DRIVING the growth of worker productivity, transforming job structures, and thereby changing the income of the people. The country needs to take steps in this direction. 

“In one aspect, we can increase the minimum wage and narrow the income gap, but we need to think about changing job structures to boost productivity. This is one way to transform the country for a better Malaysia,” said Datuk Seri Amir Hamzah Azizan in his commitment to economic reform as he stepped into the Ministry of Finance as the Second Minister of Finance (MOF) last December.

With a successful corporate background in leading the Employees Provident Fund (EPF) previously, his leadership is needed to contribute significantly to the country’s economic development.

Various views and ideas, along with the justification of government actions, especially in rationalising subsidies, were shared by him with Mingguan Malaysia journalists Maisarah Sheikh Rahim and Aqilah Mior Kamarulbaid, assisted by photographer Faiz Alif Zubir, in his office in Putrajaya last Wednesday.

TARGETING SUBSIDIES

The reality of targeting diesel subsidies is part of fiscal discipline because subsidies have been around for a long time. Last year, diesel subsidies amounted to RM14.3 billion. Given the financial constraints we face, we need to do something about this issue.

Therefore, the plan is to target diesel subsidies, recognizing that there are segments of society we need to help. At the same time, we cannot accept fraud by giving subsidies to those who are not eligible because they indeed should not receive them.

When we floated the price from RM2.15 to RM3.35, it brought the diesel price in this country closer to Thailand’s, and we received immediate feedback. If you visit southern Thailand, you will see fewer fuel sellers. Therefore, through this targeting, it is clear that we can save on subsidy expenditures, and it will not go to other countries.

Another element is that those who should not be eligible for diesel subsidies, when they go to the gas station, they take and transfer it to tanks filled with diesel, then sell it to the commercial sector. They make a margin, which we call ‘not entirely legitimate business.’

When we introduced the new price, the quantity of retail sales dropped. This means there is no longer a shift from the retail sector to the commercial sector. Thus, people will buy at commercial sector prices.

In this regard, we are confident that the estimated projection for diesel savings is around RM4 billion. While we aim to achieve these savings, we also want to protect segments of society.

SUBSIDISED DIESEL CONTROL SYSTEM (SKDS)

The Subsidised Diesel Control System (SKDS) has been around for a long time and is primarily related to public land transportation such as buses, stop-and-go buses, ambulances, and hearses, all of which still receive subsidies. They continue to buy petrol at the old price, RM1.88 per liter, because of the services they offer to the public. Then, we extended it to 33 types of vehicles eligible to receive fleet card assistance.

SKDS 2.0 was launched in February, but as usual, Malaysians wait until the last minute to apply. Currently, there are nearly 300,000 applications for diesel cars. Approvals may be quick, but fleet cards might take two to three weeks to be issued.

Therefore, the MOF has provided flexibility for applications to be submitted before June 10. Once SKDS 2.0 is approved, we will assist. On July 1, we opened cash disbursements, and it will help applicants cover the difference between retail diesel prices.

Generally, the price increase is not dramatic, although some take advantage of it. Here, the Ministry of Domestic Trade and Cost of Living (KPDN) needs to play a crucial role. They will monitor and investigate. If subsidy recipients fail to justify why certain goods should increase in price, they will issue notices and take action.

We accept all the ‘noise,’ but the benefits (from subsidy targeting) are clear, and the containment costs are also clear. We also introduced Budi Madani to target groups eligible for subsidies. Budi Madani for individuals targets 300,000 diesel vehicle owners, while for commodities and agriculture, it targets 200,000 to 280,000 vehicles.

Currently, the response is slow, with only 180,000 vehicles applying out of the 700,000 target. We are offering money, so why not apply?

Here, I am somewhat confused as to why this is happening. Then we did verification: out of 300,000 individual diesel vehicle owners, we know what cars they have and their names from Road Transport Department (JPJ) records. We checked with the Inland Revenue Board (LHDN) to see if they pay taxes, and it turns out they have not paid taxes for over five years, so we understand why.

Although we are ‘safe’ from giving them subsidies, this action is wrong because they need to pay taxes. If they pay taxes, they should be able to claim subsidies. Paying taxes is the responsibility of every citizen.

OVERLOOKED FARMERS

My main concern is the farmers and planters who earn between RM50,000 to RM300,000 annually. This group might have been overlooked, but we are very active on the ground. The issue here is that the understanding that they are eligible to apply for subsidies has not reached them. Secondly, they might not know how to apply online.

Now, we are asking the Ministry of Agriculture and Food Security as well as the Ministry of Plantation and Commodities to go to the ground, conduct a program, register with the agencies, and if there is any assistance they should receive, we will help them register with Budi Agro.

Most farmers do not have equipment like excavators, and so on; they rent. In this case, the RM200 given will be divided because they do not use it all the time; they only use it when the season starts, and when the season ends, they use other machines. When they receive RM2,400 a year, it seems sufficient for the difference, but if there are services that charge excessively, they should file a complaint, and then KPDN will investigate.

There are also small oil palm plantations that they do not manage themselves but hand over to the Federal Land Development Authority (FELDA) and the Rubber Industry Smallholders Development Authority (RISDA). Any cost increase from these two agencies, we will cover.

I think for this, the RM200 given is an additional grant. We want these farmers and planters to register and apply with us to get the benefits they are entitled to.

AFTER A MONTH OF TARGETED DIESEL SUBSIDIES

We can see that all petrol stations (in Peninsular Malaysia) have experienced a 27% decrease in diesel sales, while at the same time, there has been an increase in commercial quantities. This means that there is still smuggling within the commercial sector.

At border petrol stations, petrol sales have decreased by 40% to 50%. It is clear. I think this situation also teaches us something new. People ask why we are doing this, why not increase enforcement. The reality is that enforcement requires a lot of effort, time, and involves high expenditures.

And since diesel smuggling has decreased, enforcement agencies can now focus on RON95 instead.

NOT ABOLISHING SUBSIDIES

As I mentioned in the Dewan Rakyat, the government is not abolishing subsidies but targeting them.

The next question we need to address is how to ensure that people do not become ‘creative.’ In the past, they have ‘manipulated’ subsidies in this way; we already know this, and they will come up with new creative ways.

WHY NO TARGETED SUBSIDIES IN SABAH AND SARAWAK?

Currently, we are taking the time to think about how to implement subsidies similar to those in Peninsular Malaysia. In Peninsular Malaysia, we can travel about 60 km to find a petrol station, but there, the concern is that the logistics network is not as good as here. If we increase prices, it will affect the end users.

There is still a lot of ‘homework’ to be done. We will not proceed until we find the best mechanism.

If we want to implement a fleet card system at stations that use cash only, how will it be used? It could cause more problems if we use a cash method. The indigenous people and farmers will also face difficulties, which is why we need to think carefully.

ONE YEAR OF THE MADANI ECONOMIC FRAMEWORK

The Madani Economic Framework gives the government time to evaluate priorities and break them down into three very important aspects. First, the ceiling increases.

This is quite simple: how do we make the pie bigger?

If the pie grows, everyone will become wealthier. This means we focus on boosting the economy through foreign direct investment (FDI) and creating better job opportunities from FDI. Although not all investments are beneficial, some bring in highly talented workers.

Thankfully, last year we saw a response, but it doesn’t mean immediate results; it takes time to reap benefits and so on, but there is progress.

Second, we want to see what can be done for domestic direct investment (DDI). I always tell fund managers abroad one simple thing to remember about Malaysia is economic diversity; if one sector is not doing well, another sector is. That’s why our economic growth is stable; it doesn’t rise and fall drastically but is called “deaf in economy.”

Another thing to understand about Malaysia’s economy is the liquidity from institutions in the country. The total asset management is RM1.8 trillion. If you go to Vietnam, Thailand, Indonesia, they do not have as much as we do. This liquidity provides funds for the country’s growth. For example, corporate bonds from Malaysian companies, when there is a strong reputation, the rates will be more competitive.

Secondly, the dependence on foreign exchange will decrease. Now, I think foreign exchange dependence is less than 3 percent.

Looking back at 1997/1998, it was more than 20 percent due to high dependence. Any movement in foreign exchange would hurt, but now we are becoming more “immune” to that level because of strong equity market liquidity. However, it is still lacking in the private market. We will look at whether it is suitable to build a stronger private market.

EXPAND INDUSTRIAL AREAS

Recently, the Prime Minister launched the Kerian Integrated Green Industrial Park (KIGIP) through a collaboration with Permodalan Nasional Bhd (PNB), Sime Darby Plantation Bhd, the state government, and the federal government. Government-linked investment companies (GLICs) are creating industrial areas.

This is important because if we look at the semiconductor sector, Penang is almost complete, and so is Kulim, so we need new areas and investors to further stimulate the economy. If there are more, we can boost the domestic economy.

Infrastructure in Malaysia is quite good, and the ecosystem supporting the semiconductor sector is very strong. When we talk to foreign investors, we want GLICs to also support the supply chain. If this supply becomes larger, it is important for the country. This is the first time the government is bringing together all GLICs, identifying what areas are needed, and how the government can help.

I joke with people by saying, “I have a new task at the ministry; I am the head ‘matchmaker’. I find FDI, I find businesses and introduce them to GLICs. If the ‘dating’ goes well and something happens like ‘getting married’, alhamdulillah, it means a ‘new mosque’ has been built.”

My job is to ensure it is attractive and people invest. It cannot go wrong. If confident in making money, then invest. We open opportunities by introducing and looking at various other ways to support.

NOT GOOD AT PUBLICISING

One of the problems with this government is that we are not good at publicizing. When I went to Infineon Technologies, they mentioned expanding their wafer fabrication, which will be launched by the Prime Minister this August, but we haven’t talked about it.

When we open new facilities, we become a larger and stronger component with new technology, and hundreds of thousands of Malaysians will get jobs. Kulim will develop further; we just need to be a bit better at ensuring people understand the growth happening and that people are already getting jobs. There are many opportunities; we need to go out and find them.

MINIMUM WAGE

We are also talking about raising the floor, how to improve the quality of life for Malaysians, which is important. I know the Ministry of Human Resources (KESUMA) is looking at the minimum wage. God willing, it can be implemented. We will consider increasing it beyond RM1,500 in the future because that amount is still low.

If we look at a decent living wage, it should be more than RM3,000. This means we need a higher minimum wage, but we must look at productivity to achieve better results, which in turn can generate higher income and enable the payment of higher wages.

FOREIGN WORKERS

What needs to be done is to reduce dependence on foreign workers. If we rely too much on foreign workers, we reduce opportunities for local workers.

For example, before joining MOF, I was also on the Board of Directors of Sime Darby Plantation. The plantation sector heavily relies on foreign labour. But during the pandemic, these foreign workers were not available.

So, Sime Darby started investing in automated machinery like drones and automated machinery by re-engineering the processes in plantation work, subsequently recruiting local workers to operate these machines.

Previously, young locals in rural areas were reluctant to work on plantations, citing reasons such as the heat and the perceived shame of such work. Now, we can tell locals to come and work on plantations to operate these machines or drones and obtain certificates in these fields. They can then get higher salaries, up to RM3,000 compared to RM1,500.

INTERNATIONAL RATING

Malaysia has had a good journey for over 70 years, despite facing challenges like the Covid-19 pandemic, and has succeeded in economic recovery. But government stability is very important for foreign investors.

The current government, in its 19 months, has laid out a clear economic market through the Madani Economic Framework, guiding the country on the right path. This includes the Public Finance Act and Fiscal Responsibility (FRA) and subsidy rationalisation, not only for diesel, but also for electricity, water, and chicken. This shows the government is doing the right things.

There are no subsidies for electricity now. Fiscal management is better. The water tariff has been raised for the first time in 42 years. These actions are not perfect yet, but the model has shown a good direction. It is difficult, like the diesel subsidy, which is very emotive, but it has been done. However, confidence in the government has increased.

There is much positive evidence that has raised Malaysia’s rating despite the risks because we do not want these implementations to be stalled. However, it is a fiscal responsibility. But there are challenges beyond our control, such as global geopolitical conditions. Malaysia has guidance to overcome current challenges.

UNPOPULAR POLICIES

The government is taking balanced actions, not favouring one side only. If we look at subsidies, we do not call it abolishing subsidies, but targeting subsidies. We reduced the subsidy amount from RM14.3 billion to RM10 billion.

The government pays attention to the groups of people who need it. This is the role of the government. What is important is to ensure that people understand, not panic, and not believe the narratives told by unsupportive groups. So, the government is managing this balance. There are ways to manage both sides. But the reality is that these difficult actions need to be taken.

NATIONAL DEBT RATIO

The basic rate is still the same, but when GDP increases, the percentage decreases. As long as we can improve economic growth, the economic capacity is stronger. We are moving in the right direction. If not, Fitch Ratings would not have given a good rating, and we can still protect the society. If we look at other countries, their cost of living is higher. Sometimes, we do not realise how fortunate our country is until we see others.

POLITICISING ECONOMIC ISSUES

We hope they can be more rational. Sometimes, when we convey the basic economic issues, we are stronger, and people will be more rational. Some may easily follow. These unpopular actions need to be taken because if we do not, the country will suffer.

We lost and wasted a lot of time, about seven years, when the country was not moving between 2018 and 2022 due to government instability. So now the country is moving, outsiders have recognised this, investors are coming to invest, so let us move forward together for the future.

• This article first appeared in Utusan Malaysia daily print edition, written by MAISARAH SHEIKH RAHIM, AQILAH MIOR KAMARULBAID, and assisted by photographer, FAIZ ALIF ZUBIR.