Friday, July 16, 2010

Latest subsidy cuts irrational, claims Anwar

Friday, 16th July 2010

1Malaysia APCO First People Last!

Datuk Seri Anwar Ibrahim today criticised the Najib administration’s rationale for the latest subsidy
cuts, pointing out that the savings of RM750 million was a pittance compared to the billions spent for other “careless” expenditures.
The Pakatan Rakyat de facto leader accused the Barisan Nasional (BN) government of spending billions to bail out troubled government-linked companies and to foot exorbitant bills from foreign consultancies employed to help improve the prime minister’s international image.
He cited an example of how the government had spent RM700 million in taxpayers’ monies to help Sime Darby, which was facing losses amounting to RM946 million due to cost overruns in several projects including the controversial Bakun dam project.
“Burdening the people with the excuse of reducing fiscal deficits and using the savings to accommodate the government’s extravagance is not right and should be stopped immediately.
“Where is the dignity of a prime minister who takes the people’s money in the name of restructuring subsidies but using it to pay firms like APCO Worldwide up to RM77 million a year just to improve his image?
“This RM77 million to APCO is almost the same amount as the estimated savings from subsidy cuts on sugar, which is about RM126 million (as announced by Pemandu),” he said in a statement today.
Anwar, who is also the Parliamentary opposition leader, further pointed out that just yesterday, the House was informed that the PM’s Department’s operational expenditure had reached over RM3.8 billion last year and had been allocated a budget of RM3.9 billion for this year.
“This includes expenses for secretariats for former prime ministers and for Permata, which is handled by the prime minister’s wife,” he said, referring to Datuk Seri Najib Razak’s wife, Datin Seri Rosmah Mansor.
In a written reply to DAP’s Taiping MP Nga Kor Ming yesterday, Minister in the Prime Minister’s Department Datuk Seri Nazri Aziz had explained that the escalated operational costs were due to the creation of new agencies in the department, including Pemandu (Implementation and Coordination Unit), and the National Economic Advisory Council (NEAC), as well as an increase of manpower in some existing agencies.
Anwar claimed that cutting subsidies would not solve the country’s deficit problem but would instead exacerbate it similarly to 2008.
“In 2008, at the height of the fuel price rise, the country’s deficit escalated 4.8 per cent compared to 3.2 per cent in the previous year.
“This happened because the government was not disciplined and lacked the political will to channel the savings from the subsidy cut to sectors that truly needed a boost. Instead, more wastage and losses happened,” he said.
Anwar claimed the most effective solution to the country’s economic woes was to institute a more comprehensive reform of the economy, instead of solely focussing on the vulnerable groups.
“The prime minister cannot tell the people to change their way of life when cronies, politicians and the elite few continue to enjoy corporate subsidies like gas to independent power producers (IPPs) which costs about RM18.9 billion annually.
“This is 25 times more than the savings resulting from this latest subsidy cut,” he said.
Anwar, however, said he did not oppose the rationale of the subsidy restructuring exercise to ensure more aid is channelled directly to the 75 per cent of people whose household incomes were below RM2,000 monthly, but questioned if the government had a mechanism to carry this out.
He claimed that the present cuts were “irresponsible” on the government’s part as it had failed to prepare a proper system to help those most affected by the price hikes.
“The government has been speaking of the subsidy rationalisation plan since 2008, claiming that it was for the purpose of restructuring subsidies to ensure that it would benefit the needy.
“However, till today, the people are still waiting for that mechanism,” he said.
Anwar urged Najib to inform the people of how he planned to spend the estimated savings of RM750 million from today’s cuts.
“My advice is for this savings to be channelled in the form of higher allocations for higher learning institutions, new investments in the education sector and direct welfare aid to those with household incomes under RM2,000. This is to ensure that the savings reach the people directly,” he said.
He underlined four emergency measures that the prime minister should take to gain the people’s confidence and prove that their sacrifice of having to pay higher prices was worth it.
“The government should announce sweeping improvements to its procurement system to ensure that it is more transparent and will bring the best value to the people.
“The government should also restructure gas subsidies given to IPPs so that the savings can be channelled back to the people,” he said.
Anwar also urged the government to ensure better control over government-linked companies and agencies to avoid having to force the public to bear their losses.
He further urged the government to prove its sincerity in fighting corruption by ceasing all political interferences in the work of the Malaysian Anti-Corruption Commission and the Attorney-General’s Chambers.
In the government’s latest move to rationalise subsidies, the prices of RON95 petrol and diesel were today raised by five sen a litre while RON97 fuel sees subsidies removed completely and will be subject to market forces.
The price of natural gas (LPG) rose by 10 sen while the price of sugar increased by 25 sen per kilogramme.
In explaining the latest cuts, Najib said yesterday that the move was necessary to reduce government expenditure and strengthen the country’s financial position.
As qouted by reliable source, this is the first stage of subsidy cuts and it is expected to be reviewed every six months. Another sources said that subsidies on electricity are also expected to be cut but no decision has been made yet on when that will happen.

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