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The Malaysian dilemma

The Malaysian government is self-contradictory.

On the one hand it has tried to trim deficits and public debts, but on the other hand, it has to tread very cautiously so as not to offend the public and get blasted by the voters.

The Malaysian public are equally self-contradictory. They want to enjoy subsidies, cheap gas and necessities, but are not ready to come to terms with the country having to face the crisis of bankruptcy as public debts soar.

It is hard to demand that the country's financial health be clean and yet we can keep enjoying inexpensive commodities on government subsidies.

This doesn't sound probable in economics.

Minister in the prime minister's department Datuk Seri Idris Jala has disclosed the real dilemma in the Malaysian economy.

Well, if we all keep demanding cheap things and subsidies, we don't need to wait too long--nine years to be exact--for our public debts to equal the GDP, which will put us in the vicinity of Greece, a country on the brink of bankruptcy!

While Greece may still look to EU for help, we have no one to our rescue.

The Pemandu headed by Idris Jala has proposed some progressive subsidy cuts, beginning with 15 sen increase in petrol prices this year, and onward to RM2.60 per litre in 2015. Prices for everyday stuff such as flour, cooking oil, etc. will all have to go up.

RM2.60 per litre! Are we ready for that?

I remember when the fuel prices were last increased, people went up to the street, and Abdullah's seat was made precarious.

That said, we cannot run a country contrary to common sense. From the economic perspectives, like what liberal economy guru Milton Friedman said, subsidies will not bring economic benefits, but are the wrongful allocation of social resources, resulting in the eventual loss of productivity and competitiveness.

However, from the angle of political needs, when people have grown accustomed to subsidies, the reduction or removal of them will spontaneously inflict pains. In the end, they will vent their anger towards the government.

Idris is a political rookie with hardly any political background. As such he could present the genuine, objective economic reality.

The question is: Will the BN government put his proposals into implementation?

Collapse of government or country going bust. If our politicians are obliged to make a choice between the two, how will they choose?

I can't make any prediction here, but what I know is that we must not go down Greece's way, by all means.

Is there another way out in the midst of contradictions and dilemmas?

There is, indeed.

If Malaysia's economy can expand robustly over the next couple of years, and our incomes grow significantly with the wealth gap narrowed concurrently, then the ensuing pains from subsidy cuts will be diluted.

Very simple. The subsidies North Korean government has provided to its citizens are perhaps the most generous in the world, but with appallingly low incomes, the people remain impoverished despite the generous government subsidies.

In contrast, South Koreans can still enjoy very comfortable lives without the generous handouts from the government, because they have very high incomes.

As a matter of fact, our government needs not worry about subsidy cuts. More importantly, it must implement policies that will enhance economic growth, improve government efficiency, while cutting down unnecessary red tape and corruption so as to boost investor confidence.

Subsidies will no longer be that important once our per capita income becomes doubled. (By TAY TIAN YAN/Translated by DOMINIC LOH/Sin Chew Daily)

MySinchew 2010.05.28


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