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Subsidy in Malaysia

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Subsidy in Malaysia based on economist perspective

Subsidy in Malaysia based on economist perspective

Published in: Economy & Finance, Business

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  • 1. PRESENTED BY BASREEN AHMAD ZAINUDIN SIDEK MUHAMMAD AZRI NUR AMYRA NOORALWANI
  • 2. WHAT IS SUBSIDY? SUBSIDY is money paid by the government to specific corporate seeks to stabilize or lower prices than the market price of goods and services that can enjoyed by the people who require.
  • 3. The Government is committed to providing subsidies for basic necessities: RICE SUBSIDIES RM528 million RICE PRODUCTION INCENTIVES RM563 million FISHERMEN'S INCENTIVE RM321 million COOKING OIL SUBSIDY RM1.5 billion RATE SUBSIDIES ELECTRICITY FOR USE BELOW RM20 RM150 million For the year 2013, by RM46.6 billion or one-fifth of government expenditure allocated to subsidies, incentives and assistance to the people.
  • 4. subsidies have Long-run equilibrium effects. (Subsidies result in overproduction deadweight loss.) A subsidy will reduce the cost of production to the producer. It makes it cheaper to produce. It is likely that the producer will be encouraged to produce more therefore the supply curve will shift to the right . It is also likely to decrease the cost of the product. SUBSIDY EFFECT TO THE ECONOMY
  • 5. FUEL SUBSIDY Fuel subsidy is the largest component of government subsidies. it is intended protect consumers, but it has increased dramatically and impact of government spending. SUBSIDY 2012 2013 PETROLEUM SUBSIDY RM24.7 bilion RM 24.8 BILION
  • 6. SUBSIDY PETROL AND DIESEL PROVISIONS RM24.8 BILLION IN 2013 RM1 PER LITER 0.83 CENT PER LITER 0.63 CENT PER LITER 0.80 CENT PER LITER PETROL SUBSIDY DIESEL SUBSIDY DEDUCTIBLE TO DEDUCTIBLE TO
  • 7. ENJOYED ONLY BY 21 MILLION VEHICLES REGISTERED ESTIMATES OF DOMESTIC CONSUMPTION LOW INCOME 150 LITER PER MONTH RM94.50 MODEST INCOME 300 LITER PER MONTH RM189 HIGH INCOME 600 LITER PER MONTH RM378 Subsidies are not benefiting the target of low and middle income SAVE 0.20 CENT SUBSIDY • RM1.1 BILLION (2013) • RM3.3 BILLION PER YEAR NOW IT FAIR WHEN WE SHARED TOGETHER
  • 8. WHY CAN NOT GOVERNMENT PROVIDE PROVISION FOR LARGER FUEL SUBSIDY? FUEL SUBSIDY aimed to protecting consumers, but it has increased dramatically and affect government spending. If the government continues to allocate large amounts of fuel subsidies, the government had to sacrifice other more important expenses include expenses to provide infrastructure and basic amenities people.
  • 9. ARTICLE REVIEW
  • 10. EFFECT ON HOUSING SUBSIDY
  • 11. ARTICLE REVIEW
  • 12. RM 0.20 SUBSIDY
  • 13. Effect Of Reduction Subsidy Of Sugar
  • 14. Price Ceiling Of Sugar
  • 15. ARTICLE REVIEW
  • 16. Summary: About 30% to 40% of the country’s allocation for medical treatment are taking by the foreigners. In most European countries, foreigners were required to pay the actual cost. There is a plan to get foreigners, including students to pay for their actual cost of medical treatment in government hospital. Comment: This phenomenon is not good for our country subsidies policy because the foreigners are not the target group for the subsidy allocation. Plan to get foreigners to pay the actual cost of medical treatment in government hospital is a very good plan indeed. Suggestion: 1. Parliament or government need to draft a new act or policy regarding subsidies distribution. 2. Government should find new mechanisms to make sure that subsidies are distributed to the target group (Malaysian). 3. If government want to continue to give subsidies to foreigners, the government should increases levy or taxes to the foreign workers.
  • 17. ARTICLE REVIEW
  • 18. Based on my justification, government want to reduce the subsidy and introduce new system of tax or that call good and services tax (GST) because to reduce government expenditures and increase injection money in government revenue, deficit budget had been applied to develop project such as schools, hospital, and so on. On other view government subsidy have being rise fast over year that will effect government operation. Subsidy that had being implementing in Malaysia not benefit to the person selected or person how really need .based on my opinions government should take an effective action in order to control subsidy bill by creating a solution by using new method to distribute subsidy by giving coupon to the person or household who really need the subsidies. This method will help government to control the expenditures in subsidies giving.
  • 19. ARTICLE REVIEW
  • 20.  Government will continue to allocated subsidy for ron95 petrol despite fluctuations in global prices.  The price of ron95 petrol would remain steady at rm1.90 per liter even if global fuel prices were to increase.  The actual market price for ron95 is RM3.18. The government not only gives subsidy for ron95, it also forgoes the sales tax. ARTICLE:RON 95 PETROL SUBSIDY TO CONTINUE
  • 21. Petrol ron95 RM / Liter) Diesel (RM/ liter) RM 2.73 Actual price RM 2.80 RM 2.10 Price Control RM 2.00 RM 0.63 Subsidy Government RM 0.80 Structure Subsidy Petrol and Diesel
  • 22. • Subsidy petrol RM 0.83 -----> RM 0.63 • Comparison prices Asian country • Malaysia ranked eighth most cheaper oil in the world Product MAS INA SIN THAI F.PINA Ron95 1.90 2.93 5.45 4.90 5.54 Additional information
  • 23. • Contributed to a widening budget deficit. • Help fund welfare payments for low-income households. • Move would help fund improved handouts for the poor. • Not sign off any subsidy cuts or rate rises that were not absolutely necessary. • manage our fiscal position to ensure the stability of our economy. Advantages subsidy of Ron95
  • 24. WHY GOVERNMENT WANT TO IMPLEMENT THE RATIONALISATION OF SUBSIDY Reduction of fuel subsidy is the step for the government to provide subsidy to the target group Based oh the research, average of petrol expenditure for household that income below RM3000 are: RM132 PER MONTH Households earning more than RM5, 000 a month will get more subsidies for petrol consumption for luxury vehicles. Reduction of fuel subsidies by 20 cent is more fair because the results can be given to the poor through the provision of Bantuan Rakyat 1Malaysia (BR1M) and others.
  • 25. WHAT HAPPENS IF RATIONALISATION NOT BEEN DONE? Subsidies involve government money. Spending a lot of subsidies will reduce the growth of important sectors in the country. Increased subsidy borne by the government will lead to the development of public infrastructure and public services also declined. The attractiveness foreign investors were also affected by a reduction in infrastructure offered in Malaysia.
  • 26. WHAT GOVERNMENT GUARANTEE ON THE RATIONALISATION OF SUBSIDY? Government expenditure will does not exceed the revenue Level of debt GDP does not exceed 55% By the year 2015, the fiscal deficit will reach 3% of GDP. By 2020 about the fiscal position will achieve balanced budget
  • 27. HOW GOVERNMENT TO ENSURE IMPLEMENTATION OF SUBSIDY RATIONALISATION NOT BURDEN THE PEOPLE? Subsidy rationalization implemented gradually. Government has increased the grant Bantuan Rakyat 1Malaysia (BR1M) in Budget 2014 to reduce the burden on the people. • Grant BR1M for households earning RM3, 000 and below will be increased from RM500 to RM650 • Individual that 21 years old and over who earn no more than RM2, 000 a month, the aid will be increased from RM250 to RM300 • BR1M 3.0 will be extended to households with a monthly income of RM3, 000 to RM4, 000 with the help of RM450