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Jan 5, 2008


Subsidy review based on fuelling growth

KUALA LUMPUR: A review of fuel prices will be based on making more productive use of the subsidy rather than high crude oil prices, Second Finance Minister Tan Sri Nor Mohamed Yakcop said yesterday.

He pointed out that the total subsidies being borne by the Government not only for fuel but also essential commodities at RM40bil is equivalent to the amount being spent on development projects annually under the Ninth Malaysia Plan.

“In the long run, the issue is whether this RM40bil can be better utilised to improve the growth rate,” he said in an interview on TV3's The Exchange programme.

“We are growing at 6.5%, that is very good. But we need to put ourselves on a higher growth trajectory every year, and to do that, we need to move every resource we have optimally.”

Nor Mohamed noted that the private sector, as the main engine of economic growth, is appreciative of the Government's efforts.

“They find that the government is more practical, and business is good as more projects are now taking place.

“So, the RM40bil that we are giving in subsidies, must it still go as subsidies or should it go into creating the environment for higher growth?”

Nor Mohamed assured that whatever the Government does, “we will make sure that the poor are not affected, the lower income group does not suffer and the standard of living and the quality of life of Malaysians are not affected.”

To a question, he said the review of the subsidies did not necessarily mean a reduction in the fuel subsidies, and stressed that the review is unrelated to the general election that has been speculated upon.

On how the high oil prices – now at around US$100 (RM328) a barrel – are impacting Malaysia, Nor Mohamed said: “Luckily for us, we are an oil exporting country. So, at US$100 per barrel, it's positive.”

But the higher prices will create problems for non-oil producing countries, both developing and developed, prompting a downturn or even recession in these countries, and Nor Mohamed said this could affect Malaysia's external trade. – Bernama


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