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