Media statement by Lim Guan Eng in Penang on Tuesday, 24^th May 2011: 

Unless the BN government address the problems of rampant corruption, rising inflation, stagnant income growth and socio-economic injustice facing Malaysians today, the proposed subsidy cuts will only worsen these problems 

Despite the Government Transformation Programme (GTP) and Economic Transformation Programme (ETP), Malaysia has dropped six places from 10^th in 2010 to 16^th in the Institute of Management Development's (IMD) 2011 World Competitive Rankings. This downtrend is in tandem with the findings of the World Economic Forum's (WEF) Global Competitiveness Index for 2010-2011 as well, which saw Malaysia slipping from 24^th (down from 21^st the year before) to 26^th now.

According to the Switzerland-based Institute of Management Development (IMD), Malaysia had performed badly in two out of the four main factors of the survey - government efficiency and business efficiency, falling from 9^th and 4^th in 2010 to 17^th and 14^th respectively in 2011. The other two factors are economic performance and infrastructure.

On the other hand WEF pointed out that Malaysia's lack of competitiveness stems from poor institutional capacity, with two of the most telling problems listed as 'irregular payments and bribes' as well as the lack of 'judicial independence'. Clearly WEF is addressing the problem of corruption and cronyism just as the IMD report listed business efficacy and government efficiency hampered lack of open tenders and transparency.

Malaysia is seen to be running a budget deficit that is fast spiralling out of control in proportion to its growth. Household debt to gross domestic product (GDP) is highest in Asia after Japan, from approximately 64% in 2008 to close to 76% or RM581 billion in 2010. In other words, our budget balance and debt control is deemed to be unsustainable in the long run.

Other factors include poor infrastructure, education (low secondary and tertiary enrolment rate) and labour market efficiency. It would be safe to say that we are displaying the classic case of an export-led low wages low productivity economy that is struggling to come to terms with today's realities.

Whilst subsidies cuts may improve competitiveness, DAP questions the rationale, logic and justice of subsidy cuts for small items like sugar and diesel that saves hundreds of millions but not big-ticket items like gas subsidies to independent power producers (IPPs) and the commercial power sector that costs RM 19 billion a year. In other words, if the Prime Minister claims that subsidies are akin to 'opium', then why not first remove the 'Big Opium' in the form of subsidies to independent power producers (IPPs) before removing the 'Small Opium' of subsidies in sugar, diesel and petrol which hurt the masses directly.

The Malaysian economy is in a state of stagnation. Just like other post-manufacturing economies, we are struggling to overcome the effects of inflation due to a very low growth in income levels. The purchasing power of the average Malaysian is weakening by the day, being now only 40% of the average New Yorker.

Kuala Lumpur residents have to work four times more than New Yorkers in order to afford 1kg of rice, while the working time required to purchase 1kg of bread is double what a New Yorker has to put in.

WORKING TIME REQUIRED TO BUY

Source: UBS AG / TMI

Unless the BN government address the problems of rampant corruption, rising inflation, stagnant income growth and socio-economic injustice facing Malaysians today, the proposed subsidy cuts in June 2011 will only worsen these problems with subsidy cuts that targets the poor but spares the rich companies.

*Lim Guan Eng, DAP Secretary General & MP for Bagan