Opening

Presentation

Dato Sri Idris Jala

CEO of PEMANDU
Minister in Prime Minister’s Department
Setting the stage ....
 The purpose of Subsidy Rationalisation
Lab Open Day :

To share lab findings &

recommendations and seek
public feedback

 To recommend a Subsidy
Rationalisation Roadmap
to the government
PM has
introduced
4 pillars to
achieve Vision 2020

 1 Malaysia, People First, Performance Now

 Government Transformation Programme
 New Economic Model
 10th Malaysia Plan
 People First
Performance Now
was a first step
to unite our people
2010 is a good year..
We introduced
the GTP for
the rakyat
The GTP is
already delivering
results in just
3 months ....
 15.1% drop
in overall
Index Crime
39.6% drop in
street crime
 928,775
passenger
increase in
LRT ridership
 929 pre school
classes have started
and 7,616
primary schools
have been ranked
 Out of 44643,
12753 are
no longer
hardcore poor
2665 government
contracts
have been
published on line
97 people convicted
of corruption
have been published
in MACC website
www.sprm.gov.my
We have
launched the
New Economic Model...
 Wholesale
Financial
& Retail
Serv & Tourism
Capital Mkt

Greater Oil, Gas &

KL Energy

...and
Biz
Services
finalized Education

12 NKEAs
Agri Electrical
culture
culture & Electronics

Health
lth
Telco
Services
ces
Palm Oil
..to boost USD 15,000
our income
(GNI per capita)

USD 7,000
Malaysia’s
Competitive Index
has improved
10 th

significantly..

18 th
 Our
GDP growth
for first quarter
2010 is..

10 %
More investors are
investing in our
country...
 We have the
right ingredients
to succeed..
However, the
future looks gloomy....
Malaysia has a
rising debt...
RM

362 billion
..and a rising deficit
RM

47
2009

billion

RM

1998 5 billion
 If government debt
continues at the rate of...

12 % per annum

Government debt
RM billion

1997 2010 2020

 ...we could go
bankrupt in 2019
RM

1158 billion debt

Government debt
RM billion

1997 2010 2020

 We do not want to end up
like Greece ..

EUR

300
SOURCE : Deputy finance minister of Greece , Filippos Sahinidis
billion debt
..or other similar countries.
In order to save
our country...
We must increase our
GDP..
..AND reduce government
expenditure
International &
local leaders realized
the need to reduce our
subsidy bills...
..and Pakatan
Rakyat
share the
same views!
Malaysians need
to be aware that we are
one of the highest
subsidized nation...
 ..even higher than
Indonesia & Philippines
11.0

4.6

4.7
OECD
avg = 1.5%

Malaysia2 Swit- France United Indonesia India 3 China 4 Philippines

zerland Kingdom
We spent record
subsidy in 2009

RM

74 billion
Our subsidy bills in each
category is enormous
Social Fuel & Energy
RM RM

42.4 billion 23.5 billion

Infrastructure Food

RM RM

4.8 billion 3.4 billion

This is equal to ....

RM
= RM

74
billion subsidy
12,900
Per household
 Somalians pay more
for fuel than
Malaysians
157
Average retail fuel price in 20081

th

place
US cents/litre

Singapore Somalia Thailand Malaysia

As a result, we consume
more fuel than
other countries..
Litres per capita

Malaysia

Singapore

Thailand
Indonesia
China
India
1997 2007
 We will likely become a net
importer of petrol
by 2011
2010 net
importer Daily local demand
status at 8%
Thousand barrels

8% p.a. growth
pa growth Daily oil production
Per day

2008 09 10 11 12 13 14 2015
SOURCE: Petronas analysis
We have been giving
subsidies RM Billion in 2009

to the wrong Students

income All consumers

group Companies

Poor 1.7

Farmers &
0.2
Fishermen

Others 0.4

Total
We have the cheapest
cooking oil in the region..

Malaysia

Indonesia

Thailand

Brunei

Singapore

Price of cooking oil (1kg bottle)

RM, 2009
Our sugar price is the
lowest in the region too!

Malaysia

Thailand

Indonesia

Singapore

Philippines

Price of sugar
RM/kg, 2009
And the lowest price for
flour too..
Malaysia

Indonesia
Thailand

Philippines

Vietnam

Singapore

Price of flour (RM/kg, 2009)

We must live in the
real world..

We developed a
framework for
subsidy rationalisation
Principle 1
Focus on the Big Ticket Items
to achieve the big savings
(i.e Fuel, Gas / Electricity, Tolls)
 Principle 2
Education is a human capital
investment and subsidy
should continue but we must
reduce wastage / abuse
Principle 3
Agriculture & Fisheries
are the mainstay of the
rural poor and
subsidies will continue
but must reduce
wastage / abuse
 Principle 4
Healthcare is
necessary for a healthy
population / workforce
and subsidy should
continue but must
reduce wastage / abuse
Principle 5
We should continue to
subsidize the poor and
disadvantaged and must target
our subsidies better
(eg: welfare assistance, low
cost housing)
Principle 6
Rakyat engagement and
communications are critical
including engaging both sides
of the political divide
 Principle 7
Subsidy rationalization must be
implemented on gradual / phase
basis, not big bang
Principle 8
Mitigation measures and
assistance are necessary to
cushion the monetary impact
(eg: stabilization fund and
subsistence allowance)
Let me now take you
through the subsidy
rationalisation roadmap &
mitigation measures…
Fuel prices will
be increased
gradually..
Petrol  15 sen / litre
Diesel  10 sen / litre
LPG  + 10 %
+ RM 0.17 to 0.40 /litre to streamline
supersubsidy to RM 1.60 / litre

Thereafter ; RM 0.10 / litre fuel every 6 months

and 20% LPG every year
Mitigation Plan

We will provide
cash rebate..

RM RM

54
Per person per motorbike
(less than 250cc)
126
Per person per car
(less than 1,000cc)
Mitigation Plan

This will cost the

government..

RM

526
Million per annum
And the
government will
save....

RM

44.9
billion in 5 years
We are
reviewing the
possibility of
introducing a
floating price
mechanism ....
 Electricity
tariff will be
increased..

 Gas price (Power) by RM 4.65 / MMBTU

 Gas price (Non Power) by RM 2.52 / MMBTU
 Electricity tariff by RM 0.024 / kWh

Thereafter, increase Gas Price (Power & Non Power) by RM

3.00 / MMBTU and Electricity tarif RM 0.016 / kWh every 6
months
Mitigation Plan

New tariff will not impact

56% of consumers
Percentage of households, 2009

No
Free Change

0-100 100-200 200-400 OVER 400

Distribution of usage (KWh/mth)
The government
will save....

Savings (RM millions) (Gas)

2010 2011 2012 2013 2014
1,121 4,524 7,502 10,396 12,346

RM

35.9
billion in 5 years
Toll rates
will be
increased

as per
Concession
Agreement
Mitigation Plan

Applicable
only for toll
highways
which have
alternative
routes...
Mitigation Plan

And we will
provide
discount for
toll users..
20% Discount upon
next reload
(for more than
80 transactions per month)
Mitigation Plan

This will cost the

government...
RM

60
million per year
 In return, the
government
will save....
Savings (RM million) - Toll
2010 2011 2012 2013 2014
160.5 696 862 919 1,047

RM

3.7
billion in 5 years
Price of sugar, flour and
cooking oil will be
increased by
Sugar  + 20 sen / kg
(every 6 months until 2012)

Flour  + 20 sen /kg (2010)

+ 25 sen / kg (2011)

Cooking oil (1 kg) +15% (2010)

+15% (2011), thereafter 5% every
year until Jan 2014
Mitigation Plan

You will receive...

Year 1 Year 2
▪  Cash rebate of RM20 to ▪  Discount through MyKasih
MyKad/ MyKid card holders card (for income below
through post-offices certain threshold)

▪  Use designated shops e.g.

SaveMore, petrol stations
at high poverty areas

RM RM

560
million per year
200
million per year
 RM

8.5
billion over 5 years

...will be saved
We will reduce
wastages & inefficiencies
Agriculture Education
▪  Usage of targeted ▪  Remove subsidies for foreign
fertilizers students
▪  Re-target subsidies for poor
families

Fisheries Health
▪  Increase diesel price ▪  Increase outpatient fees
▪  Increase incentives for (RM 1  RM 3)
fish caught (10 sen /kg) Poor will be continue to be
 (50 sen/kg) fully subsided
▪  Maintain RM 200 monthly
allowance
We will reduce
wastages & inefficiencies

Agriculture
RM
Fisheries
Education

Health
16.3
billion over 5 years
We will save RM 103 billion
in 5 years 35,542
Fisheries, Paddy
Healthcare, Education, Welfare
Gas 29,510
Tolls
MKD, MasWings
Cooking oil, Sugar, Flour
Fuel
21,104
14,118

2,976
2010 1 2011 2012 2013 2014
RM million
These savings are
intended to reduce
our deficit and debt
2010 2015 Deficit

RM

103
billion in 5 years
Studies by Bank Negara
shows inflation will rise to

4%
(2011 – 2012)

3%
(post 2013) 2010 2013 2015
We asked 2 simple
questions to the public...
SMS 1
Malaysia spent RM 74 billion on
subsidies in 2009 causing a
fiscal deficit. Should subsidies
be reduced ?

Yes or No
SMS 2
If Malaysia reduces its subsidies,
should it be done
•  in 1 year
•  over 3 years
•  over 5 years
What do 191,592
Malaysians think about
Subsidy Rationalisation?

 SMS
 Forms
 Online
115,703 Malaysians
said YES to Subsidy
Rationalisation

61%
124,750 Malaysians
responded we should
reduce subsidies in
3-5 years

66%
We have to face the
realities....
..that this is the most
unpopular decision
that the Government
has to make since
independence
 We have no choice but
to avoid ending up
like Greece

EUR

300
SOURCE : Deputy finance minister of Greece , Filippos Sahinidis
billion debt
This bold step
will take us
Vision
closer to...
2020
We may be angry
today...
...so we do not
expect people
to be dancing
on the street
But the realities are...
Rising debt Rising deficit

RM RM

362 billion 47 billion

And most
importantly...

We must do it for
our future and
our future
generation
Your feedback is
valuable to us..
..for the future of
our country.
Thank You
w w w . p e m a n d u . g o v. m y