Wednesday, June 9, 2010

REMOVING SUBSIDIES


As posted by Dr. Mahathir Mohamad at Che Det on June 8, 2010 2:28 PM

1. Since the report that Datuk Seri Idris Jala had announced that the country faces the possibility of going bankrupt if the Government continues with the high subsidies to various items, there has been much concern and debate.

2. The Malaysian Insider claims that UMNO has a distaste for subsidy cuts because it has rebuked Idris. I suppose the Insider and the opposition are all against subsidy cuts even if they lead to Malaysia going bankrupt.

3. Everybody must have read about the fate of Greece whose borrowings exceeded its GDP. The European Union has had to bail out Greece to the tune of 300 billion Euro to prevent it from going bankrupt and pulling down the European Union with it. Already the Euro has depreciated substantially and many are predicting the demise of this European common currency. The European economy, once powerful and rich, faces the possibility of a recession, simply because of the bankruptcy of one of its members.

4. Idris has not predicted bankruptcy today or next year or any time soon. He says if the debt goes up by 12 per cent per annum we would be bankrupt by 2019 when our debt would be equal to our GDP. Do we want to let the country slide into banruptcy?

5. What Idris is saying is that if we continue with the present level of subsidy (already reaching RM74 billion per annum) and we cannot pay our debts, we will certainly not be able to arrest the slide.

6. To pay our debts we must cut back on spending, A big item is the subsidies for food, fuel and power, health, education and tolls.

7. I believe he will not cut subsidy, or at least not much, on food, health and education. But the subsidies for fuel and power and toll payments should be gradually reduced.

8. When I was Prime Minister the price for one barrel of oil was only US$30. The subsidy was not too big. It is now US$80. To keep the same price would mean to increase the amount of subsidy to make up the difference. Similarly when the Government agrees not to increase toll rates it has to reimburse the losses sustained by the operators. This cost a lot of money.

9. Borrowing money to pay for the increasing cost of subsidy is not the answer. A good Government must ensure that servicing loans is sustainable.

10. The Insider and the Opposition must know all these. If they are against cuts in the subsidies it must be because they want the country to go bankrupt so that the Government party would be defeated. You may defeat the Government but if you inherit a bankrupt country, you will not be able to turn around the country either.