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Published: Wednesday April 2, 2014 MYT 12:00:00 AM
Updated: Wednesday April 2, 2014 MYT 6:53:13 AM

PM: Subsidies not wholly abolished

THE Government is committed to its subsidy rationalisation programme but will not completely abolish subsidies, said Prime Minister Datuk Seri Najib Tun Razak.

“The annual development allocation now stands at RM46bil, and subsidies and incentives touched RM43bil last year.

“This expenditure is obviously lopsided and should not be continued because it is not sustainable. It is only proper to implement a sustainable subsidy rationalisation programme,” he said.

Najib, who is also Finance Minister, said this would be done via the revamp of policies.

“There are some subsidies which aid the rich more than the poor. There are also leakages like when foreign tourists take advantage of our subsidised petrol.

“A lot of smuggling activities also occur. We must plug these leakages as they are a waste of public funds,” he said in reply to a question by Datuk Wira Ahmad Hamzah (BN-Jasin) in the House yesterday.

Najib said some RM23.1bil or 15% of the country’s overall expenses were used to pay for subsidies and assistance in 2010, but this sum jumped to RM43.3bil last year or 21% of the country’s managing expenses.

“Too large a subsidy will undermine the country’s financial position and render it not sustainable for the long term,” he said.

As such, Najib said fiscal reform was important to strengthen the financial position and ensure that the targeted fiscal deficit remained at 3.5% of the Gross Domestic Product this year and 3% in 2015, and that a balanced budget was achieved in 2020.

The Government had also taken steps to improve the implementation of the 1Malaysia People’s Aid (BR1M), which was introduced to help low-income households and supplement blanket subsidies which benefit the rich and poor, he said.

“However, we realise that the BR1M must be improved. We are studying suitable measures that can be introduced to improve its implementation,” he said.

Replying to a supplementary question from Tan Seng Giaw (DAP-Kepong), Najib said: “In implementing subsidy rationalisation, the Government must ensure consolidation of the social safety net so that the low-income group does not feel the pressure from the higher expenses they face.”

Najib said part of the savings from the subsidy rationalisation would be utilised for the social safety net to improve economic growth and ensure the people’s well-being.

He also said part of the savings would be used to finance development that could raise the national productive capacity such as infrastructure development, including roads, hospitals and housing.

Tags / Keywords: Government, subsidy, rationalisation

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