Thursday, November 19, 2009

To scrap or not so scrap - Malaysian sugar subsidies

I caught parts of an interview on the local news about scraping sugar subsidies in our country. So, I decided to do a bit of research on the matter.

Subsidy on sugar costs the country about RM720mil annually. The argument for scrapping it is that "Sugar is not a staple item like rice and flour. Sugar by itself is not a necessity item. In fact, health authorities have always discouraged sugar consumption and if at all, to be consumed minimally". Besides that, government price cap encourages people to smuggle sugar across the border into Thailand, where it fetches double the price.

Malaysians consume an average of 26 teaspoons of sugar a day, compared to 17 teaspoons in the 1970s. It's no wonder that there is a sharp rise of diabetic cases among Malaysians particularly among the younger generation.

What is the actual cost of subsidising sugar then? Perhaps we should factor in the medical cost of diabetes. If a patient does not have other complications, he will consume twice the average amount of resources for medication. But once other complications set in, the cost becomes higher.

Let us see what happens when kidney failure sets in. A patient has to go for dialysis three times per week, which means about 13 times per month. Each dialysis costs around RM250 at private hospitals. This will amount to about RM3,250 per month. Factor in indirect costs such as productivity losses and foregone productivity attributable specifically to diabetes and permanent disability (loss of limbs/eye sight).

I could not find Malaysian statistics for these costs. But just to get a picture of it, the total annual economic cost of diabetes in the US is estimated at $91.8 billion in 1992 ($45.2 billion -- direct medical costs -- and $46.6 billion -- the value of productivity foregone due to disability and premature death).

Looking at these numbers, don't wait for sugar subsidies to be scrapped. It is time to cut down our own sugar consumption.

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