Wednesday, September 27, 2023

After eating out, targeted subsidy is on deck for Raja Formula

A poster is going around ridiculing Rafizi as Raja Formula for his past smart alec remarks during campaigning as opposition to criticise then BN government's economic policies. 

He was recently on the receiving end for commenting eating out reduced disposable income. Thick as a Brick commented:

He is not wrong in his assessment. In fact, this blogger have taken the same position for quite a long time. 

Its just his bad luck for sharing an unpopular view in the midst of social media getting back at "Minister Formula" for his GST statement to reintroduce the cancelled tax regime. Indirectly, he admitted wrong for his past criticism of Dato Najib for implementing the GST.  

Read on HERE

There is a situation of shortage and big jump in retail price of rice albeit imported rice. It is followed by price increases for premium sugar, and non-white bread. Coming next in your bills to come will be tariff increase for electricity. Government contemplating of bringing back a previous plan Najib's  to introduce targeted subsidy. 

Rafizi will have to ready himself to be criticised for copying again a plan prepared by the man he pursued to prison.

Thick as a Brick commented:

One reason Rafizi is receiving nasty responses for a fair and logical observation on eating out was also his past remark as opposition. 

He lamented and politicised rising cost of goods. Naturally as opposition, it was anything goes. When he became Economic Minister, he was repeating the same line a former BN Minister, Dato Hasan Malek made over switching to substitute goods.

In the early months of his appointment, he introduced vending machine as a solution to rising cost of food and it became a source of ridicule. It was a bad start as social media dug up on the vendor of the vending machine who happen to be his fellow collegian from MCKK. 

The thinking public was expecting more from Rafizi such as reforming the food supply chain, or cutting bureaucrasy, or elevating local food production with a win-win arrangement to both producers and consumers. So bear the brunt of it, Rafizi

He should refrain from political blame game and be professional in his economic narrative. 

However, old habit die hard and he is already at it with a political narrative on an urgently needed targeted subsidy policy. 

Dr Yeah Kim Leng wrote on the matter in The Star today. An extract below:

In Malaysia, the government has long subsidised basic goods and services. These subsidies are intended to lessen the burden on vulnerable groups. Among other things, they include subsidies for rice, flour, cooking oil, chicken and eggs, electricity, petrol, diesel, cooking gas (LPG), healthcare and education.

Subsidies do not actually make the cost of the items cheaper. What happens is the user only pays a fraction of the cost to purchase those items, while the rest is borne by the government. The portion that is borne by the government is what we refer to as subsidies.

Herein lies the problem. Our subsidy bill, which includes social assistance, has been growing over the years. If you can imagine, in 2008, our subsidy bill stood at RM35.2 billion. As of 2022, this had grown to RM67.4 billion. This is almost a two-fold increase.

Subsidies in 2022 accounted for nearly 4% of Malaysia’s gross domestic product (GDP) – the value of goods and services produced - and made up approximately 23% of the government’s operating expenditure. Basically, almost a quarter of allgovernment’s operating expenditure is used solely to provide discounts on some of the items the rakyat buys, rather than on things that may potentially be more productive for the nation.

We could also be using this on development expenditure, which is crucial for nation-building in economic and social development initiatives such as education, healthcare, social housing and public transport.

From another perspective, if we consider that the government’s revenue in 2022 was RM234 billion, subsidies consumed almost one-third of that. Thismeans, for every ringgit that the government collected, 30 sen went to subsidies.

The government has forecasted RM58.6 billion in subsidy payments for 2023. Despite being lower than the amount allocated for 2022, it is still a huge number. Needless to say, this isn’t sustainable.

 Read on HERE and HERE]

Thus the need for targeted subsidy to make room for development expenditure and social assistance to continue for the B40. 

It will upset the larger M40 and politically influential T20 income segments for it will increase their cost of living. 

So how will Rafizi convey this, out-debate the opposition, and convince the fuming voters to ensure continued support for the Unity Government will depend on his communication and political skill? 

That is Political Economic 101 or another way of putting it, the economic version of RealPolitik. 

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