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Dato Sri Idris Jala CEO of PEMANDU Minister in Prime Minister’s Department
Opening Presentation
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
Setting the stage ....
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 & Retail
Oil, Gas & Energy
Palm Oil
Health Services
Financial Serv &
Capital Mkt
Greater KL
Agri culture
Tourism
Education
lth ces
Electrical & Electronics
Agricculture
Biz Services
Telco
...and finalized
12 NKEAs
..to boost our income (GNI per capita)
USD 7,000
USD 15,000
Malaysia’s Competitive Index has improved significantly..
18th
10th
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...
362billion RM
..and a rising deficit
47billion RM 2009
1998 5billion RM
If government debt continues at the rate of...
12%
2010 1997 2020
per annum
Government debt RM billion
...we could go bankrupt in 2019
2010 1997 2020
1158billion debt Government debt
RM billion
RM
We do not want to end up like Greece ..
300billion debt
EUR
SOURCE : Deputy finance minister of Greece , Filippos Sahinidis
..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
OECD avg = 1.5%
Philippines China 4 India 3 Indonesia United Kingdom
France Swit- zerland
Malaysia2
4.7
4.6
We spent record subsidy in 2009
74billion RM
Our subsidy bills in each category is enormous
23.5billion RM
4.8billion RM
3.4billion RM
42.4billion RM
Social Fuel & Energy
Infrastructure Food
This is equal to ....
12,900 RM
74 RM
billion subsidy Per household
=
Somalians pay more for fuel than Malaysians
Aver
age
reta
il fu
el p
rice
in 2
0081
U
S c
ents
/litre
Somalia
157th place
Singapore Thailand Malaysia
As a result, we consume more fuel than other countries..
Litres per capita
2007 1997
Singapore
Thailand Indonesia
Malaysia
India China
We will likely become a net importer of petrol by 2011
SOURCE: Petronas analysis 2015 14 13 12 11 10 09 2008
Thou
sand
bar
rels
P
er d
ay
2010 net importer
status at 8% pa growth Daily oil production
8% p.a. growth
Daily local demand
We have been giving subsidies to the wrong income group
Total
Others 0.4
Farmers & Fishermen 0.2
Poor 1.7
Companies
All consumers
Students
RM Billion in 2009
We have the cheapest cooking oil in the region..
Price of cooking oil (1kg bottle) RM, 2009
Brunei
Thailand
Indonesia
Singapore
Malaysia
Our sugar price is the lowest in the region too!
Malaysia
Philippines
Singapore
Indonesia
Thailand
Price of sugar RM/kg, 2009
And the lowest price for flour too..
Vietnam
Singapore
Thailand
Indonesia
Malaysia
Philippines
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
We will provide cash rebate..
126 RM
Per person per car (less than 1,000cc)
54 RM
Per person per motorbike (less than 250cc)
Mitigation Plan
This will cost the government..
526 RM
Million per annum
Mitigation Plan
And the government will save....
44.9 RM
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
New tariff will not impact 56% of consumers
100-200 0-100 OVER 400 200-400
Distribution of usage (KWh/mth)
Per
cent
age
of h
ouse
hold
s, 2
009
Free No
Change
Mitigation Plan
The government will save....
35.9 RM
billion in 5 years
Savings (RM millions) (Gas) 2010 2011 2012 2013 2014 1,121 4,524 7,502 10,396 12,346
Toll rates will be increased
as per Concession Agreement
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...
60 RM
million per year
Mitigation Plan
In return, the government will save....
3.7 RM
billion in 5 years
Savings (RM million) - Toll
2010 2011 2012 2013 2014
160.5 696 862 919 1,047
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
You will receive... Year 1 ▪ Cash rebate of RM20 to
MyKad/ MyKid card holders through post-offices
Year 2 ▪ Discount through MyKasih
card (for income below certain threshold)
▪ Use designated shops e.g. SaveMore, petrol stations at high poverty areas
560 RM
million per year 200
RM
million per year
Mitigation Plan
...will be saved
8.5 RM
billion over 5 years
We will reduce wastages & inefficiencies Agriculture ▪ Usage of targeted
fertilizers
Fisheries ▪ Increase diesel price ▪ Increase incentives for
fish caught (10 sen /kg) (50 sen/kg)
▪ Maintain RM 200 monthly allowance
Education ▪ Remove subsidies for foreign
students ▪ Re-target subsidies for poor
families
Health ▪ Increase outpatient fees (RM 1 RM 3) Poor will be continue to be
fully subsided
We will reduce wastages & inefficiencies
Agriculture Fisheries
Education
Health 16.3 RM
billion over 5 years
We will save RM 103 billion in 5 years
RM million
MKD, MasWings
Cooking oil, Sugar, Flour
Fuel
Tolls
Gas
Healthcare, Education, Welfare
Fisheries, Paddy
2014
35,542
2013
29,510
2012
21,104
2011
14,118
2010 1
2,976
These savings are intended to reduce our deficit and debt
RM
billion in 5 years 103
2010 2015 Deficit
4% (2011 – 2012)
3% (post 2013)
Studies by Bank Negara shows inflation will rise to
2013 2015 2010
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
300billion debt
EUR
SOURCE : Deputy finance minister of Greece , Filippos Sahinidis
This bold step will take us closer to... 2020
Vision
We may be angry today...
...so we do not expect people to be dancing on the street
But the realities are...
47billion RM
Rising debt Rising deficit
362billion RM
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