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