THE OTHER SIDE OF SUBSIDIES

Today, Prime Minister Najib Tun Razak told Parliament that gains from the ongoing subsidy rationalisation would be channelled for national development to improve the wellbeing and quality of life of the people. The gains would also be utilised for supplementary projects, particularly in Sabah and Sarawak, the Prime Minister told Parliament.

The Prime Minister explained, “When the revenue base expands, many projects, including infrastructure development, can be implemented. The government is committed to carrying on with the subsidy rationalisation to help boost the national economy.”

“The annual development allocation now stands at RM46 billion, and subsidies and incentives touched RM43 billion last year. Of course, this is inequitable. As such, it is only proper for the government to implement a sustainable subsidy rationalisation.”

This is certainly a step in the right direction but a step that the Opposition would most likely oppose. But then the Opposition will always oppose the government for the sake of opposing even when the government does the right thing. This is what Malaysians think the job of the Opposition is, to oppose the government every step of the way.

People who defend subsidies often highlight the goods or services that have been produced or the new jobs created. What they do not normally acknowledge is the benefits to society if that money had been spent in other ways. Ideally, a government would strive to structure its expenditures so as to achieve a return to society that is roughly similar for each ringgit spent.

Subsidies can easily upset this balance.

Many subsidies are defended as benefiting disadvantaged groups, or groups the politicians have us believe are disadvantaged. Some subsidies do, of course. However, even those that do benefit certain disadvantaged groups often benefit richer people or companies even more.