20100527 1101 Malaysian Economic News.

The government will delay plans to cut state subsidies to allay inflation fears and allow more time for public feedback, Minister for Domestic Trade and Consumerism Ismail Datuk Sabri Yaakob said. The government may now phase out subsidies on essential items, from flour to highway tolls, “gradually” within 3-5 years. The government does not plan to implement the subsidy rationalization plan anytime soon or from 1 Jun 10,” Ismail Sabri added. (BT)

Based on the Performance Management & Delivery Unit (Pemandu) Subsidy Rationalisation Lab’s recommendations, the government will continue to provide affordable social services and protect the hardcore poor and vulnerable groups. One way of making subsidies work is to manage the transition and to provide assistance to cushion the impact like stablisation fund and subsistence allowance. If this can happen, 9% or RM2.9bn can be potentially rationalized, or saved from subsidy expenditure this year.

• Studies done shows that the planned subsidy removal will trigger inflation by 4.0-4.5% next year before moderating to 2.9%. 
• Subsidy savings should be invested or spent, otherwise GDP growth will decline from 5.4% to 5.2% between 2010 and 2015. 
• Subsidy cuts will focus on the big ticket items: fuel, gas, electricity and tolls; but subsidies will continue in education, agriculture and fisheries, and healthcare. (The Sun)

The Federation of Malaysian Consumers Associations (FOMCA) has called on the government to systematically dismantle the various subsidies as they are a huge "waste" and not benefiting the target groups. Its secretary-general, Muhammad Shaani Abdullah, said besides removing the subsidies, the government should also ensure that development funds were properly and effectively utilised. (Bernama)

The government has delayed making a decision on the size and timing of its first sale of Islamic bonds in eight years due to unstable market conditions, said two people with direct knowledge of the plan. The decision won’t be made this week because of swings in emerging-market assets. (Bloomberg)

US-based MEMC Electronic Materials Corp will invest RM710m to set up a solar wafer plant at Sama Jaya Free Industrial Zone here, said Deputy Chief Minister, Tan Sri Dr George Chan Hong Nam. The plant is expected to commence operation by 2011 to cater to the rapid growth and demand of solar cells globally. It will generate about 4,000 jobs. (Bernama)

Sarawak has secured 48 projects with investments totalling RM2.86bn in the manufacturing sector for the first five months of this year, said Deputy Chief Minister Tan Sri Dr George Chan Hong Nam. 17 projects with investment of RM2.79bn were supported for Ministry of International Trade and Industry approval while another 31 projects, totalling RM68m, were approved by the State Industrial Coordination Committee.

• These investments are predominantly in four main industries -- food manufacturing products (RM1.62bn), electronic and electrical appliances (RM710m), basic metal products (RM369m) and transport equipment products (RM82m). 
• The total investment, RM2.2bn (77%) were foreign direct investments, while RM650m (23%) were domestic investments. (Bernama)