Media statement by Charles Santiago in Klang on Monday, 31^st May 2010:

BN's Shock Therapy: Socialism for the rich and free market misery for the poor

The twisted reality of UMNO leaders has not changed. And neither has the government's penchant for turning propaganda into political reality waned.

This is evident in the recent statement by Minister in the Prime Minister's Department, Idris Jala, who said that Malaysia would be a bankrupt nation in another nine years if not for subsidy cuts.

This clearly indicates that the ruling Barisan Nasional government has lost all legitimacy to lead the country following its admission that its economic model has failed.

And in a radical contrast to Prime Minister Najib Tun Razak's rhetoric of putting the people first, subsidy cuts are the preferred choice to avoid bankruptcy.

There has not been a whimper about institutional changes to improve efficiency in government spending, reduce corruption, downscale wastage or promote a transparent and accountable government.

Discussions focusing on reducing military spending without jeopardising security, the streamlining of unnecessary projects and right-sizing of the civil service are also yet to happen.

Instead a feckless decision for subsidy cuts on controlled items like fuel, sugar, flour and cooking oil including an increase in toll prices have been proposed despite concerns that it would have an adverse impact on the poor and fixed income earners.

Idris has provided political legitimacy for the subsidy cuts. In an SMS poll conducted by the government, 61 per cent of the 191,592 respondents supported the subsidy reduction while another 66 percent suggested that the subsidy phase-out should be implemented between three and five years.

The legitimacy of the SMS poll needs further scrutiny. This is because the online news portal, Malaysiakini, recorded 222 comments in a couple of hours on this issue. And it is important to note that about 97 per cent of the comments were highly critical of the government's management of finances and economy.

A reader, who calls himself Bugis, said - Idris your statement could finally be the straw that will break the back of this very very very corrupt government.

Gen2, another Malaysiakini reader, said - Idris Jala. You are a smart guy but don't you realise you are the sacrificial lamb being put up to take the public's anger to deflect attention from all the past years of wastage?

While yet another reader, Indhumathi, warned - Idris you can be all wrong with your paper assumptions. Probably UMNO had planted so called intellectual to portray a situation in order to frighten the people in subjecting or rather heeding to UMNO's ways in order to gain billions in saved money so that the cronies can have a better life forever without having to sweat out. Don't fool the people.

Meanwhile another angry reader, Fairplayer notes, Idris, you should tell the UMNO crooks to return what they have siphoned out from our treasury, for their excesses and corruptible indulgences, back to the nation's coffer! UMNO is responsible for draining out our wealth in the last 53 years!

These comments clearly show that a significant segment of the population is unhappy with the proposed subsidy cuts despite spin doctoring by the local media.

The mainstream media argued that the country has no choice but to bite the bullet for the sake of future generations. The print media ran stories of individuals and representatives of business supporting the measures as necessary while cautioning political consequences.

The business media reported that the proposed subsidy cuts for controlled items like sugar, flour and cooking oil would not burden the poor as it would be implemented in stages.

The business community and economists argued that the controlled goods are not major items in a household budget but cautioned on the knock-on effect on other items which could prompt prices to inflate.

They also say that the impact of these cuts could be managed as it does not lead to a major adjustment.

The consumer and trade unions welcomed the move but cautioned on the impact on the poor and workers with a fixed income.

In short, the media and corporations have cooperated with the government as a smart play for their career advancement.

Why aren't the front-burner questions being asked?

Background

The Minister argued that high levels of debt (RM 362 billion and growing) and unsustainable levels of subsidies (RM 74 billion a year) have created a financial hole in the economic management of the country.

At present, the Malaysian economy is faced with an estimated fiscal deficit of RM 47 billion. This suggests government's total expenditures exceed the revenue that it generates, suggesting a living beyond your means scenario.

This has been the case since the last 12 years.

And if government debt continues to pile up at the current rate of 12 percent per year, in another nine years (2019) national debt will equal to GDP.

Thus, the solution offered to mitigate financial collapse of the nation is to eliminate subsidies.

Specifically, subsidies for petrol, cooking oil, flour, sugar, gas and electricity are to be phased out. Also, toll rates are to be increased together with an increase in health care, combined with cuts in tuition subsidy and text book loans for rich students.

In this schema, the government would save RM 103 billion in the next five years which will be used to pay off national debt. An important caveat to this effort is that subsidy cuts should be implemented immediately.

Put simply, these cuts would bail-out the economy from a debt crisis, financial collapse and bankruptcy.

But let's go through a checklist:

• What no commentator mentioned was that Barisan Nasional's 53 years of economic management has resulted in a failure. In 1960, 70' and 80's Malaysia was an envy of the developing world. At present, we are competing with the likes of Vietnam.

• If Malaysia is truly considerd Malaysia Inc, and if a company is confronted with debt and loses together with the potential for bankruptcy in nine years, then stake holders will demand for a new management team to take over.

• The Malaysian economic model tinkering with neo-liberal free market has been a failure. Large scale transfer of public wealth to private hands has come to a naught.

• Malaysia was to attain a developed nation status in 2020 but might face bankruptcy instead.

• The computer simulations predicting marginal price increase is faulty. The government's Subsidy Rationalisation Lab suggests that an increase of 15 per cent in gas prices would result in one to four sen's increase in the prices of roti canai, nasi lemak, teh tarik and mee goreng.

The government's simulation model has not factored-in the nature and history of price increases in the country. Also, the simulators must have forgotten that prices of cooking oil, flour and sugar including fuel would be increasing at the same time. It is important to note that the IMF and World Bank got it wrong in many countries. Failure stories in Indonesia, the Philippines, Africa and Russia call into question our continuing reliance on the Bretton Woods institutions approach to structural adjustment.

• Are pro market analysts in the driver's seat?

• What are the implications on the quality of life of working women and men with increases in prices from GST and subsidy cuts.

I am verbalising the questions that linger in the minds of most Malaysians who have lost confidence in a government which has carelessly dismissed efforts at institutional changes to promote transparency and good governance.

The government's back door deals and aversion to economic reforms has sapped the nation's ability to address serious issues in a durable manner.

It is asking the people, especially the poor, to sacrifice but at the same time continues to dish out contracts to the rich in a non-transparent manner suggesting that the political-business link is alive and kicking in the country.

Its clumsy plans for subsidy slashes clearly reflect the government's lack of attempts at future reforms. Furthermore, shocking the population into submission with the view to accepting subsidy cuts will not be tolerated by a discerning population.

If the Chief Executive Officer of Sime Darby was asked to step down after it was discovered that there was an over run of RM 1.6 billion, the same principle should apply to the Barisan Nasional government.

As such, I call on the government to dissolve parliament and hold a snap election as it has failed the nation and its people.

* Charles Santiago, MP for Klang