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RM10,000 cash rebate to 40% low income households is a better and more effective mitigation plan

There is no dispute 61% people who answered Pemandu survey agree subsidies have to be trimmed down. The question is what is the best mechanism and how best to minimize its impact on our poor people and nation competitiveness.

I would like to propose an alternative approach which I deem is benefiting targeted poor rakyat than selective companies and foreigners.

Let see how this Turkey therapy approach works. IF government withdraws all subsidies except education and healthcare services immediately.

Based on these assumptions from various official sources like Statistics Department, Pemudah, etc.,

– 40% household monthly income is less than RM2000.
– There are estimated 6.2 millions households with 4.5 average headcounts per household.
– Subsidy is treated as debt, growing at 12% per annum from 2010 till 2014.
– 57% subsidy is allocated for education and healthcare services.

Total projected subsidies paid by the government for the period from 2010 to 2014 is 526.45 billion, with RM300.10 billion is for education and healthcare services. Hence, by removing all subsidies except education and healthcare, a whooping RM 226.35 billion can be saved.

Next is how much the budget is needed for RM10,000 cash rebate scheme for households with less than RM 2000 monthly income?

There are 2.48 million qualified households, therefore the budget for cash rebate scheme is RM 24.8 billion per year or RM 124 billion for next 5 years.

Net saving for five years period is RM 102.35 billion, close to RM 103 billion package suggested by Pemandu.

The advantage of cash rebate scheme is subsidized money go to hands of needy rakyat directly. Besides, no more distorted market price for essential goods and people will be more prudent and cautious in their spending. Also no more smuggling of subsidized goods to foreign countries.

Low income rakyat should be able to cushion one-time shocking inflation with hard cash on their hands to spend.

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