PETALING JAYA: The government should get out of the subsidy mentality as it is destructive to the economy, warns a former top civil servant.
Group of 25 retired top civil servants (G25) co-founder Tan Sri Sheriff Kassim said by spending billions on subsidies for rice, sugar, RON95 petrol, diesel, electricity and cooking oil, the government is putting a strain on the fiscal deficit, leading to rising federal government debt levels, which are already reaching RM1.5 trillion.
“Government debt is now 85% of the gross domestic product. The current account deficit keeps on growing and apart from the financial cost, the proliferation of subsidies creates a fertile ground for smuggling,” said Sheriff in his latest social media posting.
Sheriff, who was also a former treasury secretary-general, said cross-border smuggling also involved criminal gangs operating in the underground economy, which is believed to be nearly half the size of the open economy.
“When smuggling becomes profitable, our east coast fishermen would find it a better option of making a living than going out to sea to catch fish at dawn.”
He said every time the government decided to subsidise a product, the Customs Department would tell the Treasury that their enforcement officers would worry about being posted to border checkpoints.
Smuggling activities are difficult to control because the Customs have to patrol the sea lanes and land borders.
Sheriff said Malaysia has so many border crossings compared with other countries, while pirates have speed boats and are more heavily armed than the marine police.
“Although subsidies are politically popular, they can destroy our economy. The government must therefore get out of the subsidy mentality before it’s too late,” he said.
In his view, the best way to assist hardcore poor Malaysians is by providing targeted cash transfers and food stamps, like what many countries did during the Covid-19 crisis.
Malaysia should also strengthen its social protection schemes to help the poor, he added.
Sheriff said an income support scheme can be planned to suit particular needs, while subsidies are too open-ended for the government to manage. Furthermore, he stressed that subsidies contribute to incidents of waste, leakages, smuggling and the associated black market operations.
