Friday 29 Mar 2024
By
main news image

This article first appeared in The Edge Malaysia Weekly on May 14, 2018 - May 20, 2018

SUBSIDIES need to be well targeted so that the lower-income group benefits the most from them rather than the affluent from consuming a larger share of the subsidised items. This is why the previous government removed blanket subsidies.

According to a study by Bank Negara Malaysia, the bottom 40% of households only gets 14% of the subsidies — a fifth of the 68% enjoyed by the top 40%. The bottom 20% gets only 4% while the top 20% gets 42%.

To recap, in 2013, some RM23.5 billion or 54% of the RM43.35 billion subsidy bill for that year, went towards subsidising petrol for consumers.

Although the study was based on a 2009/10 household expenditure survey, the fact remains that blanket subsidies lead to an over-consumption of subsidised and price-controlled items, which in 2009 included petrol, natural gas, electricity, cooking oil and sugar.

The subsidy bill originally budgeted for 2018 is RM26.5 billion, although the breakdown for petrol is not immediately clear.

Brent crude oil traded at more than US$100 a barrel in 2013 and was at US$77 a barrel at the time of writing. The ringgit was also closer to 3.00 against the US dollar then than 4.00 at present.

The stabilisation of petrol prices and the introduction of targeted petrol subsidies is one of the 10 promises that Pakatan Harapan has said it will deliver within 100 days of forming the federal government.

“If we fail or if we break our promise, by all means reject us in the next general election,” Dr Mahathir said in his March 8 statement appended to the Pakatan Harapan manifesto.

The manifesto cites technologies that will allow the identity card to be used at the petrol pumps. “We will devise a mechanism that will enable the targeted subsidies to be allocated using data on the identity cards. This will ensure that only those who qualify are able to access the subsidies,” the manifesto reads.

If indeed the smart chip in the identity card is put to greater use, targeted subsidies can eventually go towards helping the lower and middle-income group with more than just petrol.

The Pakatan Harapan government has also promised that it will “remain committed to increasing and improving economically sustainable public transport so that owning private vehicles will no longer be a burden for the people”. Success here would also aid the retirement kitty as money no longer needs to go towards car ownership.

 

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's AppStore and Androids' Google Play.

      Print
      Text Size
      Share