Posted by: Financial Sith Lord | May 25, 2010

Subsidies Poser – Amended

Recently, I received an sms from PEMANDU, conducting polls on the Government’s deficit due to subsidising various consumer goods, which results to an annual expenditure of RM 74 billion. The polls asks whether the respondent agrees to reduce the subsidies. The only answering options given was a Yes or a No. To my opinion, its more than that. The voices or opinions of the nation on this issue could not just be represented by merely Yes or No answers.

Deeper and more deliberate views must be highlighted and taken into consideration as the essence of the issue is much more intricate than Yes/No answers. Now, let us explore both possibilities and study the impact of each answer.

If the answer is YES; the Government reduces its subsidies on all consumable and controlled goods. This would definitely result to price increase in most consumable goods. Traders would jump in the wagon and increase prices in other products as well, thus creating an inflation of price in the local economy. This would also result to demands for higher wages, which is unlikely to happen. As it is right now, the majority of the country’s workforce belongs to the lower income group demography (salary range between RM 2,500 – 3,500). This salary scale are taxable, and if they do qualify for exemption, they would still have to pay for taxes in other various forms.. The scale of reduction is vital to maintain economic stability in the country. As it is right now, Malaysia’s economy is somehow cosmetic. Main reason; is to attract FDIs (Foreign Direct Investments) into the country.. the Iskandar Region amongst other projects implemented by the Federal Government. Malaysians are still learning financial prudence and are still in the teething stages. KPIs set by the Prime Minister are fractionally met by most of the government and public services, but there’s basically no way in the world to monitor the KPIs of GLCs. The question is: are we, the citizens of Malaysia, paying the price for the poor performances of GLCs?

If the answer is NO; the Government maintains its subsidies on all the vital consumable and controlled goods, the consumers, especially of those belonging to the lower income group (which reflects a vast majority of the income demography), can slowly build up its financial stamina and adapt the financial prudence propagated by the government today. The wealth is truly distributed amongst Malaysians and everyone gets to enjoy the benefits. But the government would eventually be in financial ruins. To avoid that, various forms of revenue streams can be created and several key elements would have to be implemented. When President Obama took the helm as US President, he led the inquiries on bonuses and remuneration packages of top US Corporations and their CEOs, which led to the biggest rounding up of US corporate history. Things are rather left unchecked here in Malaysia, and GLC CEOs are raking in ridiculously high salary packages.

Malaysia strives to be a developed nation by adapting various measures commonly practised by modelled nations. It should balance the issue intricately, preferably reducing aids in certain not-so-vital product, and maintaining aids in certain very-vital goods, in line with 1Malaysia’s motto, ‘Rakyat di dahulukan, Pencapaian di utamakan’..

What say you??

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