Inflation, Price Increase and Subsidies

My Thoughts, week ending 21st May 2011

This week ended with talks or rather; with the UMNO Regime “preparing” the rakyat with news of the forthcoming price increase for RON95.

I am not one who advocates subsidies but as Najib has said, subsidies are like opium and the rakyat are addicted.

Therefore, it is very important indeed for the administration to look at its priorities especially when it comes to cutting subsidies.

Removing subsidies for RON95 and for sugar and diesel (as announced recently) are definitely not the way forward. These are basic items which will also be the “multiplier” – thus an increase in price would bring along a rolling effect on the price of many more basic necessities.

Whilst the UMNO regime has reported an inflation rate of 3% the truth and reality on the ground is that price of household items and basic necessities have increased by an average of 10% year to year with no corresponding increase in salary.

Thus at this point in time, reducing subsidies for RON95 as part of the administration’s subsidy rationalization plans is definitely not the way.

What more with the recent Bank Negara’s announcement of an increase in base rates means the rakyat would be burdened with higher loan repayments.

The average Malaysian family spends over 40% of their income on purchasing basic household necessities. Thus a big portion of our expenditure will be further hit by an increase in price of basic necessities.

Therefore with these real figures it would definitely not be morally right for the administration to even consider a reduction in the subsidies for RON95. Not at this point in time anyway.

What should rightfully be done instead is to have the political will to regularize the subsidies given that does not bring direct benefit to the lower income communities. Subsidies given to the Independent Power Producers for example, must definitely be re-looked at seriously.

Similarly, tightening the belt by the administration and leadership must be given serious priority. Unnecessary and wasteful spending must be curbed. Good governance and competency must be real and not just be given lip-service.

Public transportation must be on top of the list of priorities that the administration need to reform. The services must be efficient, user-friendly and affordable where the rakyat would be proud to use it and would encourage others to use it too.

Introducing minimum wages would be another way to spread the burden with businesses. With bigger take-home pay and thus stronger spending power, an increase in price of basic necessities due to reducing subsidies would bring lesser impact.

Yes I remain a proponent of rationalization of subsidies. The nation’s economic status must be real; based on real figures and not on these “subsidized reality”. There must come a point in time when we free ourselves of the addiction as suggested by Najib or as the doctor said,” we must get rid of the crutches.”