Subsidies: The Jala Myopia?

Dr. Mahathir, in his usual self, pooh-poohed Idris Jala's prediction of Malaysia going bankrupt if subsidies are not removed.

Let us read what the doyen has to say on the Jala Myopia.

"KUALA LUMPUR, June 1 — Dr Mahathir Mahathir today downplayed the country’s debt situation, saying that Idris Jala was “exaggerating” when he remarked that Malaysia could face bankruptcy by 2019 if subsidies were not slashed.

The former prime minister argued that it would be a stretch to say that the country would go bankrupt although it could become “poor” if steps were not taken to address government spending.

“Perhaps Idris was exaggerating. We are not going to be bankrupt but we are going to be poor,” he told reporters during a media briefing on the Perdana Leadership Foundation and The New Club of Paris roundtable and public dialogue on the knowledge economy.


Idris Jala predicted Malaysia could be bankrupt by 2019 if it does not begin to cut subsidies for petrol, electricity, food and other staples, which cost RM74 billion last year.

But the Najib administration has said it is waiting for public feedback before deciding on actual cuts.

Najib Razak has also distanced himself from Idris’ warning and said that the minister’s estimations were merely based on Pemandu’s studies.

However, Dr Mahathir admitted that the government would have to cut subsidies if the country’s economic stagnation does not improve.

“When the country is doing well, most people are working and they are creating wealth and then the government will tax them but in a recession that is when most of the people are unemployed and yet that is the time when we need the most amount of money. At the time when the country is in recession and the government has no money,” he said.

He also warned that the government must cut subsidies gradually.

“We need to accept but I hope that the government will do this gradually and not suddenly pull the carpet from under your feet,” he said.

Dr Mahathir stressed that the public cannot solely depend on government aid.

“In Malaysia, we must accept that when prices of raw materials go up then the prices of the end-product must also go up. You know the prices of petrol during my time was US$30 but at one time it went up to US$140.

“Imagine the amount of money that the government has to roll out. Especially now when our country’s oil production has been reduced to less than 500,000 barrels per day and we use more than 400,000 barrels a day. Therefore we only have 100,000 barrels to sell,” he said."

It think that is fair comment.