Thursday, June 3, 2010

Lies, Damned Lies and Statistics

On 27 May 2010, Idris Jala, CEO of Pemandu presented the Government’s justification for the proposed removal of subsidies. The presentation can be downloaded here. Today, we all the mainstream newspapers interviewing Idris Jala and allowing him to explain his views further here. It seems eminently reasonable to remove the subsidies, if you are one of those that lack a thinking cap. Once you think hard enough though, something appears to be wrong with this picture.

Interesting Headlines but …
The Government tells us that we, Malaysians must be swimming in the lake of milk and honey all this while. In Bolehland, prices are the lowest and life, the rosiest. We have enjoyed living in luxury via generous government subsidies and now the party’s over. No more Bolehland … time to return to the ‘Real World’. Well, this appears to be strange. The cost of living appears to have gone UP these past few years but … well, the picture above seems to imply otherwise. Is what is being said true?

An Independent Analysis
Let’s use the Internet to do a simple, independent analysis, shall we? The analysis below is a review of the cost of living between Malaysia and Singapore, using Numbeo, a free Internet database about the cost of living worldwide. Why Singapore? Well, that tiny little speck south of Johor was once part of Malaysia. We are both geographically and culturally similar. Since Bolehland has the lowest prices in the region, we would expect our cost of living to be significantly LOWER than Singapore, right?

Using Numbeo, we can compare the prices of food in Malaysia and Singapore in USD as well as our median monthly disposable income. Let’s look at the numbers below (click on the picture to enlarge it):
Hmmm.., food costs twice as much in Singapore (USD510) as compared to Malaysia (USD268). So, it is true that we are paying much less for food due to subsidies paid for by our Government. However, let’s not forget the MOST important fact. The average median monthly disposable salary of Singaporeans of USD2.2K is more than twice that of Malaysians, USD0.9K. Singaporeans only have to fork out 22% of their disposable salary on food. However in Malaysia, we have to fork out 27% of our disposable income for the same foodstuff. Although this analysis is imprecise, it is sufficient as an indicator that our cost of living is higher than Singapore. Further, this high cost will only go UP if we agree to the subsidy hike.

So, if the Government goes ahead and removes the subsidies on subsidized goods and fuel, inflation is projected by the Government to increase to approximately 5% per annum. This will be compounded by an additional 5% Goods and Services Tax by the Government. To maintain the same lifestyle, Malaysians will have to fork out an additional 3% (or more) of their hard earned (might I add, measly) salary for food alone.

The main question we should be asking is WHY there is such a HUGE disparity in the quality of life enjoyed by Singaporeans compared to Malaysians? Why is the Government portraying Malaysia as the land of milk and honey? Even BEFORE the subsidies are removed, our cost of living is already substantially higher than the Singaporeans. Let’s not forget that Singapore is a country with almost non-existent natural resources and lacks the economies of scale that Malaysia possesses.

Conclusion
Surprisingly, based on PEMANDU Open Day polls, over 90% of the attendees are ‘happy’ with the proposed subsidy removal. And that is being used as one of THE main justification to remove the subsidies. The very Government that put into place this subsidy mechanism, spent beyond its' limits and wasted billions in white elephants projects and bailing out GLCs is asking us for more money. They promise that it will be used wisely to increase our monthly income, eventually. I say, let’s wait for PIGS to fly and hope that we don’t starve to death in the meantime.

14 comments:

Ken

The following is the SMS from PEMAMDU:

If Malaysia reduces subsidies, it should be done
A. in 1 year
B. Over 3 years
C. Over 5 years
Send A, B or C to 27701

Of course PEMAMDU could get approval of more than 90% of those who replied the SMS; as there isn't an option to reject the reduction of subsidies.

Anonymous

The question on most people's mind is why remove subsidies on essential food items which directly affect the poor and the pensioners ?

In fact, the cooking oil subsidy scheme(COSS) had been paid by the oil miller owners upfront to maintain the cooking oil price at around RM11.45. If the government allows the price to reflect the market price, then they are benefitting both ways.

Over the years ( 53 years ), the BN government had been spending our money like there is no tomorrow.

Just look at the wasteful spending :-

1. Bailout of BMF scandal
2. Bailout of cronies companies like Tajuddin Ramli MAS ; Halim Saad Renong and Mahathir's son Konsortium Perkapalan Bhd.
3. Awarding contracts under direct negotiations and having built-in clauses to compensate these companies ( all covered under OSA so that the people would not know )
4. Mismanagement of Perwaja ; Martrade building cost overrun ; cost overrun and additional cost for repairs to MRR2
5. Unnecessary defence spending with Perimekar collecting RM 500 million commission on 2 submarines delivered that cannot dive ; fighter planes now without engines ; armoured vehicles costing billions
6. Bailout of badly mismangemed GLCs including KTM ; Star LRT and Putra LRT.
7. Compensation given to Bakun and IPPs
8. Massive losses when government intervene in Maminco's International Tin Price stabilisation scheme in London Metal Exchange and trying to prop up the share market.
9. Countless other examples etc

Left the BN government tried to hijacked taxpayers money to reward their cronies and right they taxed the rakyat unknowingly like charging RM 5 per traveller in airport tax to compensate YTL's loss in ERL link operation between KLIA and KL Sentral.

Why can't the government drop all these wasteful spending as the first step and they will see hundreds of billions being saved without curring the essential commodities subsidy cuts.

doc2mee

That is why the gomen is trying to increase our minimum wages, from then on the rakyat will have more disposable income.

Normally, to be in the high income group, our country needs to industrialise creating more jobs and more skilled worker thus commanding more pay.

But in Malaysia, the gomen is taking a shortcut just by increasing minimum wages which will not auger well for further investment as will do not have enough skill workers to support high end industries.

Avatar

Thanks for the comments.

Ken - what a lop-sided survey :) Unfortunately, this is not disclosed in the press release in the local newspapers. I'm sure that the survey done by Pemandu for their Open Day must be similarly distorted as well.

Anonymous - good comments. These should be the issues we should be discussing. Unfortunately, in the local media, it's propaganda all the way. Sometimes, it's enough to make one's blood boil!

Doc2mee - yes, increasing minimum wages without corresponding productivity will only result in a welfare state. The education system needs to be fixed first for us to get out of this conundrum.

Rgds

Daniel Hirsch

Hi Dear
Marvelous and very nice post about wonder,wealth and wisdom............
Oil Prices Statistics

Anonymous

The reasons behind removing subsidies is not true. Malaysia will not go bankrupt, it is BN !!! Why can't they stop all the waste ? It is very simple the waste is the gain of someone else. Who ? Think about it.

Jean

Well written. I am going to link this page to one of my article in my blog if you dun mind :)

Internet marketing

What you have written is very insightful and much better than what several others have written on this topic. Thanks

Search Engine Marketing

Great information .Very useful for me and hope others also benefited by these information.Keep blogging......

Anonymous

Hey there, would you say Idris Jala is doing a good job then? And when you mean the government is asking us for more money, do you mean it through the increase in prices or higher taxes?

So, what do you think it's reasonable to do if you are in Idris Jala's shoes?

Not acquainted to him in any ways, but it's a rather interesting insight. Learning from the ones who know.

Reply here or uy_k17@hotmail.com.

Thanks

wonder

Dear uy_k17@hotmail.com,

1. Increase in general prices = Money come to Government
The Government has been running a budget deficit for some time now. This means money out > money in. How do they finance it? By borrowing. So, the Government has to get more money somehow from the rakyat. One of the ways is through GST.

GST is similar to Sales and Service Tax but is very wide in scope. So, in the future, every Ringgit you spend on a product, you'll have to donate, say 5% to the Government. And I mean everything, from that packet of Nasi Lemak you eat to the clothes you wear. The Government says it will exempt small business. But think! All these small business also buy their supplies from big vendors such as Carrefour and Tesco and will pass these higher prices down via inflation.

So, the answer is Govt will ask for more money by taxing us which will result in price increase. This one not so obvious, like Income Tax. It will hit the lower income the worst, since they're paying minimal (if any) income tax.


2. In Idris Jala shoes
One man cannot move a mountain. I believe he means well but Government rarely changes their behaviour. A radical change is only possible when things are too little, too late. See what has happened in Greece and Ireland.

If I were in his shoes, I would tighten government expenditures drastically to balance the budget. We need less Government (and Governing)- not more!

Rgds

Graphic Designer Cairns

I simply love the way you write!

Anonymous

Great article.Thanks for sharing. san diego seo firms

Valentines Treasure Hunt

Hi...I have a great idea to wish your lover in a great way. You can arrange Treasure Hunt game for your lover and express your feeling in front of your lover. Visit for more detail...

  © Blogger template 'Minimalist G' by Ourblogtemplates.com 2008

Back to TOP