KUALA LUMPUR: A balance has been struck between the abolishment of fuel subsidies, the introduction of the Goods and Services Tax (GST) and more targeted forms of subsidies which serve those truly in need.
Prime Minister Datuk Seri Najib Razak explained the factors that contributed to the improvement of the government's policies regarding subsidies, which has often been the subject of criticism from certain quarters, during an interview on RTM's "Bicara Empat Mata" aired tonight.
"This approach or subsidy policy is not something new. We have had subsidies before, but those were mainly bulk subsidies included in the prices of goods and products, such as oil subsidies, RON95, RON97, diesel and LPG," said Najib, in response to questions by host Datuk Aznil Nawawi.
"Not too long ago, in the past four years, the subsidies peaked at RM22 billion per year. Looking at those figures, I said this was unnecessary."
Najib said the bulk subsidies under previous policies had not benefited those who truly needed them.
"If we provided bulk subsidies for fuel, the ones who benefited were those who were driving big cars. But the poor, those who were riding Honda Cubs, did not benefit much compared to those who were driving Mercedes-Benz and such cars," said Najib.
"It would be better if we reduced bulk subsidies and replaced them with targeted subsidies. The idea to introduce Bantuan Rakyat 1Malaysia (BR1M) then came about, When we introduced BR1M, the subsidies were more targeted, more focused towards those in need. Thus we abolished fuel subsidies."
Najib said BR1M was part of the rationalisation of subsidies gained from savings, which were directed straight to those in need of help.
The Prime Minister also explained that the abolishment of fuel subsidies and the managed float system for fuel prices, revised on a weekly basis, did not come without controls.
He said such measures were common practice in developed nations, where fuel prices fluctuated on a daily basis, but the government provided a guarantee that measures would be taken to cushion the impact should fuel prices rise beyond (for example) RM2.50 per litre for RON95.
"There is nothing wrong with this. We are also aiding the welfare of the people, while even state governments under the opposition are also providing such financial aid, although the total amount is far less. The principles are the same," said Najib.
He said the B40 group, which earn RM3,000 or less, was the group that needed help, and even those who earned RM3,400 had wanted to be included under BR1M recipients. Najib added that at a recent launch of an Urban Transformation Centre (UTC) in Seremban, he found many people in the Inland Revenue Department (IRD) office checking whether they qualified for BR1M.
"If they did not need BR1M, they would not be present. So, for those who don't want BR1M, they too need not accept it. If they disagree or dislike BR1M, then they don't need to accept it,” said Najib.
Najib also fielded questions on the GST.
"GST is a tax system that is progressive. If it is not progressive, then 165 nations in the world would not be utilising it. The latest is India and from Jan 1, Middle Eastern countries have introduced GST. If there wasn't GST, we need to use the SST (sales and services tax), which would not be sufficient for the nation," said Najib.
He said when crude oil prices dropped from US$110 (RM480) per barrel to US$30 (RM123), Malaysia's economy would have faced a recession.
"When there is a recession, the economy shrinks and when that happens, companies would retrench people, business opportunities would be limited, people would face hardships. But our life went on as usual, there was no such effect," said Najib, adding that civil servants too were not affected, while the government's spending continued, although slightly reduced.