SUBSIDYPRESENTED BY

BASREEN AHMADZAINUDIN SIDEKMUHAMMAD AZRI

NUR AMYRANOORALWANI

WHAT IS SUBSIDY

?

SUBSIDY is money paid by the government to specific corporate seeks to stabilize or lower prices than the market price of goods and services that can enjoyed by the people who require.

The Government is committed to providing subsidies for basic necessities:

RICE SUBSIDIES

RM528 million

RICE PRODUCTION INCENTIVES

RM563 million

FISHERMEN'S INCENTIVE

RM321 million

COOKING OIL

SUBSIDY RM1.5 billion

RATE SUBSIDIES

ELECTRICITY FOR USE

BELOW RM20 RM150 million

For the year 2013, by

RM46.6 billion or one-fifth of government expenditure allocated to subsidies,

incentives and assistance

to the people.

subsidies have Long-run equilibrium effects. (Subsidies result in

overproduction deadweight loss.) A subsidy will reduce the cost of production

to the producer. It makes it cheaper to produce. 

It is likely that the producer will be encouraged to produce more therefore

the supply curve will shift to the right . It is also likely to decrease the cost of the

product. 

SUBSIDY EFFECT TO THE ECONOMY

FUEL SUBSIDYFuel subsidy is the largest component of government subsidies. it is intended protect consumers, but it has increased dramatically and impact of government spending.

SUBSIDY 2012 2013

PETROLEUM SUBSIDY RM24.7 bilion RM 24.8 BILION

SUBSIDY PETROL AND DIESEL PROVISIONS RM24.8 BILLION IN 2013

RM1

PER LITER

0.83 CEN

TPER LITER

0.63 CEN

TPER LITER

0.80 CEN

TPER LITER

PETROL SUBSIDY

DIESEL SUBSIDY

DEDUCTIBLE TO

DEDUCTIBLE TO

ENJOYED ONLY BY 21 MILLION VEHICLES REGISTERED

ESTIMATES OF DOMESTIC CONSUMPTION

LOW INCOME150 LITER PER

MONTHRM94.50

MODEST INCOME

300 LITER PER MONTHRM189

HIGH INCOME600 LITER PER

MONTHRM378

Subsidies are not benefiting the target of low and middle income

SAVE 0.20 CENT SUBSIDY• RM1.1 BILLION (2013)• RM3.3 BILLION PER YEAR

NOW IT FAIR

WHEN WE SHARED TOGETHER

WHY CAN NOT GOVERNMENT PROVIDE PROVISION FOR LARGER FUEL SUBSIDY?

FUEL SUBSIDY aimed to protecting consumers, but it has increased dramatically and affect government spending. If the government continues to allocate large amounts of fuel subsidies, the government had to sacrifice other more important expenses include expenses to provide infrastructure and basic amenities people.

ARTICLE REVIEW

EFFECT ON HOUSING SUBSIDY

ARTICLE REVIEW

RM 0.20

SUBSIDY

Effect Of Reduction Subsidy Of Sugar

Price Ceiling Of Sugar 

ARTICLE REVIEW

Summary:

About 30% to 40% of the country’s allocation for medical treatment are taking by the foreigners. In most European countries, foreigners were required to pay the actual cost. There is a plan to get foreigners, including students to pay for their actual cost of medical treatment in government hospital.

Comment:

This phenomenon is not good for our country subsidies policy because the foreigners are not the target group for the subsidy allocation. Plan to get foreigners to pay the actual cost of medical treatment in government hospital is a very good plan indeed.

Suggestion:

1. Parliament or government need to draft a new act or policy regarding subsidies distribution.

2. Government should find new mechanisms to make sure that subsidies are distributed to the target group (Malaysian).

3. If government want to continue to give subsidies to foreigners, the government should increases levy or taxes to the foreign workers.

ARTICLE REVIEW

Based on my justification, government want to reduce the subsidy and introduce new system of tax or that call good and services tax (GST) because to reduce government expenditures and increase injection money in government revenue, deficit budget had been applied to develop project such as schools, hospital, and so on.

On other view government subsidy have being rise fast over year that will effect government operation. Subsidy that had being implementing in Malaysia not benefit to the person selected or person how really need .based on my opinions government should take an effective action in order to control subsidy bill by creating a solution by using new method to distribute subsidy by giving coupon to the person or household who really need the subsidies. This method will help government to control the expenditures in subsidies giving.

ARTICLE REVIEW

Government will continue to allocated subsidy for ron95 petrol despite fluctuations in global prices.

The price of ron95 petrol would remain steady at rm1.90 per liter even if global fuel prices were to increase.

The actual market price for ron95 is RM3.18. The government not only gives subsidy for ron95, it also forgoes the sales tax.

ARTICLE:RON 95 PETROL SUBSIDY TO CONTINUE

Petrol ron95 RM / Liter)

Diesel (RM/ liter)

RM 2.73 Actual price RM 2.80

RM 2.10 Price Control RM 2.00

RM 0.63 Subsidy Government

RM 0.80

Structure Subsidy Petrol and Diesel

• Subsidy petrol RM 0.83 -----> RM 0.63 • Comparison prices Asian country• Malaysia ranked eighth most cheaper oil in the

world

Product MAS INA SIN THAI F.PINA

Ron95 1.90 2.93 5.45 4.90 5.54

Additional information

• Contributed to a widening budget deficit.•  Help fund welfare payments for low-income

households.• Move would help fund improved handouts for the

poor.• Not sign off any subsidy cuts or rate rises that

were not absolutely necessary.• manage our fiscal position to ensure the stability

of our economy.

Advantages subsidy of Ron95

WHY GOVERNMENT WANT TO IMPLEMENT THE RATIONALISATION OF SUBSIDY

Reduction of fuel subsidy is the step for the government to provide subsidy to the target group

Based oh the research, average of petrol expenditure

for household that income below RM3000 are:

RM132 PER

MONTH

Households earning more than RM5, 000 a month will get more subsidies for petrol

consumption for luxury vehicles.

Reduction of fuel subsidies by 20 cent is more fair because the

results can be given to the poor through the provision of Bantuan

Rakyat 1Malaysia (BR1M) and others.

WHAT HAPPENS IF RATIONALISATION NOT BEEN DONE?

Subsidies involve government money.

Spending a lot of subsidies will

reduce the growth of

important sectors in the country.

Increased subsidy borne by the government

will lead to the development of

public infrastructure and

public services also declined.

The attractiveness foreign investors

were also affected by a reduction in

infrastructure offered in Malaysia.

WHAT GOVERNMENT GUARANTEE ON THE RATIONALISATION OF SUBSIDY?

Government expenditure

will does not exceed the revenue

Level of debt

GDP does not exceed

55% By the year 2015, the fiscal

deficit will reach 3% of GDP. By 2020 about the

fiscal position will achieve

balanced budget

HOW GOVERNMENT TO ENSUREIMPLEMENTATION OF SUBSIDY RATIONALISATIONNOT BURDEN THE PEOPLE?

Subsidy rationalization implemented

gradually. Government has increased the

grant Bantuan Rakyat 1Malaysia (BR1M) in

Budget 2014 to reduce the burden on

the people.

• Grant BR1M for households earning RM3, 000 and below will be increased from RM500 to RM650

• Individual that 21 years old and over who earn no more than RM2, 000 a month, the aid will be increased from RM250 to RM300

• BR1M 3.0 will be extended to households with a monthly income of RM3, 000 to RM4, 000 with the help of RM450