Jomo: Stop quibbling on subsidy for rakyat, look at leakages

Prominent economist Jomo Kwame Sundaram said the government and stakeholders are paying too much attention to trying to target subsidies for the rakyat but not looking into the larger issues of leakages.

For example, he said, one major blind spot is the subsidies extended to corporations, which remain unquestioned in the discussion on subsidy rationalisation.

“We’re so concerned about how much we’re spending on the poor, to make sure only the ‘really poor’ will get it and no one else will get it. Statisticians will know to do this, you’ll get Type 1 and Type 2 errors which are wrongful inclusion or wrongful exclusion.

“Instead of paying attention to this, what about about subsidies for big corporations? No one ever questions that,” he said during a panel discussion on just energy transition at Petaling Jaya today.

“We really look at the bigger picture to stop fighting over whether every last poor person is really qualified but look at the bigger picture of where the money is going and follow the money. That is my plea,” he added.

Off budget costs

He said other “leakages” which are not questioned is overinflated spending on large infrastructure projects like the East Coal Rail Link (ECRL).

The Najib Abdul Razak administration signed a deal for the rail project to cost RM81 billion and yet when it was recently revived, some RM20 billion was shaved off the bill, using the same alignment plan, he pointed out.

Jomo also highlighted that some engineering experts informed him the project could be done by about a quarter of the cost.

“By the way, for ECRL, for RM81 billion, what we will pay is over RM110 billion,” he said, adding that this cost is kicked forward to the next generation to pay.

He said the ECRL is not the only “off-budget” spending undertaken by the government, leaving the administration with contingent liabilities which are not overseen by the auditor-general and the accountant-general.

“The Finance Ministry says we own RM1.5 trillion but the accountant-general says RM1.4 trillion. But the accountant-general doesn’t monitor certain things.

“These are huge leakages but no one talks about it,” said Jomo.

This comes as the government continues its public campaign for subsidy rationalisation.

Prime Minister and Finance Minister Anwar Ibrahim has repeatedly said it is only fair to rationalise consumer subsidies so that they can be given to the deserving and not to the rich or foreigners.

Economy Minister Rafizi Ramli said the government will soon roll out a mega database, which will profile all households, so the government can effectively target subsidies.

Rafizi Ramli

‘The latest slogans’

Meanwhile, critiquing the recently announced Budget 2024, Jomo said that the government has the same misguided approach to renewable energy.

According to him, the government was missing the boat on biodiesel completely when it announced plans to cut subsidies on diesel. This, he said, was despite the talks of biodiesel since the 1980s.

Jomo mentioned that when it comes to decarbonisation, there is a lot of focus on the “latest slogans” like carbon pricing, instead of our established advantages in the sector which is the production of solar photovoltaic (PV) panels.

In fact, he said, the carbon market is just a way to allow pollutants to buy a pass for polluting.

“We are all quibbling over whether micro dams are better and what the adverse impacts of micro dams versus solar panels are. But we have to ask the larger questions.

“We’re number two behind China (in the production of solar PV) and China does not export most of it. There are less than 200 components in solar PV. How many components (are there in a) Proton (vehicle)?” he asks.

“We can reach 400 components in a Proton but can’t do 200 components (in a solar PV panel) when that technology has been stable since the 1990s.

“My plea is to get our priorities right,” he said empathically.

Also speaking on the panel regarding financing on just energy transition was Finance Ministry chief assistant secretary Maximilian Tariq Conrad.

Responding to a question on carbon taxing, Maximilian said the government is actually studying the introduction of that tax, which some argue could change business practices and reduce carbon emissions.

In fact, he said, businesses have also requested the government to introduce such taxes.

This is because of European Union regulations, for which their exports will be penalised for carbon emitted during production.

“(The business said) they would rather pay to Malaysia than pay to the EU. These proposals are coming in but we have to look at what are the impacts on the people and the micro, small and medium enterprises out there.

“And then there are subsidies out there, which are actually negative carbon taxes, and we’re looking at how to make it more targeted,” he said. - Mkini