Tuesday, 1 November 2011

"Subsidies" Is Spelled With A "Die"

November already? Which means I've been with this outfit for a whole year.

But it's little cause for celebration.

This morning on the radio, news of "independent" power producers (IPPs) crying havoc over depleting gas supplies and the possibility of sourcing gas elsewhere at five times the price.

Then, the following:

The government has allocated RM15.9bil for petrol and diesel subsidies this year ... spending on the subsidies last year amounted to RM9.6bil.

. . .

Restructuring of petrol and diesel subsidies which saw reduction of RM0.05 per litre twice last year saved more than RM1.7bil in subsidies.

Arguably, allocated amount isn't necessarily the same as spent amount. But it's still worrying.

A radio ad said it: When energy (and by extension, everything) is subsidised, nobody feels the need to use it wisely. The public loves subsidies. Anything to take the edge out of market forces. But as some parts of the world now realise, they can't buy their way out trouble forever.

Nobody likes taxes, but if the money is well spent and is seen to be well-spent, the public should take pride in being a taxpayer. But years ago, in Greece, tax evasion evolved into what some call a "national pastime". The laws were lax, and few dodgers were punished, if ever. Pile that on top of huge public spending, and you have a ticking financial time bomb.

For me, Greece's financial meltdown resulted from failures at about every level. The government didn't check tax dodging; bad apples among bankers, politicians and businesspeople set a bad precedent; and the public adopted some of those bad habits. Nobody felt the need to save for a rainy day when the sun was still shining.

I don't know how serious our tax-dodging situation is. But the subsidies can't go on forever, not if they keep getting higher each year. And the government seems to cower every time we complain about rising prices.

...Well, they're certainly not going to fall any time soon.

Instead of more handouts, or looking to the various government bodies or departments (who aren't exactly paragons of frugality or prudent spending), we should probably start thinking of ways to help keep the country afloat? You know, before we end up like Greece?


  1. While I was in university, one of my projects involved dissecting and understanding the global black market.

    Interestingly, Malaysia topped the list. About 40% of its economy is, in fact, unregistered, unregulated and untaxed. This involves everything from DVD piraters to loan sharks to bomohs.

    This figure may be larger, though. It's difficult to get a handle on the Malaysian black economy, simply because statistics aren't collected and processed.

  2. DVD peddlers? Loan sharks? Who'd be brave enough to collect those stats from them?

    And I doubt those involved would be the types that can be moved to save the economy when straits get dire.

    40 per cent? That's quite a slice. But would it be possible to bring some, if not all of that, into the mainstream? Would it even be a good idea in the first place?

  3. Good question.

    The black economy is largely carried out in cash, so there's no sure way to track actual transactions. And an entire cottage industry has arisen to keep the status quo that way -- through the funneling and laundering of money.

    One suggestion that has been put forward is to introduce GST -- a blanket tax on all good and services at the point of sale. But that brings about its own problems as well -- it requires a large bureaucracy to enforce.

    If you already have a lumbering bureaucracy, it's an added burden that may prove to be more trouble than it's worth.

  4. But additional bureaucracies mean opportunities to "hire more people", as they say. That's good news for some. Properly implemented, GST can be part of the solution, but when it comes to implementation...

    If the size of these cottage industries are as big as you say it is, it would form a sizeable voting/power bloc, big enough to keep things in this country the way they like it.

    Thing is, the good times can't last forever. A global economic downturn is bad news for everyone in general. I doubt this hidden economy could keep itself insulated from the effects for long.

    To keep the economy going, everyone has to chip in. But who among us will heed the call when it comes?

    I have bad vibes about how things are currently going.

  5. Yes, you're right.

    Even in Penang, where a DAP government is firmly entrenched, you can see loan sharks advertising and operating openly. Authorities don't really feel an impetus to crack down on them, especially when public doesn't necessarily see their presence as 'corruption.'

    People, in general, are adverse to paying more taxes, so they are reluctant to call out those who don't.

  6. Well, some of us have our income taxes automatically deducted from our pay each month, so we don't have a choice. But it makes things easier.

    This site, however, says the global black market isn't just big, it's also the future.

    With institution-run economies teetering on the brink, that might not be an exaggeration.


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