Business Commentary

Pakatan will have to deal with Haj subsidy – sooner or later

apilgrims

TheMole
Written by TheMole

By Salahuddin Bin Hisham

THE new Pakatan Harapan government is almost a month old but the establishment of a full Cabinet is still work in progress and the arduous job of making the promised New Malaysia a reality has just begun.

Sooner or later, the new government will have to deal with the potentially explosive issue of Haj subsidy for pilgrims under the Lembaga Tabung Haji (LTH).

For now, the new government is trying hard to fulfil its promises made in the 14th General Election manifesto.

Many inside and outside the Government are beginning to admit that keeping their word on all the 100-day promises that brought Pakatan to power (on the back of alleged wrongdoings in the 1Malaysia Development Berhad (1MDB) and the hue and cry over rising prices) will be easier said than done.

Critics have even accused the new inhabitants of Putrajaya, the administrative capital, of manipulating government debts (raising it to over RM1 trillion from the internationally-accepted RM680 billion) to excuse itself from having to justify the election promises.

These include promises to abolish toll, to defer student loan repayment with the aim of abolishing it altogether, to return petrol subsidy, forgive Felda settlers’ loans, and replace Good and Services Tax (GST) with a “fairer” tax regime.

As if these weren’t hard enough, supporters of Pakatan are clamouring for speedier action (again, as promised) against former Prime Minister Datuk Seri Najib Razak over 1MDB. A crisis between the Palace and Prime Minister Tun Dr Mahathir Mohamad is brewing over the Pakatan government’s Attorney-General nominee even as calls to review and even dismantle the various Islamic bodies, such as JAKIM, gain momentum.

As the new government or, rather, the Council of Eminent Persons, deals with the issue of rising prices, it will inevitably face the question of rising cost of subsidies for the obligatory Haj pilgrimage to Muslims.

The removal of subsidy from the cost of Haj would be deemed as unconstitutional to the conservative Constitutional purists.

They would argue that any change in government spending for Islamic purpose must get the concurrence of the King, or the Yang Di Pertuan Agong, just as in the case of the Malay and Bumiputera empowerment policies under Article 153 of the Federal Constitution.

The counter argument could be that Haj subsidy is the day-to-day administrator’s prerogative and a matter of ringgit and sen.

A Q&A on the Lembaga Tabung Haji (LTH) official website puts the subsidy figure as RM9,750 for every pilgrim.

Last November, former Minister in the Prime Minister’s Department Datuk Jamil Khir said the actual cost of performing the Haj was RM22,450 and LTH’s subsidy was RM12,450.

The total amount of subsidies borne by LTH to send Malaysians to perform the Haj was RM300 million.

The Saudi Arabia government recently reduced their subsidies for Haj administration and are passing the cost on to pilgrims. It resulted in increases in transportation, accommodation, meal, and other prices. In the past, there was no airport tax for pilgrims, or they were charged just a token, but now they have to pay like everybody else.

In March, former Deputy Minister in the Prime Minister’s Department, Dato Dr Asyraf Wajidi Dasuki said the Saudi government’s move to introduce the Value Added Tax (similar to our then GST) would add RM733 more for every Malaysian pilgrim.

Ringgit was hovering at the 3.90 to the US dollar level in March. It appreciated to almost RM3.85 prior to the general election, but now is short of 4.00 under volatile trading. It means even tighter costs.

The subsidy cost that Tabung Haji would need to bear this year could reach RM400 million.

Thus it begs the question: Can LTH, in the light of the sharp drop in the stock market, reduced attractiveness of Malaysia’s Islamic capital market, and expected decline in investment return, afford it?

For the long-term, the new government will need to decide whether to maintain or abolish the subsidies for Haj. The middle of the road solution could be to do target subsidy but the fundamental question is Shakespearean – to be or not to be.

It is as much a political decision as it is a financial one. Political fallout with the Malay voters will be one a major consideration but the Pakatan government can take comfort with the fact that the next general election is still five years away.

Haj season will begin after the Hari Raya. Perhaps, pilgrims for 2018 would be spared but sooner or later the new government will still have to deal with the Haj subsidy issue.

And have no doubt that it will. So far, the new Putrajaya has shown that it is willing to risk deflation and negative growth as well as upset the stock and capital markets and tempt a recession. It has shown determination to remove excesses and cancel tens of billions of worth of projects. It is not even taboo anymore to fire the previously untouchable public servants.

Some would see these as a political display, the kind the previous government never had. Time will tell.

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