Do away with corporate subsidy first

Supremo-bloggo-journo Datuk Ahirudin “Rocky” Attan broke the news that Federal Government Minister in-charge of EPU Tan Sri Nor Mohamed Yackop would be presenting the plan of withdrawal of subsidy tomorrow. Times are still difficult for many, where subsidies are still required. Be it direct or indirect.

Of course, they would rationalize it. Knowing the habit of getting consultants to do the script, even for agencies such as PEMANDU, they would use bombastic economic and merchant banking jargons would inadvertently confuse more than it explains, let alone convince. Subsidies for Malaysians now it an intergral part of their lives.

Probably which ever party rule the nation, any revocation of subsidy would be a minus point when they face the rakyat at general election. Withdrawal of subsidies is equivalent of increasing tax. History have taught many societies that increasing taxes would become so unpopular that there would even be an uprising.

In 1990, Britain saw the iron-lady Prime Minister Margaret Thatcher was thrown out from her job by her own party. One of the reason is the introduction of highly unpopular poll tax. Despite having led Britain to victoriously recapture Falkland Islands 6,000 miles away from the invasion of the Argentinians eight years earlier, Britons were very angry when Thatcher imposed the GBP 400.00 per head for everyone living in Great Britain.

One question that loom in our mind is that if the Federal Government is bent on reducing the RM 80 odd billion per annum various form of subsidies, have these economic planners really pondered through all the numbers with microscope. Yes, as price of crude oil price continue to rise and it eventually would cost the system RM 14 billion in subsidies to keep the retail price of various fuel low, there is the question of other subsidies that are given out and away.

We are talking about ‘corporate subsidies’. Money making corporations are still being given tax holidays and even exemptions. Of course they would have economic excuse to rationalize these ‘corporate subsidies’ allowed. One of the corporation which is enjoying this is AirAsia. Almost a year ago, it was announced that Air Asia would be getting 5 years tax break.

AirAsia net profit falls 23% on lower forex gains

(AFP) – 4 hours ago

KUALA LUMPUR — Southeast Asia’s largest budget carrier AirAsia said Tuesday its first-quarter net profit fell 23 percent mainly due to lower forex gains rather than high oil prices.

Net profit for the quarter ending March 31 was 171.9 million ringgit ($56.3 million), compared with 224.1 million a year earlier, the airline said in a statement.

Revenue increased by 20 percent to 1.05 billion ringgit from 870.6 million.

Group chief executive officer Tony Fernandes said the airline’s performance was “excellent despite high fuel prices.”

“What is particularly significant for us is that our operating profit margins were also significantly higher year-on-year, demonstrating that we are maintaining tight control of costs even as we grow revenues,” he said.

The airline recorded operating profit of 241.72 million, up 46 percent year-on-year. The operating profit margin was 23 percent, up three percentage points.

“Yes, fuel prices shot up — but that is something beyond our control. Our response is not to wring our hands and moan, but to use our creativity to address the issue and find ways to overcome this challenge. And our Q1 results indicate that we are on the right path,” Fernandes said.


Air Asia could have bag a cool RM 1 billion profit for their operations. And yet Treasury allowed ‘corporate subsidy’ in the form of tax break. This is a corporation which vehemently refused to pay its dues like charges for the use of airports to Malaysia Airport. Ten of RM millions in areas are recorded. Then when its highlighted in the media for these unpaid charges, they have the cheek to ask for discounts.

They should be charged interest for late payment!

Air Asia is talking about losing money to forex. This is should be construed as an insult because Air Asia actually prefer to do their maintenance, repair and overhaul (MRO) services in Singapore instead in Malaysia. Moreover, with Malaysia Airlines which is a GLC. In an airline business, a lot of money is allocated to MRO. Especially with high utility operation such as Air Asia, where aircrafts are subjected for fast turn around and gotten airborne to maximise its utility and they really bank of the numbers game. We are not sure on their MRO or flight operations but they seemed to be having a little bit issues on safety.

Having notable personalities such as former Minister of International Trade and Industry Tan Sri Rafidah A Aziz as the Chairman and someone who is very close to Prime Minister Dato’ Sri Mohd. Najib Tun Abdul Razak, Omar Ong, in the BOD is very good strategy for their business. This include to maintain the tax break and probably other rebates or exemptions.

If its true that Air Asia is using Perak State Government to lobby for a dedicated low cost carrier airport in place of the failed proposed ‘Labu LCC Airport’, then this new proposal should be scrutinize really carefully. As a GLC, Malaysia Airports have the monopoly to run all airports (with the exception of Senai) and the interest of the rakyat comes first. This include the investment and opportunity cost for an airport being built which will impair existing Malaysia Airport operations and business.

Rakyat must come first. It is part of ‘1 Malaysia’ vow Malaysians subscribing to lately. Rakyat means common people. Not corporate citizens. Especially those who is expected to make 10 digit in profits!

Published in: on May 25, 2011 at 00:59  Comments (15)