Posted on by Kit

When belts cannot be tightened anymore

Hsu Dar Ren
The Malaysian Insider
May 26, 2011

MAY 26 — I chatted with an old patient of mine after a consultation yesterday. He was probably suffering from the side effect of stress and not enough rest. I enquired about his job and he told me that he is working two jobs now; a daytime office job and part- time taxi driving at night. He had to do this to make ends meet.

So I told him what any doctor would tell his patient under these circumstances– to rest more.

Then he started to pour out his woes to me: that he has already been tightening his belt over the past few years, that he dreads to think of ways to tighten it some more, since the cost of living is creeping up and food prices are going to shoot up. He told me that there would come a point that the belt cannot be tightened anymore, and that point is fast being reached.

With so much news on the need to cut subsidies in the newspaper (it was even equated to opium), the government is in fact building up a case to cut subsidies further. It is just a matter of time that subsidies on petrol will be cut further. When that happens, petrol prices as well as electricity tariffs will go up.

Any economist will tell us that subsidies are actually bad for the economy in the long run. It creates a subsidy mentality among the people. But removing subsidies in a stagnant economy will result in a lot of problems for the poor. Subsidy removal must be done very gradually, and that too, should be done when the economy is expanding and real income rising.

I can’t help but recall what a young man said at a round table conference which I attended in February 2010 on subsidy and the economy.

At that particular round table talk, although most speakers spoke about the need to do away with the cost of living subsidy, like the subsidies for sugar, petrol and so on, what the young man said impressed me most.

This young man began by saying that even though all the speakers spoke about the need to do away with subsidies, he was against the idea because being a cynical person, he doubted whether the money saved from abolishing the subsidy (direct and indirect subsidy comes to about RM80 billion a year), will go to development and helping the poor. He said that being cynical, he thinks that this huge amount of money will go to someone else’s pockets and if so, why should he give up his right to subsidies?

His reason is based on one point only, and that is the whole system is rotten. I thought about it and I think he has a very valid point.

With the rotten system and everyone out to make a fast buck, whatever mechanism of doing away with the subsidy and using the amount saved to channel to development and helping the poor would just not work . Remember that time when the pump price of petrol went up to RM2.70 from RM1.92? The government promised to use the savings to channel into public transport and make it more efficient. Did we see any money going into the intended sector?

A big “No” of course.

I came out from that round table meeting thinking that if the money saved from abolishing subsidies (the 80 billion) goes into private pockets and results in a few more PKFZ, even though I am all for abolishing subsidies gradually (with safety nets in place such as cash coupons and cash cards to be given to the poor), I would want to change my mind and go along with the reasoning of this young man.

After all, if you have lived in Malaysia for the past 30 years, you can’t help but be cynical.

We should perhaps start to withdraw subsidies slowly AFTER we ensure that the leakages and wastages are plugged first. After all, the amount that has been siphoned out of the system is quite high, if we go by the foreign media and investment reports.

The government must have the will to tackle corruption and cronyism, not just pay lip service, and expect people to tighten belts which cannot be tightened anymore.

If subsidy withdrawal results in people unable to make ends meet, then expect social problems and crime rates to go up. If we do not clean up corruption first, expect corruption to become even more rampant and severe, since civil servants too will be hard hit by the subsidy removal and they, being in a position to dictate things, will no doubt be tempted to find other sources of income under the table.

From 2004 till now, we have wasted seven years tackling corruption, which is perceived to be even worse now. We do not have another seven years, given the conditions of the world economy and the middle income trap that we find ourselves in.

But do we have the will?

15 Replies to “When belts cannot be tightened anymore”

  1. The government isn’t talking about stimulus plans any more. Do you know why?

    First, there is nothing left to stimulate. All the stimulus points are already dead.

    Second, the country is almost bankrupt. Najib is literally begging for money everywhere he can find it.

    Thirdly, the ‘beggars’ and free-loaders keep asking for more. They must have their ‘rights’ or else.

    Fourthly, they have run out of scams. They’ve tried it all and they all don’t work.

    Finally, they all can’t think with empty stomachs.

  2. the umno government is suffering from erectile dysfunction. whatever they tried to do just won’t work. Now they are resorting to “Viagra” economics at the expense of the people. They get the erection while the people get the filthy cum.

    that’s them. The evil regime.

  3. We have been paying for the folly, or rather the stupidity of voting and puting in place a government the milks the people and the country without any restraint!
    Perhaps it is far too late to revive the patient now!
    The dose of sleeping pills swallowed over the decades have been taking its toll!!!
    And the patient is too far gone!
    His death wish has been granted.

  4. If you talk to most Malay, even the rural poor uneducated, they think that removing the subsidies will not result in better economics for them personally now or in the future. Even an UMNO supporter will tell you in private they think so too. BUT yet, you have so many of them still voting for UMNO and its not simply because they get a few bucks during election time.

    To me there seem to be a disconnect between what they know will happen and understanding it systematically why. At the end of it, they do not understand the inefficiency of administration of UMNO/BN govt. Such terms as multiplier effect, such terms as GINI coefficient, limits of feudal economics and trickle-down theory. They are not students of systems dynamics – a subject even some engineers don’t quite get all of it and we know most UMNO/BN leaders have absolutely no clue what the exact coefficients and links but half suspect, they rather not speak of, that has never been very good and getting worst.

    That is really the gist of it, that the Malay support of UMNO is not simply a tribal one what that their bias demand more facts and enlightenment than is available. He simply cannot put a number of how his life is worst off and the privilleged UMNOputras are better off at his expense.

  5. The people deserves who they want to be in the government. Those who continue to want BN to govern the country despite its obvious incompetence and corruption should keep quiet and suffer in silence as the country gets bankrupted.

    There is no way the country and people can escape punlishment though they may be able to defer it somewhat initially when as much as 888 billions were corrupted and siphoned away from the country in a short period. How can there be any uplift when extremists the likes of Perkasa goons, Pembela imbeciles and UMNO ultras are firmly holding the rein of power and kill every policy that can help the people. They are nothing else but big time rent seeking beggars whose only competency is in inciting hatred and chaos in the hope of diverting the rural Malay mass attention from their treachery. How can the people escape punishment when every policy, every undertaking and every thing in life here evolves around race and quotas. Have we seen any racist country in the world succeed? How can the country ever do well if only UMNOputras and cronies are allowed to staff important institutions and companies in the country. How could we have done well when we have only incompentent nincompoops holding high positions to steal, rob and plunder. Which GIC has succeeded? Which mega project has taken off and yielded return? Can we really expect miracles when our best and brightest have left and continue to leave. Vote for BN one more time and we will all be really screwed big time.

  7. Aiyah! Najib was talking about his own stimulant la…otherwise, how to keep Fat Mama happy?!
    sheriff singh, you are ill-informed and need to brush
    with UMNO remedy….privileged treatments for the
    so called Bumi elites!!

  8. In the course of work I came to know some people in pawnbroking business. Bad economic times always bring extra business to pawnbrokers. That used to be normal. Not now, unfortunately. Economy has been down for far too long. As a result customers actually have less personal valuables to pledge today! Indians are real hoarders of gold. They hoard them as security against rainy days, I suppose. And they too have less to pawn these days, I was told. That is scary. And thay is the reason why, I presume, many in the country ran out of patience and left the country without waiting for the day when pakatan takes over putrajaya.

  11. Big FLOM fr Putrajaya palace could not understand d problem n exclaimed: Aiyah, what problemo, ask them 2 get diamond-studded LV belts lah n punch more holes 2 tighten their belts lor; celaka, so simple solution pun made so much noise
    Otherwise, loosen d chastity belts lor, enjoy n make some $ mah

    Dis Hsu DR should know how UmnoB/BN (incl Gerakan) squeeze $$ fr normal mortals 2 enrich UmnoB/BNputras n cronies, cos he was once a BNputra mah

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