NEM & Subsidy Removal: Proof Of BN’s Double Standard And Flagrant Inconsistency

The 5 sen price hike imposed on RON95 fuel is a second successive increase in 6 months. The announcement made by Dato’ Seri Idris Jala also included subsidy removal on other essential household items such as sugar (20 sen increase), diesel (5 sen increase) and LPG (5 sen increase).

While Barisan Nasional claims the quantum of these price hikes is too small to have an impact on the public, the policy direction that is taking shape cannot be mistaken. Barisan Nasional through PEMANDU has outlined (announced during Subsidy Rationalisation Open Day on 27 May 2010) a subsidy removal plan to impose a 6-monthly price hike on RON95 fuel. The announcement last night confirms that similar price hikes will take place in the future and perhaps at an even bigger quantum as the originally proposed quantum of price hike was at 10 sen per price hike for every 6 months[1].

A similar phased removal of subsidy on other essential household items was also outlined including the removal of gas subsidies extended to wealthy IPPs owned by business elites and cronies of Barisan Nasional. Amazingly, the only hikes implemented so far are on those items that hit directly on the people’s purse; not the cronies’.

PEMANDU estimated that a total of RM1.12 billion could be saved in 2010 if subsidies on gas price to IPPs and non-power sector are reduced. This could have been achieved if gas price to IPP and non-power sector is increased by RM4.65 per mmbtu and RM2.52 per mmbtu respectively. Currently, the government through PETRONAS subsidises the IPPs and industries to the tune of RM19 billion annually as the subsidised gas price of RM10.70 per mmbtu (for IPPs) is remarkably lower than the average market price of imported gas of RM38 per mmbtu (should the country need to import the gas to meet the demand against a shortfall in production).

Therefore, the Prime Minister and his government must answer why it is hell-bent on pushing for subsidy removal on fuel, sugar and LPG that will undoubtedly increase the burden of the lower income group; when similar zeal is not shown vis-a-vis the rich corporate giants?

This is more so when nothing has been done so far (despite promises after promises) to reform the subsidy allocation system. This is pivotal to ensure that the lower income group will continue to benefit from state assistance to counter the rising cost of living. PEMANDU seems to be extremely efficient at pushing for the subsidy removal; yet extremely slow at coming out with a solution to redistribute the subsidy that are meant for the poor.

Thus, I share the scepticism of the public in reviewing the recently announced concluding part of the NEM. Barisan Nasional outlines ambitious ideas and concepts on bringing reforms to the economy, yet its track record at implementing these ideas have been appalling.

Barisan Nasional talks about the necessity to reduce subsidy in order to cut the nation’s deficit as a result of its carefree spending in the last decade. It chases the small change in the form of subsidy removal on household items most widely used by the people, yet it procrastinates on confronting the real subsidy monsters (in the form of the IPPs).

In the end, the RM126 million saved from the 16th July’s 20-sen hike on sugar is not even enough to pay for PEMANDU’s own exorbitant cost as reported by Malaysiakini (3rd December 2010). Where is the moral authority of a government that takes RM126 million from the poor to pay RM66 million to consultants for the set up of a government unit and another RM65 million for its whole operation in 2010?

Hence, I take the recent announcement on NEM with a pinch of salt. Barisan Nasional will continue to hoodwink the public of its intention to transform the public sector, but it quietly  pays the new breed of civil servants in PEMANDU top of the range salaries that will easily beat the private sector.

Its NEM document dedicates a substantial part on promoting competition through liberalisation and deregulation, but behind closed doors it awarded a licence to operate the prized 700 MHz to YTL (yet again) without an open tender, much to the chagrin of the telecommunications industry.

There is a patent of flagrant inconsistency between the public pronouncement and the honesty to carry out the announcement. This is not surprising as the whole machination of this administration is based on the perpetuation of a public image crafted by firms of public relations that are paid by the taxpayers’ money – with the sole intention of buying Barisan Nasional additional time before the people casts their judgement.

The onus is then on Pakatan Rakyat and the people to keep a vigilant eye on each of the decision by this administration. If we fail in this endeavour, we are definitely en route to paying a fuel price at RM2.10 litre within a year’s time.




[1] Please refer to Subsidy Rationalisation Open Day, 27 May 2010

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