Subsidy Rationalization Lab
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Dato Sri Idris Jala, CEO of PEMANDU and Minister in the Prime Minister's Department, presented Malaysia's subsidy rationalization roadmap which aims to reduce government spending on subsidies from RM74 billion in 2009. The plan involves gradually increasing fuel, electricity, and toll prices while providing cash rebates and discounts as mitigation measures. These changes are estimated to save the government RM103 billion over 5 years, helping reduce Malaysia's rising debt and deficit. Public feedback supported rationalizing subsidies over 3-5 years by a majority of 66%. While an unpopular decision, rationalization is necessary to avoid financial problems and move closer to achieving Vision 2020.
Subsidy Rationalization Lab
- 1. Opening Presentation Dato Sri Idris Jala CEO of PEMANDU Minister in Prime Ministers Department
- 2. Setting the stage .... The purpose of Subsidy Rationalisation Lab Open Day : To share lab findings & recommendations and seek public feedback To recommend a Subsidy Rationalisation Roadmap to the government
- 3. PM has introduced 4 pillars to achieve Vision 2020 1 Malaysia, People First, Performance Now Government Transformation Programme New Economic Model 10th Malaysia Plan
- 4. People First Performance Now was a first step to unite our people
- 5. 2010 is a good year..
- 6. We introduced the GTP for the rakyat
- 7. The GTP is already delivering results in just 3 months ....
- 8. 15.1% drop in overall Index Crime
- 9. 39.6% drop in street crime
- 10. 928,775 passenger increase in LRT ridership
- 11. 929 pre school classes have started and 7,616 primary schools have been ranked
- 12. Out of 44643, 12753 are no longer hardcore poor
- 13. 2665 government contracts have been published on line
- 14. 97 people convicted of corruption have been published in MACC website www.sprm.gov.my
- 15. We have launched the New Economic Model...
- 16. Wholesale Financial & Retail Serv & Tourism Capital Mkt Greater Oil, Gas & KL Energy ...and Biz Services finalized Education 12 NKEAs Agri Electrical culture culture & Electronics Health lth Telco Services ces Palm Oil
- 17. ..to boost USD 15,000 our income (GNI per capita) USD 7,000
- 18. Malaysias Competitive Index has improved 10 th significantly.. 18 th
- 19. Our GDP growth for first quarter 2010 is.. 10 %
- 20. More investors are investing in our country...
- 21. We have the right ingredients to succeed..
- 22. However, the future looks gloomy....
- 23. Malaysia has a rising debt... RM 362 billion
- 24. ..and a rising deficit RM 47 2009 billion RM 1998 5 billion
- 25. If government debt continues at the rate of... 12 % per annum Government debt RM billion 1997 2010 2020
- 26. ...we could go bankrupt in 2019 RM 1158 billion debt Government debt RM billion 1997 2010 2020
- 27. We do not want to end up like Greece .. EUR 300 SOURCE : Deputy finance minister of Greece , Filippos Sahinidis billion debt
- 28. ..or other similar countries.
- 29. In order to save our country...
- 30. We must increase our GDP..
- 31. ..AND reduce government expenditure
- 32. International & local leaders realized the need to reduce our subsidy bills...
- 33. ..and Pakatan Rakyat share the same views!
- 34. Malaysians need to be aware that we are one of the highest subsidized nation...
- 35. ..even higher than Indonesia & Philippines 11.0 4.6 4.7 OECD avg = 1.5% Malaysia2 Swit- France United Indonesia India 3 China 4 Philippines zerland Kingdom
- 36. We spent record subsidy in 2009 RM 74 billion
- 37. Our subsidy bills in each category is enormous Social Fuel & Energy RM RM 42.4 billion 23.5 billion Infrastructure Food RM RM 4.8 billion 3.4 billion
- 38. This is equal to .... RM = RM 74 billion subsidy 12,900 Per household
- 39. Somalians pay more for fuel than Malaysians 157 Average retail fuel price in 20081 th place US cents/litre Singapore Somalia Thailand Malaysia
- 40. As a result, we consume more fuel than other countries.. Litres per capita Malaysia Singapore Thailand Indonesia China India 1997 2007
- 41. We will likely become a net importer of petrol by 2011 2010 net importer Daily local demand status at 8% Thousand barrels 8% p.a. growth pa growth Daily oil production Per day 2008 09 10 11 12 13 14 2015 SOURCE: Petronas analysis
- 42. We have been giving subsidies RM Billion in 2009 to the wrong Students income All consumers group Companies Poor 1.7 Farmers & 0.2 Fishermen Others 0.4 Total
- 43. We have the cheapest cooking oil in the region.. Malaysia Indonesia Thailand Brunei Singapore Price of cooking oil (1kg bottle) RM, 2009
- 44. Our sugar price is the lowest in the region too! Malaysia Thailand Indonesia Singapore Philippines Price of sugar RM/kg, 2009
- 45. And the lowest price for flour too.. Malaysia Indonesia Thailand Philippines Vietnam Singapore Price of flour (RM/kg, 2009)
- 46. We must live in the real world.. We developed a framework for subsidy rationalisation
- 47. Principle 1 Focus on the Big Ticket Items to achieve the big savings (i.e Fuel, Gas / Electricity, Tolls)
- 48. Principle 2 Education is a human capital investment and subsidy should continue but we must reduce wastage / abuse
- 49. Principle 3 Agriculture & Fisheries are the mainstay of the rural poor and subsidies will continue but must reduce wastage / abuse
- 50. Principle 4 Healthcare is necessary for a healthy population / workforce and subsidy should continue but must reduce wastage / abuse
- 51. Principle 5 We should continue to subsidize the poor and disadvantaged and must target our subsidies better (eg: welfare assistance, low cost housing)
- 52. Principle 6 Rakyat engagement and communications are critical including engaging both sides of the political divide
- 53. Principle 7 Subsidy rationalization must be implemented on gradual / phase basis, not big bang
- 54. Principle 8 Mitigation measures and assistance are necessary to cushion the monetary impact (eg: stabilization fund and subsistence allowance)
- 55. Let me now take you through the subsidy rationalisation roadmap & mitigation measures
- 56. Fuel prices will be increased gradually.. Petrol 15 sen / litre Diesel 10 sen / litre LPG + 10 % + RM 0.17 to 0.40 /litre to streamline supersubsidy to RM 1.60 / litre Thereafter ; RM 0.10 / litre fuel every 6 months and 20% LPG every year
- 57. Mitigation Plan We will provide cash rebate.. RM RM 54 Per person per motorbike (less than 250cc) 126 Per person per car (less than 1,000cc)
- 58. Mitigation Plan This will cost the government.. RM 526 Million per annum
- 59. And the government will save.... RM 44.9 billion in 5 years
- 60. We are reviewing the possibility of introducing a floating price mechanism ....
- 61. Electricity tariff will be increased.. Gas price (Power) by RM 4.65 / MMBTU Gas price (Non Power) by RM 2.52 / MMBTU Electricity tariff by RM 0.024 / kWh Thereafter, increase Gas Price (Power & Non Power) by RM 3.00 / MMBTU and Electricity tarif RM 0.016 / kWh every 6 months
- 62. Mitigation Plan New tariff will not impact 56% of consumers Percentage of households, 2009 No Free Change 0-100 100-200 200-400 OVER 400 Distribution of usage (KWh/mth)
- 63. The government will save.... Savings (RM millions) (Gas) 2010 2011 2012 2013 2014 1,121 4,524 7,502 10,396 12,346 RM 35.9 billion in 5 years
- 64. Toll rates will be increased as per Concession Agreement
- 65. Mitigation Plan Applicable only for toll highways which have alternative routes...
- 66. Mitigation Plan And we will provide discount for toll users.. 20% Discount upon next reload (for more than 80 transactions per month)
- 67. Mitigation Plan This will cost the government... RM 60 million per year
- 68. In return, the government will save.... Savings (RM million) - Toll 2010 2011 2012 2013 2014 160.5 696 862 919 1,047 RM 3.7 billion in 5 years
- 69. Price of sugar, flour and cooking oil will be increased by Sugar + 20 sen / kg (every 6 months until 2012) Flour + 20 sen /kg (2010) + 25 sen / kg (2011) Cooking oil (1 kg) +15% (2010) +15% (2011), thereafter 5% every year until Jan 2014
- 70. Mitigation Plan You will receive... Year 1 Year 2 Cash rebate of RM20 to Discount through MyKasih MyKad/ MyKid card holders card (for income below through post-offices certain threshold) Use designated shops e.g. SaveMore, petrol stations at high poverty areas RM RM 560 million per year 200 million per year
- 71. RM 8.5 billion over 5 years ...will be saved
- 72. We will reduce wastages & inefficiencies Agriculture Education Usage of targeted Remove subsidies for foreign fertilizers students Re-target subsidies for poor families Fisheries Health Increase diesel price Increase outpatient fees Increase incentives for (RM 1 RM 3) fish caught (10 sen /kg) Poor will be continue to be (50 sen/kg) fully subsided Maintain RM 200 monthly allowance
- 73. We will reduce wastages & inefficiencies Agriculture RM Fisheries Education Health 16.3 billion over 5 years
- 74. We will save RM 103 billion in 5 years 35,542 Fisheries, Paddy Healthcare, Education, Welfare Gas 29,510 Tolls MKD, MasWings Cooking oil, Sugar, Flour Fuel 21,104 14,118 2,976 2010 1 2011 2012 2013 2014 RM million
- 75. These savings are intended to reduce our deficit and debt 2010 2015 Deficit RM 103 billion in 5 years
- 76. Studies by Bank Negara shows inflation will rise to 4% (2011 2012) 3% (post 2013) 2010 2013 2015
- 77. We asked 2 simple questions to the public...
- 78. SMS 1 Malaysia spent RM 74 billion on subsidies in 2009 causing a fiscal deficit. Should subsidies be reduced ? Yes or No
- 79. SMS 2 If Malaysia reduces its subsidies, should it be done ≒ in 1 year ≒ over 3 years ≒ over 5 years
- 80. What do 191,592 Malaysians think about Subsidy Rationalisation? SMS Forms Online
- 81. 115,703 Malaysians said YES to Subsidy Rationalisation 61%
- 82. 124,750 Malaysians responded we should reduce subsidies in 3-5 years 66%
- 83. We have to face the realities....
- 84. ..that this is the most unpopular decision that the Government has to make since independence
- 85. We have no choice but to avoid ending up like Greece EUR 300 SOURCE : Deputy finance minister of Greece , Filippos Sahinidis billion debt
- 86. This bold step will take us Vision closer to... 2020
- 87. We may be angry today...
- 88. ...so we do not expect people to be dancing on the street
- 89. But the realities are... Rising debt Rising deficit RM RM 362 billion 47 billion
- 90. And most importantly... We must do it for our future and our future generation
- 91. Your feedback is valuable to us..
- 92. ..for the future of our country.
- 93. Thank You w w w . p e m a n d u . g o v. m y