02 June 2010

Preventing Malaysia to become the next Greece

Malaysia will become the next Greece in 9 years” reported a daily, saying that if nothing is done to reduce the current budget deficit; we will become the headline of the world then. Sound scary? 9 more years left only…

 
As a preventive measure, Datuk Idris Jala, Minister in the Prime Minister’s Department, and the head of Performance Management and Delivery Unit (Pemandu), is proposing to cut subsidies that could save up to RM103bn over 5 years for our nation (see chart).

 

 
Amongst the key proposals are:

 
- Petrol prices will increase by 15 cents/liter in mid-year, and thereafter 10 cents every 6 months until 2014.
- Toll rates to increase as per concession agreements, except for those without alternative toll-free routes.
- Electricity tariffs will be raised by RM0.024/Kwh and thereafter RM0.016/Kwh every 6 months.

 
If implemented, the country budget deficit may see a small budget surplus of about 1% of GDP in 2012. And, inflation will rise to 4% in 2011-12 before easing to 3% in 2013.
To gather feedback from the public on its proposals, Pemandu had organized the Subsidy Rationalisation Lab on 27 May. According to Pemandu, the Government provided a total of RM74bn as subsidies in 2009.

Well, I supported the subsidy reduction and it should be done gradually over the next few years. While cutting subsidies will benefit the nation in the long run, Malaysians would face financial difficulties in the short to medium term. Anyway, this is a very good opportunity to test the spirit of 1Malaysia.

 
I think, if Rakyat can face it, Government must do following too.
  1. Reducing red-tape of doing business.
  2. Reducing Government’s total operating expenditure.
  3. Be efficient or cost effective.
  4. Besides rewarding, penalized or remove those non-performing civil servants.
  5. Ensuring fair pricing of projects/deals, by using open-tender system.
These measures could prevent Malaysia for following Greece’s footstep also. It must be two ways actions, not only from Rakyat itself. Government should lead an example, so that Rakyat could face it voluntary.

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