PETALING JAYA: Savings from government subsidies can be used to spur Malaysia’s goal of becoming a high-income nation.
AmResearch senior economist Manokaran Mottain said that by reducing subsidies, the country would also appear more attractive to investors.
“It is the Government’s intention to reduce subsidies so the funds can be allocated to development. We have to move towards being a market-oriented economy. Investors think our economy is distorted,” he told The Star.
Manokaran said the money saved could be diverted to fund development projects, which would have a multiplier effect around the country.
“This will result in stronger growth as the country moves at a faster rate,” he said.
The current subsidy mechanism is no longer sustainable, as Government debt stood at RM362bil last year, or 54% of the GDP.
That is much higher than Indonesia’s 28%, and is approaching the Philippines 62%, he said in reference to Monday’s frontpage report in The Star of the Government’s plan to cut subsidies.
An open day on subsidy rationalisation will be held at the Kuala Lumpur Convention Centre on Thursday to get feedback on the proposal.
The savings would also reduce the national debt, he said, as the Government would not have to borrow as much for operational and development projects.
“If there are no reforms, we cannot move up the competitiveness rankings,” said Manokaran.
He said for people to accept the reduction, the Government would have to find a way to relieve their burden, such as reducing corporate or individual income tax.
The fuel subsidy takes up a huge chunk of government subsidies. “The subsidy is now 20 to 30 sen a litre, and I think it will be reduced gradually, not at one go,” he said.
According to a high-ranking source, one of the proposals from the Performance Management and Delivery Unit (Pemandu) subsidy rationalisation lab is to reduce the subsidy bill over five years by 30%.
A fixed date would be set for subsidy cuts to take place each year, which may mitigate panic buying and sudden price hikes.
According to a forecast on fuel prices by the Finance Ministry, the market price of fuel is around RM2.20 now and is expected to hit RM2.60 by 2016.
According to a GTZ International (Deutsche Gesellschaft für Technische Zusammenarbeit) fuel report last year, even the Somalians were paying more for fuel.
The average price of fuel in Somalia was US$0. 91 (RM3) per litre.
AmResearch senior economist Manokaran Mottain said that by reducing subsidies, the country would also appear more attractive to investors.
“It is the Government’s intention to reduce subsidies so the funds can be allocated to development. We have to move towards being a market-oriented economy. Investors think our economy is distorted,” he told The Star.
Manokaran said the money saved could be diverted to fund development projects, which would have a multiplier effect around the country.
“This will result in stronger growth as the country moves at a faster rate,” he said.
The current subsidy mechanism is no longer sustainable, as Government debt stood at RM362bil last year, or 54% of the GDP.
That is much higher than Indonesia’s 28%, and is approaching the Philippines 62%, he said in reference to Monday’s frontpage report in The Star of the Government’s plan to cut subsidies.
An open day on subsidy rationalisation will be held at the Kuala Lumpur Convention Centre on Thursday to get feedback on the proposal.
The savings would also reduce the national debt, he said, as the Government would not have to borrow as much for operational and development projects.
“If there are no reforms, we cannot move up the competitiveness rankings,” said Manokaran.
He said for people to accept the reduction, the Government would have to find a way to relieve their burden, such as reducing corporate or individual income tax.
The fuel subsidy takes up a huge chunk of government subsidies. “The subsidy is now 20 to 30 sen a litre, and I think it will be reduced gradually, not at one go,” he said.
According to a high-ranking source, one of the proposals from the Performance Management and Delivery Unit (Pemandu) subsidy rationalisation lab is to reduce the subsidy bill over five years by 30%.
A fixed date would be set for subsidy cuts to take place each year, which may mitigate panic buying and sudden price hikes.
According to a forecast on fuel prices by the Finance Ministry, the market price of fuel is around RM2.20 now and is expected to hit RM2.60 by 2016.
According to a GTZ International (Deutsche Gesellschaft für Technische Zusammenarbeit) fuel report last year, even the Somalians were paying more for fuel.
The average price of fuel in Somalia was US$0. 91 (RM3) per litre.
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