Subsidy cuts due to BN’s huge deficits, says Anwar

By Shannon Teoh
January 25, 2011

SHAH ALAM, Jan 25 – Datuk Seri Anwar Ibrahim today claimed that Barisan Nasional (BN) was cutting subsidies after it had run up huge deficits because of leakages and graft.

The opposition leader said that the budget deficit could be reduced by minimising disproportionate incentives to investors and through the practice of good governance instead.

“When we give to investors, we call it incentives but when we give to farmers and fishermen, we call it subsidies. In actual fact, they are both the same,” he said at a luncheon on “Subsidies: National Burden or Public Burden?”

The PKR de facto leader said that after an economic crisis, it is always the poor who are the worst hit, yet the poor have had their subsidies cut due to the resulting fiscal deficit while the rich received bailouts.

He cited a CIMB Research report that said for households earning RM1,500 and below, the cost of housing, food and vehicle loans collectively amounted to 80 per cent of their income.

Last year’s deficit was seven per cent of GDP in 2009, a 27-year high, although it was projected to drop to 5.3 per cent last year. This is still higher than 2008’s 4.8 per cent.

Speaking in his capacity as Selangor’s economic advisor, he said that the federal government could instead reduce its deficit by renegotiating the contracts with independent power producers (IPP) that he claimed were worth RM19 billion in subsidies.

The Permatang Pauh MP also said that the lack of good governance was the cause of Malaysia ranking 5th among developed countries in illegal money outflows.

Illicit money outflows from Malaysia tripled to US$68.2 billion (RM208.1 billion) in 2008, from US$22.2 billion in 2000, according to a report by US-based financial watchdog Global Financial integrity (GFI) released this month.

“The report defined illicit money as corruption, money from unknown sources and tax evasion. These are all about governance. If the leakage was RM10 to 20 billion, maybe it is defensible but RM200 billion? Defending that would be atrocious,” he told a press conference after his speech.

He called on the government to be responsible and undertake an independent study by agencies such as the Malaysian Anti-Corruption Commission, Bank Negara, the Securities Commission and the police to produce a detailed analysis on the problem.

The former finance minister cited the growing cost of building the national palace which began at RM400 million but has been reported to have tripled to RM1.2 billion since.

 

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