rate.

Bank Negara Malaysia has raised the main interest rate three times this year as keeping the cost of borrowings at very low levels could stoke inflation.

The latest figures show that inflationary pressures in Malaysia are still mild, economists said.

The Statistics Department said yesterday the index expanded from 111.8 to 113.7 during the month, with food and non-alcoholic beverages posting a 2.7 per cent increase.

Compared with May, the index increased by 0.2 per cent while for the first half of the year, the CPI grew by 1.6 per cent.

Standard Chartered Bank economist Alvin Liew said food-related price increases were again the key contributor to the CPI in June from 1.6 per cent in May.

But HSBC Bank Asian economist Wellian Wiranto said the pace of the food price increases was rather mild and he expects seasonal factors like Ramadan and festivities to spark a temporary increase.

Economists don't think inflation would jump due to the recent increase in the price of sugar and petrol although they expect the "modest" subsidy cuts to continue this year.

"Although last week's move signals the government's intention in removing subsidies, the pace that they adopted also indicates to us that they are much more likely to proceed in 'baby steps' rather than in a 'great leap forward' fashion - not least because they are ever-vigilant on the potential political repercussions," Wellian said.

First round of cuts

The Star Online
Friday July 16, 2010

PETALING JAYA: The Government has begun its first round of a gradual subsidy rationalisation programme, promising it would have minimal impact on families.

Describing the cuts as part of a “difficult but bold” decision to reduce fiscal deficit, the Government said it would still have to spend an estimated RM7.8bil on fuel and sugar subsidies this year.

Thus, effective today, prices of petrol, diesel, liquefied petroleum gas (LPG) and sugar have increased following a reduction of the subsidy.

Sugar is revised to an additional 25 sen per kg to RM1.90. LPG is up 10 sen per kg to RM1.85.

Petrol RON 95, RON 97 and diesel have gone up by five sen per liter. For RON 97, the Government has decided to withdraw the subsidy later and subject it to a managed float, where the price will be determined by an automatic pricing mechanism.

“This subsidy rationalisation will, according to estimates, allow Malaysia to reduce Government expenditure by more than RM750mil this year,” a statement from the Prime Minister’s Office said yesterday.

Details of the changes are available on the websites of the Prime Minister’s Office and Pemandu.

The Government also said the “long-needed” economic reforms would help Malaysia maintain the strong growth it had achieved to become a developed and high-income nation.

“We have begun a planned and fair reform of a subsidy regime that for too long has been ineffective in helping those who need it most and, over time, has become a barrier to Malaysia’s progress,” the statement read.

The prices of fuel and sugar in Malaysia would still be among the lowest in the region, it said.

It also said the Government made the decision about the subsidies following robust consultations with the people, citing the thousands of Malaysians who took part in policy labs and Open Day.

“As with subsidy reform, the Budget, the Government Transformation Programme and the National Key Economic Areas, the Government has made a determined effort to engage the public, listen and learn, and then act in the best interest of the nation,” it said.

Although Malaysia had weathered the global recession well, the Government said the country could not achieve its ambition to be a high-income nation by simply managing through a crisis.

“As the Government has consistently said over recent months, we must also implement subsidy reforms that will remove distortions in the marketplace and enable us to better target our resources on those most in need, and on investments that will provide lasting benefits for Malaysians.”

It assured that the savings from the reforms would allow for resources to be better channelled for families, communities and business growth.

“Measures such as the 1Malaysia clinics, the 1Malaysia mobile clinics, as well as the scholarships for all 9A+ and deserving students – specifically those who have done well, but come from lower income families – are made possible by such reforms,” it said.

There were three main concerns which led to the subsidy rationalisation: wrong beneficiaries, wastage and abuse.

The Government also said that businesses used twice as much subsidised sugar than households, while owners of luxury cars enjoyed cheap fuel although they could afford unsubsidised prices.
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