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
The Government is committed to providing subsidies for
For the year 2013, by
or one-fifth of
allocated to subsidies,
to the people.
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
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
SUBSIDY PETROL AND DIESEL
PROVISIONS RM24.8 BILLION IN 2013
ENJOYED ONLY BY
21 MILLION VEHICLES REGISTERED
ESTIMATES OF DOMESTIC CONSUMPTION
150 LITER PER
300 LITER PER
600 LITER PER
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
WHEN WE SHARED
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
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.
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.
1. Parliament or government need to draft a new act or policy regarding
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.
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.
Government will continue to allocated subsidy
for ron95 petrol despite fluctuations in global
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
Petrol ron95 RM /
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
• Subsidy petrol RM 0.83 -----> RM 0.63
• Comparison prices Asian country
• Malaysia ranked eighth most cheaper oil in the
Product MAS INA SIN THAI F.PINA
Ron95 1.90 2.93 5.45 4.90 5.54
• Contributed to a widening budget deficit.
• Help fund welfare payments for low-income
• Move would help fund improved handouts for the
• Not sign off any subsidy cuts or rate rises that were
not absolutely necessary.
• manage our fiscal position to ensure the stability of
Advantages subsidy of Ron95
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
Households earning more than
RM5, 000 a month will get more
subsidies for petrol
consumption for luxury
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.
WHAT HAPPENS IF
RATIONALISATION NOT BEEN DONE?
Spending a lot of
subsidies will reduce
the growth of
important sectors in
borne by the
will lead to the
and public services
were also affected
by a reduction in
offered in Malaysia.
WHAT GOVERNMENT GUARANTEE
ON THE RATIONALISATION OF SUBSIDY?
will does not
Level of debt
By the year
2015, the fiscal
deficit will reach
3% of GDP. By 2020
about the fiscal
HOW GOVERNMENT TO ENSURE
IMPLEMENTATION OF SUBSIDY RATIONALISATION
NOT BURDEN THE PEOPLE?
increased the grant
1Malaysia (BR1M) in
Budget 2014 to reduce
the burden on the
• 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
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