Why Malaysia’s Mr Populist is risking wrath, tightening the purse

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It would have been easy for Prime Minister Datuk Seri Najib Razak to remain Mr Populist and suffocate any talk about cutting subsidies. Very easy, indeed.

Why? Because it is part of his DNA to want to be loved by Malaysians rather than respected; to travel the path of least resistance rather than confront the knot of structural issues that bedevil this country.

Let's face it, a prime minister who prefers tossing money around like confetti at a wedding is always more at ease giving money away than tightening the purse strings.

So it must have been the financial reality that Malaysia is facing that forced Najib away from his comfort zone as a populist into unfamiliar territory.

His government's spend, spend and spend approach in the run-up to the general election was always going to result in several consequences.

Among them, eating up shrinking government revenue and feeding the Malaysian illusion that the good times will continue indefinitely without hurting their pocket.

But economists have been issuing periodic warnings for some time now, so have ratings agencies that the Malaysian love affair with subsidies and easy money has to end. Between RM25 billion to RM30 billion is spent on subsidies to allow Malaysians and foreigners to enjoy cheaper fuel, gas and water.

This was the scene at most petrol stations in the country last night as motorists rushed to fill up after the government's announcement of the fuel price hike. The Malaysian Insider pic by Afif Abd Halim, September 3, 2013.Apart from distorting the economy, subsidies are also enjoyed by groups of Malaysians and foreigners who really should not be benefiting from cheaper goods and services.

For example, many of the motorists who grumbled about the 20-sen increase in the price of a litre of RON95 last night should not be enjoying a fuel subsidy in the first place. After all, the pump price has doubled in 15 years but world oil prices have gone up 10 times in the same period.

Also, the main beneficiaries of subsidised diesel are owners of Vietnamese and Thai fishing vessels, and the Malaysian fishermen who sell their subsidised allocation to them.

The leakages have gone on for years and the government has done precious little to address this situation. So why now? Because the national treasury aka Petronas does not have a bottomless pit.

Its profits are down and the national oil company has been warning Putrajaya that it cannot continue subsidising gas for industrial use.

Najib will not admit it publicly but the country's revenue situation cannot be healthy. That is why Mr Populist is being forced to become Mr Realist.

But it is tough to wean Malaysians off the life of subsidies. Najib is being assailed by the Opposition, by the man in the street and by Umno supporters.

Some of their barbs are valid.

They want to know why a resource-rich country is suddenly on an austerity drive; they demand to know whether only wage earners are being asked to make sacrifices for the country; they believe that the rise in the price of fuel is a precursor to a sharp across-the-board spike in the cost of living; they feel duped into supporting the Barisan Nasional in GE13.

Finally, they want to know whether they are paying for the inflated contracts and projects enjoyed by cronies of the government.

Najib will not be able to answer all the questions but he had better try. He must make sure that there is transparency in the award of contracts and show evidence that savings from cutting the fuel subsidy is used for the common good.

If he wants to persuade Malaysians that the old way of doing things cannot be sustained, then he should set the example.

Ending his love affair with populism is a good start. - September 3, 2013.

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