Thursday, July 3, 2014

Subsidies for the rich

By Koon Yew Yin

In yesterday’s article, I drew attention to the subsidy cut on gas and analysed its impact on poor and middle class households.
In this article, I shall look at the area of subsidies for the cronies of the powerful political elite—subsidies that are beneath the radar, unaccountable, undeserved and which have been partly responsible for the financial mess that the country is now facing.

What should comprise the first, second and third rung of subsidy cuts to balance the national budget should be open to national debate. In what sector? Affecting which beneficiary group? By how much? All these questions are important because the government is facing pressure from several powerful quarters for special treatment and preference in the country’s socio-economic programmes.
One sector in which we should consider subsidy cuts is higher education. Although I am a strong advocate of strengthening access to higher education, there must be a rigorous cost-benefit analysis of public universities.
During the last forty years, tens if not hundreds of billions of ringgit have been spent on Mara junior colleges and public universities where the enrolment has been skewed to benefit the Malays. All these colleges and universities have done badly. Their educational standards are low and the graduates they produce are unsuitable for the market.
Last week brought damning evidence of the decline in the standards of public universities, with not a single Malaysian local tertiary institution placed in Asia’s top 100. The finding by the Times Higher Education Asia University Ranking 2014 is worrying because in the 1970s, Malaysian universities and colleges were acknowledged to be among the best in the region.
Now is the right time to evaluate this subsidy to public higher education using rational criteria and taking a holistic and national rather than racial approach.
This is especially necessary in light of recent disclosures that RM8.6 billion is being spent to privatise the construction of six UiTM campuses nationwide. Besides the key question of whether this new construction is necessary given the glut of UiTM graduates who cannot compete in the job market, there are other questions as to how public funds will be spent and who benefits.
According to whistleblower Rafizi Ramli, “This is a repeat of the privatisation concessions of other UiTM campuses where each concession company has links with Umno leaders or businessmen with close ties with Umno.”
Citing information from the Companies Commission of Malaysia, Rafizi said Detik Utuh Sdn Bhd holds a minority stake in Unitapah Sdn Bhd, which was awarded a 23-year concession to build and rent out the Tapah campus to UiTM. Deputy Agriculture Minister Tajuddin Rahman is a majority shareholder in Detik Utuh.
Serious charge
Further, Rafizi made the shocking disclosure that “every privatisation concession of UiTM branch campuses is making profit for Umno politicians through rental that is a burden on the rakyat.” Rafizi has also alleged that Shahrir Abdul Jalil, a brother of former minister Shahrizat Abdul Jalil, had a stake in a company involved in the construction of a UiTM campus in Negeri Sembilan.
This is a serious charge that needs to be investigated by the anti-corruption authorities and made the subject of a special parliamentary inquiry, especially if there was no open tender process involved in the award of the concessions.
What we are seeing with educational expenditure is a repetition of the massive abuse with toll road, water and electrical power concessions. Selected cronies are given the licence to ‘print money’ through long term concessions which are negotiated behind closed doors. The concessionaires’ profits are guaranteed. There is no open tender system, no transparency, no competition, no cost-benefit analysis, and no papers or disclosure available to the public except when a whistleblower emerges.
When will the toll collection stop? Why should the toll rate be increased when the number of road users are increasing?
The other major concern is the grant of RM20 billion from Petronas under a revised pro-Bumiputera New Economic Model (NEM) announced in September last year by the Prime Minister. Not only does it appear that the subsidy grant of RM20 billion is not enough to appease Umnoputras, but we are now hearing arguments from Perkasa chief Ibrahim Ali that Petronas’s CEO should resign for saying that Petronas belongs to all Malaysians, and not just to the Bumiputera community.
What we are seeing is another attempt by rogue Umno or ex-Umno elements to hijack the nation’s scarce financial resources for the small group of Malay cronies (and their non-Malay partners) in the name of NEP and affirmative action to assist the Malay community. Spoon feeding the rich such as Ibrahim Ali and undeserving Malay companies will not come cheap. Poor Malays will suffer, as we can see clearly from the impact of the power price hikes.
And if that is allowed to happen, not only are the poor Malays the losers but the entire nation as well because our fiscal reforms will go down the drain.
Subsidies for the poor or rich? Subsidies to bloated, inefficient and loss making GLCs such as MAS or subsidies to the small and medium scale enterprises? Subsidies to benefit all Malaysians or for Bumiputeras only? Subsidies for public universities to produce unemployable graduates and to benefit concessionaires?
We still have time to make the right decisions. But time, like the nation’s wealth, is fast running out.