T20 subsidy cut will provide more funds for future investments - Analyst

14 Jun 2023 05:01pm
Razman said the funds could also be used to increase allocations for investments in school, hospital and road infrastructure, in addition to making internet more accessible in rural areas. Photo for illustrative purposes only - 123RF
Razman said the funds could also be used to increase allocations for investments in school, hospital and road infrastructure, in addition to making internet more accessible in rural areas. Photo for illustrative purposes only - 123RF
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KUALA LUMPUR - The move to reduce government subsidies to the rich or high income (T20) group will ensure that the country has sufficient funds for future investments, said economic analyst Assoc Prof Dr Ahmed Razman Abdul Latiff.

Razman of Universiti Putra Malaysia (UPM) Putra Business School, said the funds could also be used to increase allocations for investments in school, hospital and road infrastructure, in addition to making internet more accessible in rural areas.

He said these developments must be implemented to attract foreign investors and international companies to invest in the country, which would further enable Malaysia to achieve its goal of becoming a developed country.

"If the cut in subsidy is implemented, a lot of savings can be made. For example, for subsidies on electricity, the government may be able to save about RM4 billion while for petrol subsidies (RM15 billion).

"The amount of savings could be channeled towards allocations for the purpose of developing educational infrastructure, improving skills or expanding internet access to all,” he told Bernama, adding that he doubts that the funds would be used for Rahmah cash handouts.

He was commenting on Prime Minister Datuk Seri Anwar Ibrahim's statement on Monday that it was unjustifiable for the government to continue giving electricity subsidies and haj financial assistance to the T20 group, because at least 40 per cent of the subsidies which the government channeled to the poor were also enjoyed by the group.

Elaborating, Razman said the removal of subsidies for the T20 group is also as a measure to ensure that the rich would not continue to get richer especially when the individual income tax imposed on them is only 30 per cent, lower than the rate in Thailand, Indonesia and Vietnam.

Meanwhile, economic analyst at University of Kuala Lumpur (UniKL) Business School, Assoc Prof Dr Aimi Zulhazmi Abdul Rashid said the cut in subsidies for the T20 group is the most effective way to reduce the government's financial burden as this would enable growth targets to be achieved.

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He said the current practice of giving untargeted subsidies was not helping the people, especially the low-income group, because the subsidies are also enjoyed by the rich who have a higher purchasing power in the consumer segment.

"In 2022, the allocation for subsidies expenditure was almost RM80 billion, exceeding development expenditure, with the largest component for fuel subsidies.

"This had definitely put a burden on the government's budget, so it is hoped that the subsidies would be managed better when the Central Database Hub (Padu) is implemented in January because through it, targeted subsidies and aid can be distributed more effectively,” he added.

Meanwhile, e-hailing driver Mohd Haikal Adam, 35, said the government was doing the right thing in implementing the reform initiative as this was only being fair to all income groups following the Covid-19 pandemic.

"The implementation must be well-executed so as not to negatively impact the people through for example, an increase in the price of goods that could affect cost of living.

"It should also be able to prevent certain parties from creating a mechanism to benefit from the subsidies though they are not eligible," he said. - BERNAMA