Subsidy Rationalization Lab

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  • 1. Opening Presentation Dato Sri Idris Jala CEO of PEMANDU Minister in Prime Minister’s Department
  • 2. Setting the stage .... The purpose of Subsidy Rationalisation Lab Open Day : To share lab findings & recommendations and seek public feedback To recommend a Subsidy Rationalisation Roadmap to the government
  • 3. PM has introduced 4 pillars to achieve Vision 2020 1 Malaysia, People First, Performance Now Government Transformation Programme New Economic Model 10th Malaysia Plan
  • 4. People First Performance Now was a first step to unite our people
  • 5. 2010 is a good year..
  • 6. We introduced the GTP for the rakyat
  • 7. The GTP is already delivering results in just 3 months ....
  • 8. 15.1% drop in overall Index Crime
  • 9. 39.6% drop in street crime
  • 10. 928,775 passenger increase in LRT ridership
  • 11. 929 pre school classes have started and 7,616 primary schools have been ranked
  • 12. Out of 44643, 12753 are no longer hardcore poor
  • 13. 2665 government contracts have been published on line
  • 14. 97 people convicted of corruption have been published in MACC website www.sprm.gov.my
  • 15. We have launched the New Economic Model...
  • 16. Wholesale Financial & Retail Serv & Tourism Capital Mkt Greater Oil, Gas & KL Energy ...and Biz Services finalized Education 12 NKEAs Agri Electrical culture culture & Electronics Health lth Telco Services ces Palm Oil
  • 17. ..to boost USD 15,000 our income (GNI per capita) USD 7,000
  • 18. Malaysia’s Competitive Index has improved 10 th significantly.. 18 th
  • 19. Our GDP growth for first quarter 2010 is.. 10 %
  • 20. More investors are investing in our country...
  • 21. We have the right ingredients to succeed..
  • 22. However, the future looks gloomy....
  • 23. Malaysia has a rising debt... RM 362 billion
  • 24. ..and a rising deficit RM 47 2009 billion RM 1998 5 billion
  • 25. If government debt continues at the rate of... 12 % per annum Government debt RM billion 1997 2010 2020
  • 26. ...we could go bankrupt in 2019 RM 1158 billion debt Government debt RM billion 1997 2010 2020
  • 27. We do not want to end up like Greece .. EUR 300 SOURCE : Deputy finance minister of Greece , Filippos Sahinidis billion debt
  • 28. ..or other similar countries.
  • 29. In order to save our country...
  • 30. We must increase our GDP..
  • 31. ..AND reduce government expenditure
  • 32. International & local leaders realized the need to reduce our subsidy bills...
  • 33. ..and Pakatan Rakyat share the same views!
  • 34. Malaysians need to be aware that we are one of the highest subsidized nation...
  • 35. ..even higher than Indonesia & Philippines 11.0 4.6 4.7 OECD avg = 1.5% Malaysia2 Swit- France United Indonesia India 3 China 4 Philippines zerland Kingdom
  • 36. We spent record subsidy in 2009 RM 74 billion
  • 37. Our subsidy bills in each category is enormous Social Fuel & Energy RM RM 42.4 billion 23.5 billion Infrastructure Food RM RM 4.8 billion 3.4 billion
  • 38. This is equal to .... RM = RM 74 billion subsidy 12,900 Per household
  • 39. Somalians pay more for fuel than Malaysians 157 Average retail fuel price in 20081 th place US cents/litre Singapore Somalia Thailand Malaysia
  • 40. As a result, we consume more fuel than other countries.. Litres per capita Malaysia Singapore Thailand Indonesia China India 1997 2007
  • 41. We will likely become a net importer of petrol by 2011 2010 net importer Daily local demand status at 8% Thousand barrels 8% p.a. growth pa growth Daily oil production Per day 2008 09 10 11 12 13 14 2015 SOURCE: Petronas analysis
  • 42. We have been giving subsidies RM Billion in 2009 to the wrong Students income All consumers group Companies Poor 1.7 Farmers & 0.2 Fishermen Others 0.4 Total
  • 43. We have the cheapest cooking oil in the region.. Malaysia Indonesia Thailand Brunei Singapore Price of cooking oil (1kg bottle) RM, 2009
  • 44. Our sugar price is the lowest in the region too! Malaysia Thailand Indonesia Singapore Philippines Price of sugar RM/kg, 2009
  • 45. And the lowest price for flour too.. Malaysia Indonesia Thailand Philippines Vietnam Singapore Price of flour (RM/kg, 2009)
  • 46. We must live in the real world.. We developed a framework for subsidy rationalisation
  • 47. Principle 1 Focus on the Big Ticket Items to achieve the big savings (i.e Fuel, Gas / Electricity, Tolls)
  • 48. Principle 2 Education is a human capital investment and subsidy should continue but we must reduce wastage / abuse
  • 49. Principle 3 Agriculture & Fisheries are the mainstay of the rural poor and subsidies will continue but must reduce wastage / abuse
  • 50. Principle 4 Healthcare is necessary for a healthy population / workforce and subsidy should continue but must reduce wastage / abuse
  • 51. Principle 5 We should continue to subsidize the poor and disadvantaged and must target our subsidies better (eg: welfare assistance, low cost housing)
  • 52. Principle 6 Rakyat engagement and communications are critical including engaging both sides of the political divide
  • 53. Principle 7 Subsidy rationalization must be implemented on gradual / phase basis, not big bang
  • 54. Principle 8 Mitigation measures and assistance are necessary to cushion the monetary impact (eg: stabilization fund and subsistence allowance)
  • 55. Let me now take you through the subsidy rationalisation roadmap & mitigation measures…
  • 56. Fuel prices will be increased gradually.. Petrol 15 sen / litre Diesel 10 sen / litre LPG + 10 % + RM 0.17 to 0.40 /litre to streamline supersubsidy to RM 1.60 / litre Thereafter ; RM 0.10 / litre fuel every 6 months and 20% LPG every year
  • 57. Mitigation Plan We will provide cash rebate.. RM RM 54 Per person per motorbike (less than 250cc) 126 Per person per car (less than 1,000cc)
  • 58. Mitigation Plan This will cost the government.. RM 526 Million per annum
  • 59. And the government will save.... RM 44.9 billion in 5 years
  • 60. We are reviewing the possibility of introducing a floating price mechanism ....
  • 61. Electricity tariff will be increased.. Gas price (Power) by RM 4.65 / MMBTU Gas price (Non Power) by RM 2.52 / MMBTU  Electricity tariff by RM 0.024 / kWh Thereafter, increase Gas Price (Power & Non Power) by RM 3.00 / MMBTU and Electricity tarif RM 0.016 / kWh every 6 months
  • 62. Mitigation Plan New tariff will not impact 56% of consumers Percentage of households, 2009 No Free Change 0-100 100-200 200-400 OVER 400 Distribution of usage (KWh/mth)
  • 63. The government will save.... Savings (RM millions) (Gas) 2010 2011 2012 2013 2014 1,121 4,524 7,502 10,396 12,346 RM 35.9 billion in 5 years
  • 64. Toll rates will be increased as per Concession Agreement
  • 65. Mitigation Plan Applicable only for toll highways which have alternative routes...
  • 66. Mitigation Plan And we will provide discount for toll users.. 20% Discount upon next reload (for more than 80 transactions per month)
  • 67. Mitigation Plan This will cost the government... RM 60 million per year
  • 68. In return, the government will save.... Savings (RM million) - Toll 2010 2011 2012 2013 2014 160.5 696 862 919 1,047 RM 3.7 billion in 5 years
  • 69. Price of sugar, flour and cooking oil will be increased by Sugar + 20 sen / kg (every 6 months until 2012) Flour + 20 sen /kg (2010) + 25 sen / kg (2011) Cooking oil (1 kg) +15% (2010) +15% (2011), thereafter 5% every year until Jan 2014
  • 70. Mitigation Plan You will receive... Year 1 Year 2 ▪  Cash rebate of RM20 to ▪  Discount through MyKasih MyKad/ MyKid card holders card (for income below through post-offices certain threshold) ▪  Use designated shops e.g. SaveMore, petrol stations at high poverty areas RM RM 560 million per year 200 million per year
  • 71. RM 8.5 billion over 5 years ...will be saved
  • 72. We will reduce wastages & inefficiencies Agriculture Education ▪  Usage of targeted ▪  Remove subsidies for foreign fertilizers students ▪  Re-target subsidies for poor families Fisheries Health ▪  Increase diesel price ▪  Increase outpatient fees ▪  Increase incentives for (RM 1 RM 3) fish caught (10 sen /kg) Poor will be continue to be (50 sen/kg) fully subsided ▪  Maintain RM 200 monthly allowance
  • 73. We will reduce wastages & inefficiencies Agriculture RM Fisheries Education Health 16.3 billion over 5 years
  • 74. We will save RM 103 billion in 5 years 35,542 Fisheries, Paddy Healthcare, Education, Welfare Gas 29,510 Tolls MKD, MasWings Cooking oil, Sugar, Flour Fuel 21,104 14,118 2,976 2010 1 2011 2012 2013 2014 RM million
  • 75. These savings are intended to reduce our deficit and debt 2010 2015 Deficit RM 103 billion in 5 years
  • 76. Studies by Bank Negara shows inflation will rise to 4% (2011 – 2012) 3% (post 2013) 2010 2013 2015
  • 77. We asked 2 simple questions to the public...
  • 78. SMS 1 Malaysia spent RM 74 billion on subsidies in 2009 causing a fiscal deficit. Should subsidies be reduced ? Yes or No
  • 79. SMS 2 If Malaysia reduces its subsidies, should it be done •  in 1 year •  over 3 years •  over 5 years
  • 80. What do 191,592 Malaysians think about Subsidy Rationalisation? SMS Forms Online
  • 81. 115,703 Malaysians said YES to Subsidy Rationalisation 61%
  • 82. 124,750 Malaysians responded we should reduce subsidies in 3-5 years 66%
  • 83. We have to face the realities....
  • 84. ..that this is the most unpopular decision that the Government has to make since independence
  • 85. We have no choice but to avoid ending up like Greece EUR 300 SOURCE : Deputy finance minister of Greece , Filippos Sahinidis billion debt
  • 86. This bold step will take us Vision closer to... 2020
  • 87. We may be angry today...
  • 88. ...so we do not expect people to be dancing on the street
  • 89. But the realities are... Rising debt Rising deficit RM RM 362 billion 47 billion
  • 90. And most importantly... We must do it for our future and our future generation
  • 91. Your feedback is valuable to us..
  • 92. ..for the future of our country.
  • 93. Thank You w w w . p e m a n d u . g o v. m y