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Subsidy is not all BAD. Give to needy, not everybody.

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For those who have followed my articles, you would know that I do not believe in continuous subsidy. I believe in working harder, learning more and doing better year after year. Truth is, there would be a time when the subsidy has to be fully rationalised. Subsidy is not all bad. Just give to the needy, not everybody. We already know that there are 2 million Malaysian households who are living with RM3,000 or lower per month. The subsidy should be targeted at them. Of course I still do not believe that it should done forever. Concrete plans must be made to help these 2 million Malaysian households rise up and the number can then be reduced further.

Today, in a study entitled “Energy Subsidy Reform: Lessons and Implications”, the IMF revealed that the because the subsidy is across the board, the top 20% population gains six times more from the energy subsidy compared to the bottom 20 percent. This meant that inequality became worse. The irony is that the top 20% can actually afford to pay the usual energy price without subsidy while the bottom 20% just could not! How about spending that subsidy to help the bottom 20% instead? As usual however, the argument is always on how removing subsidy is bad for the poor etc but no one wanted to tackle the issues head on. In fact, majority of everybody I know especially the richer ones wanted subsidy to remain forever.

Many years ago, I told my mother that I have to pay more income tax. My mother said, ‘do you want to qualify to pay higher tax or do you want to continue to pay LOW TAX?.’ Always remember, the reason you are paying higher tax is because you are already better off than many and the fact is, 10% of a high pay is worth much more than 20% of a low pay. When your income is high, even an increment of just 5% would mean potentially the salary of an office boy per month! You want to live better but the poor income group just want to get by easier. Food on the table, not choose where to have dinner! In the long term, if the poor becomes even poorer than today, what do you think would happen to the country and society in general? My belief remain, subsidies are not all bad, as long as it is not across the board for everybody but targeted at the needy.

written on 9 Oct 2014

Next suggested article: Standard & Poor’s rating for Malaysia, subsidy and competitiveness

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