Health and Wealth according to Anwar Ibrahim

When I read headlines saying “Anwar says sugar subsidy removal means a sweet RM1 billion profit for sugar giant“, I thought some poor hack must have misquoted him and would probably be in line for a $100m lawsuit soon. Surely he couldn’t have said something so stupid. So I looked up the source, and well, apparently he really did say it.

While debating the recently tabled 2014 budget, Anwar Ibrahim said the following in relation to the proposed sugar subsidy cut:

Setelah diambil alih oleh Tradewinds dan syarikat baru, keuntungannya melonjak 15% setahun. Dijangka dengan penghapusan subsidi, keuntungan sebelum cukai syarikat dalam sektor ini dijangka melonjak sampai sehingga 20% ke 25%. Maknanya, untung hampir RM1 bilion. Untung syarikat gula akan mencecah RM1 bilion, rakyat miskin patut bayar tambahan. Ini dia kebijaksanaan yang saya sebutkan tadi bahawa dasar ekonomi yang memperkayakan kalangan yang memonopoli, golongan maha kaya dan memiskinkan rakyat terbanyak.

His words in the second sentence indicate cause and effect. That is, the removal of the subsidy would cause the profits of the sugar suppliers to increase. Sure, the profits enjoyed by the sugar producers have increased to date and I have sympathy with his argument that the market should be liberalised, but how does removing subsidies help these producers gain even more?

The basic law of supply and demand states that when the price of something rises, demand for it falls. With the price of sugar increasing by 34 sen a kg, one would expect less of it to be consumed, all things being equal. If the producers are pocketing the price difference then sure, he may have a point, but in this case they’re not. So my question to him is: By what mechanism does a reduction in subsidies result in increased profits for suppliers?

I would like to point Anwar back to what he said when debating the Supplementary Supply Bill in Parliament on June 20th last year. Then, he said:

Jadi sebab itu kita pertikai kewajaran menambah. Gula, alasannya konon hendak meringankan beban rakyat, tahun 2012 jumlah subsidi gula RM200 juta, dengan tambahan RM367 juta menjadi RM567 juta. Peningkatan 42%, kita hendak tanya Yang Berhormat Menteri, jawab siapa yang dapat manfaat cara langsung? Berapa keuntungan syarikat TradeWinds(M) Sdn. Bhd. Tan Sri Syed Mokhtar dalam isu subsidi gula ini? Mengapa syarikat gula yang dikuasai oleh seorang yang dikaitkan dengan beberapa lembaga, tetapi diberikan subsidi begitu tinggi dan kita hendak tahu rekod keuntungan dia dan berapa sumbangan dia kepada pihak-pihak tertentu? Sehingga menyebabkan mudah sekali dinaikkan subsidi gula kepada satu monopoli.

So which is it? Is it removing the sugar subsidies that benefits the producers, or is it persisting with them? Surely it can’t be both.

Then towards the end of his speech, he mocks the government’s reasoning for removing the sugar subsidies:

Saya tidak pandang serius hujah itu yang dibawa oleh Yang Berhormat Menteri Kewangan. Ini kerana tidak bersandarkan fakta. Ini pandangan remeh, meremehkan hujah besar bagi rakyat. [Tepuk] Kalau betul sebab gula, turun subsidi beras kerana karbohidrat itu juga menyebabkan penyakit diabetes. Tak tahukah basic fact? [Tepuk] Malu sungguh aih!

So, is the argument that sugar consumption results in an increased incidence of diabetes without any basis in fact, as Anwar says? Take a look at some of the research on the matter:
Sugary soft drinks linked to type 2 diabetes risk
Sugar-Sweetened Beverages and Risk of Metabolic Syndrome and Type 2 Diabetes
Sugar-sweetened and artificially sweetened beverage consumption and risk of type 2 diabetes in men

The conclusion from these studies, in a nutshell, is this:

A lot of the added sugar in our diet comes from sugar sweetened beverages. These sugary drinks are bad for us and not just because they are a source of calories that contribute to obesity. If you drank just 1 can of soda a day but compensated for the extra calories by eating less rice, your risk of developing type 2 diabetes would still rise by about a fifth. And that increase in risk is cumulative. The more sugary drinks you consume, the higher the risk of developing diabetes, even if your total calorie intake does not increase.

I will concede that Anwar is not a doctor and that many doctors in Malaysia seem unaware of the findings of the latest research on sugar and diabetes. But what is really memalukan sungguh is that someone who was once the Minister of Finance would not know the basic laws of supply and demand and suggest that removing subsidies in and of itself will lead to increased profits for suppliers.