Something that Malaysian politicians as well as advocates of subsidy need to learn. Quoted below are the effects of subsidy at another place on another commodity:
It is hard to make ends meet in Egypt, where about 45 percent of the population survives on just $2 a day. That is one reason trying to buy subsidized bread can be a fierce affair, with fists and elbows flying, men shoving and little children dodging blows to get up to the counter.
Egypt is a state where corruption is widely viewed as systemic, which is also why the crowd gets aggressive trying to buy up the subsidized bread. Cheap state bread can be resold, often for double the original price.
[…]
Egypt started subsidizing staples like bread, sugar and tea around World War II, and has done so ever since. When it tried to stop subsidizing bread in 1977 there were riots. Egyptians are generally not known as explosive people, but tell them you are raising the price of bread — of life — and beware.
[…]
The inspector explained why the system was so open to abuse. The government sells bakeries 25-pound bags of flour for 8 Egyptian pounds, the equivalent of about $1.50. The bakeries are then supposed to sell the flatbread at the subsidized rate, which gives them a profit of about $10 from each sack. Or the baker can simply sell the flour on the black market for $15 a bag.
[…] So they fight for cheap bread. They begin gathering outside the bare one-room bakery at about 11 a.m. every day except Friday, the day of prayer.
Over the course of an hour one recent day, 14-year-old Mahmoud Ahmed managed four trips to the counter. His job, he said, was to ensure a steady stream of bread for a nearby food vendor, who then resold it in sandwiches. It appeared that the baker let him push his way to the front to get bread before others. Was there a deal going? Mahmoud would not say.
Down the road, five blocks away, a 12-year-old, Muhammad Abdul Nabi, was selling bread, the same kind of bread, from a makeshift table for more than double the price at the bakery. But there were no lines. [Egypt’s Problem and Its Challenge: Bread Corrupts. Michael Slackman, Nadim Audi. NYT. January 17 2008]
Subsidy, lines and pressure to sell the commodity at a higher price. Sounds familiar?
One reply on “[1514] Of bread subsidy in Egypt”
Because subsidy is the cheapest way to buy votes.
Except EU and country that achieve 1st world status, few government are interested to create mode middle income group.
Making more middle class take lengthy process, and need careful planning. In addition, because middle income group tend to demand more from the government and “don’t pay gratitude” to the ruling party.