UNIVERSITI TEKNOLOGI MARA (MELAKA)
Kampus Jasin
AGR113
FACULTY OF COMPUTER &
MATHEMATICAL SCIENCES
FACULTY OF PLANTATION &
AGROTECHNOLOGY
FUNDAMENTALS OF ALGORITHM DEVELOPMENT(CSC118)
ASSIG NMENT
MINI PROJECT
TEAM MEMBER’S : 1. 1)mohammad
1. MUHAMMAD LUQMAN
Ahmad Adam
im!n HAKIM
[Link]
mohd BIN
Hakim
nor RUZLAN
(2015711473)
2) MUHAMMAD NIZAM BIN YUSUF
2.3)[Link]
No!a"#
"kh#e
NORHAFIFY Nor
bin
BIN abidin
amir
NOR (2015892178)
ABIDIN
GROUP : M3CS110/1A
M3AT110/2F
PROJECT TITLE : Subsidy
Project On Book Shop
Sir Zahid
LECTURER’S NAME : Madam Zainab binti Othman
SUBSIDY
AGR113
INTRODUCTION
Most of the subsidies by government are in form of cash grants or
loans to the businesses. It encourages activities the government
wishes to promote. Generally, subsidy depends on the amount of
goods or services provided by one.
A level of government can also provide subsidies to another party.
This includes federal grants given to state or local governments.
Also, state grants given to municipal governments. The World
Trade Organization (WTO) acknowledge that, a subsidy is any
financial benefit provided by a government which gives an unfair
privileges to specific industry, business or even individual.
WTO mentioned five types of subsidies. The aforesaid subsidies
are cash subsidies (e.x : grants), tax concessions (e.x : exemptions
or deferrals) assumption of risk (e.x : loan guarantees), government
procurement policies (pay more than free-market price),
stock purchases (which keep company's stock higher than actual
market value).
IMPORTANCE OF SUBSIDY IN MALAYSIA
Malaysia’s subsidies are blanket in nature, hence, become more
regressive as economy develops. The benefits of most blanket
subsidies is that, it will accrue more to the more affluent groups if
these groups consume larger quantities of the subsidised items in a
middle or high-income economy. For instance, the benefits are
enjoyed disproportionately by high-income households in case of
the fuel subsidy in Malaysia who consume a larger amount of fuel
as they are more likely to own multiple vehicles with larger engine
capacities. It is estimated that the bottom 20% of households in
Malaysia only receive 4% of the fuel subsidy, while the richest 20%
receive 42% of the subsidy. Thus, the blanket subsidy has become
a less effective tool in ensuring the benefits of low fuel prices are
widespread and inclusive.
Second, subsidies and price will affect the distortion of price by
artificially depressing the prices of key goods and services in the
economy. This could distort both consumption and production
decisions in a number of ways, and hence, lead to a misallocation
of resources in an economy. Key among these distortions is an
overconsumption of the subsidised or price-controlled items by
both households and firms. In addition, petrol consumption per
capita in Malaysia has increased over the last decade and is higher
than in other regional economies. This has contributed to Malaysia
becoming a net importer of crude oil and refined petroleum
products in 2014 coupled with a moderating trend in production.
From a structural perspective, hinder incentives such as subsidies
and price controls can improve productivity and efficiency, thus
holding back long-term development. Subsidies and price controls
would result in an overreliance on cheap inputs by firms, which
could lead firms to being trapped in low-cost, energy-intensive
sectors. This would reduce incentives to improve productivity,
undertake research and development (R&D) or to innovate and
move up the value chain, thereby impeding these firms’
international competitiveness.
Finally, subsidies and in certain cases price controls, also impose a
burden on the government. Attempting to keep prices of resources
low amid rising global market prices and overconsumption by
households and firms will ultimately weigh on the fiscal position of
the government.
COMPARISON OF HOW MALAYSIAN AND
OTHER COUNTRY CONDUCT SUBSIDY
fossil fuel subsidy
> Malaysia
The Malaysian government spends the subsidies for petrol, diesel
and liquefied petroleum gas had already reached 24 billion ringgit
[US$7.4 billion] in 2012. per month to keep the price of fuel
artificially low. However, our Prime Minister, Najib Razak said
spending is not sustainable and prevents him from investing in
higher paying jobs (education, health, and other needs of
vulnerable segments of the population) and want to move to a
more targeted subsidy system that caters to vulnerable groups. So,
Malaysia has cut fuel subsidies to shore up finances.
> India
In India for instance, the petrol subsidy is fixed and prices adjust in
line with the global market. It will retail price of petrol in India with
global crude prices declining. The price will pump when global
prices rise.
> United States
Oil Change International (OCI) estimates United States fossil fuel
exploration and production subsidies at $20.5 billion annually as of
October 2017 Other estimates of annual United States fossil fuel
subsidies range from $10 billion to $52 billion annually. Yet, none
of these include costs borne by taxpayers related to the climate,
environmental or health impacts of the fossil fuel industry.
Fossil fuel subsidies in the USA also include massive military
expenditures to acquire and defend fossil fuel interests around the
globe, infrastructure spending, related maintenance based on an
antiquated energy system built on large, remote power plants and
cheap electricity.
> Venezuela
The fuel subsidies in Venezuela are given more heavily in 7.1 to the
richest part of the population who are consuming the most energy.
The fuel subsidies maintained a cost of about US$0.01 per liter of
gasoline since 1996 until President Nicolas Maduro reduced the
national subsidy in 2016 making it roughly US$0.60 per liter. Fuel
consumption has increased since the 1996 policy began. Even
though the production of oil has fallen more than 350,000 barrels
per day since 2008 under the same policy. PDVSA [Venezuelan
state oil company] has been losing money on domestic trade since
enactment of the policy. These losses is also attributed to the 2005
Petro-Caribe agreement, under which Venezuela sells many
surrounding countries petroleum at a reduced price. Essentially, a
subsidy by Venezuela for countries that are part of the agreement.
The subsidizing of fossil fuels and consequent low cost of fuel has
created a loop hole in which contributed to the creation of a large
black market. Criminal groups smuggle fuel out of Venezuela to
adjacent nations (mainly Colombia, the home country of the world
renowned, biggest and gruesome cartel leader, Pablo Escobar de
Gaviria of Cali cartel). This is due to substantial profits that can be
reaped since fuel is more expensive in Colombia compared to
Venezuela. The fact that this notorious issue have already been well
acknowledge in Venezuela, the government doesn’t seems to
concern in overcoming this pandemic cancer of which contribute to
the economy crisis of the nation. Worse than bad, the state hasn’t
eliminated the aforesaid subsidies.
Russia
Russia, the world's 3rd largest energy subsidizer, subsidizes
electricity and natural gas, as well as oil extractions. For oil
extraction alone, it is said that Russian government grants a tax
exemptions and duty reductions amounting to US$22 billion per
year. Some of the tax exemptions and duty reductions is also
applied to natural gas extractions (an immense part of the subsidy
is basically allocated for oil). Back in 2013, Russia offered the first
subsidies to renewable power generators. Since the large subsidies
of Russia are very costly, it is recommended that Russia lowers its
domestic subsidies in order to aid their economy.
Agricultural subsidy
> Malaysia
The government provided RM1.3 billion to boost paddy subsidies
and incentives, including aid to tide over the monsoon season in
the Malaysia agricultural sector (2017). The government provided
RM260 million as cost of living allowance. ) for the fishermen.
These are done to ease the people’s burden and grow the local
economy and incentives were an important aid for the people and
for a developing country production and help the farmers.
> European Union (E.U)
In 2010, the EU spent €57 billion on agricultural development, of
which €39 billion was spent on direct subsidies. Agricultural and
fisheries subsidies form over 40% of the EU budget. Since 1992
(and especially since 2005), the EU's Common Agricultural Policy
has undergone significant change as subsidies have mostly been
decoupled from production. The largest subsidy is the Single Farm
Payment.
> Africa
According to the Overseas Development Institute (ODI), Malawi
Government Agricultural Inputs Subsidy Programme (implemented
back in 2006) has been successful at promoting the utilization of
fertilizers in both maize and tobacco productions. This increases
both agricultural productivity and food security. The subsidy was
implemented by means of a coupon system, in which it could be
redeemed by the recipients for fertilizer types at approximately 1/3
of normal cash price. The voucher for coupon system can be an
effective way of rationing and targeting subsidy to maximize
production, economic and social gains. Many practical and political
challenges remain in the program design itself. It’s implementation
is required in increasing efficiency, controlling the costs, limiting
patronage and monitoring fraud in the system therein.
> New Zealand
New Zealand is reputed to have the most open agricultural markets
in the world after radical reforms began in 1984 by the Fourth
Labour Government which halted all the subsidies.
In 1984, New Zealand's Labour Government took dramatic step of
ceasing all farm subsidies. The subsidies then consisted of 30
separate production payments and export incentives. This was a
truly striking policy action since New Zealand's economy is very
much tied and dependent on farming. Subsidies in New Zealand
(NZ) accounted for more than 30 percent of the value of
production prior reform. New Zealand’s farming was marred by
common problem, which was overproduction, inflated land prices
and environmental degradation.
As the country is a large agricultural exporter, continued subsidies
by other countries are a long-standing bone of conflict, with New
Zealand being a founding member of the 20-member Cairns
Group fighting to improve market access for exported agricultural
goods.
> United States (U.S)
The United States paid around $20 billion in 2005 to farmers in
direct subsidies as farm income stabilization via farm bills. These
bills pre-date the economic turmoil of the Great Depression (1929)
with the 1922 Grain Futures Act, the 1929 Agricultural Marketing
Act, and the 1933 Agricultural Adjustment Act creating a tradition
of government supports.
The aforesaid subsidy programs give farmers extra cash for their
crops and guarantee a price floor. For instance, according to the
2002 Farm Bill, for every bushel of wheat sold, farmers were paid
an extra 52¢ and guaranteed a price of $3.86 from 2002–2003.
That is, if the price of wheat in 2002 was $3.80, farmers would get
an extra 58¢ per bushel (52¢ plus the 6¢ price difference).
Corn is the top crop for subsidy payments. The Energy Policy Act
mandates that billions of gallons of ethanol be blended into
vehicle fuel each year, guaranteeing demand. US corn-ethanol
subsidies are between $5.5 billion to $7.3 billion per year.
Producers also benefit from federal subsidy of 51¢ per gallon,
additional state subsidy and federal crop subsidy that can bring the
total to a least 85¢ per gallon. However, the federal ethanol
subsidy expired December 31, 2011. US corn-ethanol producers
were shielded from competition from cheaper Brazilian sugarcane-
ethanol by a 54¢ per gallon tariff. Unfortunately, that tariff has also
expired on December 31, 2011.
ITEMS THAT HAVE BEEN SUBSIDIZIED IS MALAYSIA
List of Controlled
Goods :
These are the goods which have been declared as controlled
articles under the Control of Supplies Act 1961.
• Sugar and Salt
• Milk (Condensed, powdered or dried ,Evaporated)
• Cement and Clinker
• Wheat Flour
• Cooking Oil
• Fertilizers
• Pesticides
• Formic acid or any other acid used for coagulating latex
• Mild Steel Round Bars
• Kerosene
• Prepared or preserved fish in airtight containers
• All types of rice and paddy ( State of Sabah Only)
• Petrol Motor Spirit & Motor Gasoline (All Grades)
• Diesel Fuel
• Liquefied Petroleum Gas (LPG)
• Breads
• Fuel Oil
• Chickens
• Rubber Woods
• Facemask ( 1-ply, 2-ply, N95)
CONCLUSION
Subsidies are often intended to help industries to grow and develop
or protect them from troubles. It is essentially, financial grants to
corporations from the government that enable them to invest more
money in things like research and developments (R&D).
Subsidies help industries grow and strengthen so they can compete
in global market and protect industries from foreign competition or
domestic troubles, which can save jobs. Either way, subsidies give
corporations in a particular industry funds that they can use to invest
in better productivity.
Think of it as a loan from the government that does not have to be
repaid and occurs every year for a set number of years, like a financial
umbrella from the rain that is economic competition or challenging
factors.
REFERENCE
> http: / / [Link]/ definition/ [Link]
> https: / / [Link]/ publications/ 8711-fossil-fuel-subsidies-
developing-countries
> https: / / [Link]/ amp/ [Link]/
kpdnkk/ amp/ list-of-controlled-goods
> http: / / [Link]/ malaysia/ article/ petrol-
subsidy-abolition-not-main-cause-of-fuel-price-hike-says-najib
> http: / / [Link]/ fossil-fuel-subsidies
Assignment By > 1. Mohammad Imran bin Mohd Nor (2015711473)
2. Ahmad Fikhrie bin Amir (2015892178)
THE END
