By Clara Chooi | May 18, 2011
The Malaysian Insider

KUALA LUMPUR, May 18 — Pakatan Rakyat (PR) lawmakers have blamed Barisan Nasional (BN) for failing to address the country’s addiction to subsidies with alternatives, rebuking Datuk Seri Najib Razak for transferring the “opium’ to cronies.

They said escalating cost of living and stagnant wages have made Malaysians dependent on subsidies, warning that any sudden removal would bankrupt people instead of encouraging competition and wiping out market distortions.

The PR lawmakers suggested the Najib administration take a more holistic approach to cut its burgeoning subsidy bill through a total restructuring of the system by reducing subsidies to corporate giants instead of to the poor, implementing a minimum wage council to boost salaries, and providing better public transportation system to reduce dependency on vehicle ownership and fuel consumption.

“What they are essentially doing shows that they are not serious in their intent to restructure subsidies in the country,” said DAP publicity chief Tony Pua who agreed with Najib subsidies were like “opium” to the Malaysian economy but he blamed the government for failing to provide a proper alternative to consumers before reducing their access to the subsidy “opium”.

He also complained that the administration was going about its subsidy removal plan in the wrong way by cutting from the “poor man on the street” and yet at the same time, still providing massive subsidies to big corporate giants.

“What Najib is doing instead is making this opium exclusive to Barisan Nasional (BN) cronies,” the Petaling Jaya Utara MP told The Malaysian Insider.

He said in order to ease the people’s addiction to the subsidy “opium”, better alternatives should be made available like a good public transportation system.

“At this point in time, Malaysians consume a large amount of fuel, not just because we pay lower-than-market rates but because we have no other alternative but to own cars due to the lack of transportation infrastructure,” Pua added.

He also suggested the government consider cutting back on its subsidies to corporate giants like the independent power producers (IPPs) and toll concessionaires instead of depriving the poor of financial aid.

Klang MP Charles Santiago agreed with Pua and added that one of the main reasons why Malaysians in general are so “addicted” to subsidies is because of their stagnating wages. He pointed out that 34 per cent of Malaysian workers earn monthly salaries of below the poverty line at RM700.

“Between 2000 and 2010, wages increased by only 2.6 per cent, meaning that in the last ten years, there has been a stagnation and our wages cannot match the rising cost of living.

“Also, the country’s household debt to the GDP is 78 per cent, and in the next two years, it will rise to 80 per cent. This shows that Malaysians are borrowing to survive… the average Malaysian family is highly indebted and highly dependent on subsidies for survival,” he said.

Charles, a trained economist, suggested that the government table a bill in the next Parliament sitting in June to propose the formation of a minimum wage council that will set minimum wages at between RM1,500 and RM2,000.

Additionally, he said, a cash assistance programme should also be implemented to complement the council, targeting groups like the poor and those earning below RM1,000 monthly.

“Finally, there should be major effort by the government to cut back on corruption which costs the country a lot of money, cut back on big expenditures like subsidies to corporate giants and regulate the outflow of illicit capital,” he said.

He pointed out that if the government wanted to reduce market distortions and encourage competition, it should employ the same measures on corporate giants like IPPs and toll concessionaire holders.

“Let them fight in the global economy. They should be competitive too… if they cannot make it, then too bad,” he said.

He pointed out that the “culprit” that was sustaining market distortions was the government itself in its provision of massive subsidies and financial grants to corporate giants and cronies.

“And on the other hand, they are reprimanding and humiliating the rakyat by saying we are addicted to this subsidy opium, which pales in comparison to what they are giving to their cronies,” he said.

Dzulkefly urged the government to consider policies outlined by PR in its Buku Jingga, in which an overall restructuring of the subsidy system is suggested.

“We in PR understand that the approach is not going to be simply dismantling subsidies… we call for a holistic restructuring of the system. Theirs (BN) is just a piecemeal, short-term method which, if they proceed with it, will force the poor to be subjected to the vulgarities of the global economics,” he said.

The Kuala Selangor MP added that a total subsidy withdrawal would trigger inequitable costs to the more sensitive groups like the lower income earners.

“This is like a neo-conservative policy of enriching cronies and the more privileged group while victimising the poor.

“Ask Najib, through this way, will it not exacerbate the inequality of distribution of wealth and equity?” he said.

Dzulkefly also reprimanded the administration for constantly bragging that its policies placed the people’s interests above all else.

“It is Umno cronies that benefit, who are addicted to this opium. You brag about it as though it is a crime that we enjoy subsidies. We are taxpayers, too.

“In fact, we should be given our daily essentials and quality services like good healthcare, education, transportation, water and so on but here you are talking about prioritising withdrawing subsidies,” he said.

PKR communications director Nik Nazmi Nik Ahmad said the government should not punish the public for its inability to balance the country’s budget, by removing subsidies to those in need of it.

He pointed out that when the economy was doing well between 2003 and 2008, the government had failed to cut its spending and had instead embarked on massive infrastructure projects, resulting in a budget deficit for the past few years.

“No one disputes that subsidies distort the economy but the issue is that in Malaysia, massive corporate giants like the IPPs, the toll concessionaires, continue to enjoy generous subsidies worth billions of ringgit more than the smaller things like sugar, flour and rice.

“The fact that we are facing a deficit budget now should not be blamed on the people, it is the fault of the government and its failure implement strategies to encourage a dynamic growth in the economy.

“The people are suffering from high inflation, no minimum wage, the prices of properties ballooning… so why burden the public instead of the corporate sector,” he said.

In a speech to the Oxford University’s Centre for Islamic Studies on Monday, Najib described fuel subsidies as “opium” to the Malaysian economy, adding that it will have to be reduced gradually to bring the budget deficit under control.

He said his government had budgeted for fuel subsidies to cost the economy RM11 billion this year but that the estimate had soared to around RM18 billion because of high international crude oil prices.