Thursday, May 27, 2010

Removing Subsidy Is What Economic Hitmen Would Ask!

Let me make it clear that removing subsidies from essential items and so forth is what the economic hitmen would do: to cheat nations out of trillions of dollars. As of this time, Malaysia is having a debt that almost consume the current amount of reserves that Bank Negara has recorded right until of end of last month. That's why, there are some things like the football betting licenses or land exchange in Singapore are more or less the quick-buck measures to save Malaysia from ending up like Greece.

Apart from how the money from the Petronas earnings / royalty there are some mega companies in Malaysia that seems to reap tons of profits out of sales and yet increasing the price of say an item / service with the excuse of cost overruns. Thus, rather than Idris Jala saying that "End subsidies and become another Greece", there should be another title to work on this problem. The title itself simply shows intimidation. And to claim that BN takes care of people doesn't seem to get reflected here. There is an impression that trust is getting betrayed, although it doesn't speak much in form of actions.

The most radical way of reducing this case is to peg the US Dollar to the pre-1997 crisis rate of 2.5. In this case, given of the amount of imports after conversion to ringgit, we can save approximately 30% of the subsidy bill that is present. Letting the dollar being decided by the market forces at this time is unsustainable. The dollar has to be devalued, while the other basket of currencies has to be revalued to pre-crisis values. A statistics chart of the currency in 1997 before July is still available for check at the Bank Negara online archives.

Yesterday, PEMANDU has been sending survey SMSes to everyone on what is the best timetable to gradual removal of subsidies. Obviously people would go for 5 years. It's better than facing the shock as in June 2008 where Abdullah Badawi decided to reduce fuel subsidy by 70% out of a standard RM 1. It seems that there is still some confusion on whether the government's stand that there's a 30 sen subsidy per liter of petrol contradicting with ex-Minister Shahrir Samad saying that there is no more subsidy for petrol. I don't really believe that it is a survey but more leaning to a public relations matter.

If the government and Khazanah can take over the highways from PLUS and other concessionaires, it is also a way to channel money from users to them. IPP power reserves can be halved as to save more money required to pay to the providers. And so does other realistic measures that are better than reducing subsidies altogether.

I was wondering how the New Economic Agenda that PR and Anwar Ibrahim were talking about for more. than a year or two can fit into the solving of this economic problem there. Previously Najib used to say that "Our economy is strong." But the situation seems to say otherwise. It's like cheating the people out there. I just want what Anwar's NEA document mantra can do in this.

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