An excerpt from Wikipedia’s definition of subsidy is as follows ‘subsidy (also known as a subvention) is a form of financial assistance paid to a business or economic sector.

Most subsidies are made by the government to producers or distributors in an industry to prevent the decline of that industry (eg, as a result of continuous unprofitable operations) or an increase in the prices of its products or simply to encourage it to hire more labour (as in the case of a wage subsidy).

Examples are subsidies to encourage the sale of exports; subsidies on some foods to keep down the cost of living...’

But our government gives subsidies to IPPs like Malakoff and YTL Power to the tune of RM20 billion per annum. Why? So that these companies can enjoy super-profits also known as abnormal profits to enrich certain individuals and I’m sure certain politicians also.

These companies then sell their power to TNB which distributes electricity while making billions from people like you and me. So this whole rip-off scheme is designed to milk monies from people so that certain individuals become super rich.

I’ll give you a simple analogy. First, the RM20 billion comes from people’s money ie, taxes, profits from oil etc. Then TNB makes billions in profits from the people and this ends up enriching just certain individuals. So the intentions of a subsidy itself is so flawed in this country that it is a result of totally selfish and greedy behaviour of certain individuals.

In the US, they have farm subsidies which are to truly help the farming target group since their output is reliant on market prices which are much lower than farm production costs.

Why doesn’t the government take away the RM20 billion in subsidies from these IPPs? In nine years, the country would have saved RM180 billion which is more than enough than the RM103 billion needed to save the nation from going bankrupt in 2019 (before reaching Vision 2020, the country risks being bankrupt!).

Recently, Idris Jala was given the task to announce a scheme to remove subsidies for the people in progressive stages so that Malaysia can be saved. Why is it when the country needs to be saved, the people are asked to sacrifice and when there is abundance in wealth none of the people are given anything like tax cuts, EPF cash bonus payouts (Singapore did this a few years ago) and reductions in duties etc?

In very simple terms, if we assume that the government is clean, efficient, frugal, diligent and competent (which would be a miracle in Malaysia), subsidies are paid by people for certain target groups in order to help others to ride out the storm or help reduce the cost of living to alleviate the burdens of the majority. It is like the elder brother helping the younger brother sort of thing.

But at the end of the day the younger brother must start fending for himself on his own. However, he must start working first, save money, give the household some money (in macro terms this means taxes), grow progressively as advised by the elder brother so that all is well and good in the family. That is the purpose of a subsidy.

While agreeing that we should do away with subsidies and promote efficiency, competence and capacity build-up for the target industries to be profitable (applicable to industries) and to push for quality education, skills, training and promoting ‘entrepreneurship’ (applicable to people) strictly based on merit, we must first increase the income of people so that they ultimately become self sufficient.

Then you can remove subsidies and give the ‘younger brother’ a pat on the back. But for our government, IPPs seem to be the target group that needs to be ‘saved’ and helped for all these years.

But back to the original objective of subsidies, we should help these target people until they are self-sufficient as mentioned earlier. So, yes I agree to do away with subsidies. But do it progressively in tandem with increasing the incomes of people and keeping a check on inflation rate. Fiscal policies must be so fine-tuned that these must be modified in tandem also to balance the numbers.

What I’m saying is that you must match the incomes of people to their expenditure levels while allowing them to meet their tax obligations and savings target (which can mean investment also). Simple. That’s all.

But our average income per capita is too low, just US$7,000 per annum from US$5,600 ten years ago which means our incomes grew by a meager annualised rate of 2.5%. Our fixed deposit savings rate is more than that. This means if my income was only interest income, it would be better for me to stay at home and not work since my income can grow more than my salary levels. What a shame.

However, the government now intends to remove subsidies at this moment. It should increase the income levels first. Our salaries are one of the lowest (at developed country levels) in the world. A security guard in Singapore earns RM3,000 per month but in Malaysia however the same guard earns RM650-RM800 per month. When subsidies are removed, the security guard in Malaysia would not be able to put food on the table.

The solution is to remove the subsidies to the IPP companies, increase governance on fund management and for our financial system and for the government to sort out the scourge of corruption and eliminate handouts to cronies etc.

These were the problems that beset Greece (coincidently this is what Idris Jala said about Malaysia becoming like Greece meaning he agrees these are the problems Malaysia has) and the country just crumbled.

There will be enough money then for Malaysia. Later, when our income levels are okay, the government can remove the subsidies and reduce taxes at levels that meet both the objectives of the government and the quality of life required by the people.