Lessons for Anwar from diesel subsidy cut

You want the rakyat to remain calm and genuinely be confident that the government will take away your benefits and interest in a logical, fashionable and calm manner, with reasonable compensation. Clearly, the diesel subsidy removal has defied this core principle.

Ooi Tze Howe

SUBSIDY rationalisation is central to Prime Minister Anwar Ibrahim’s economic agenda. The reason being simple as over the years, government tax revenue is at a historically low point as to the percentage of GDP.

While the income of the government is declining, the government spending on subsidies increased tremendously from the range of RM40 billion in 2015 to RM60 billion during the Covid-19 pandemic period.

The subsidy system, no doubt, is at the verge of collapse if subsidy rationalisation does not take place as soon as possible.

Yet, rationalising the universal subsidy system that has been implemented for decades is a complex maneuver, much more complicated than most people’s imagination. Many think that it is a simple policy move that removes subsidies from high-income groups and gives them to low-income groups.

But in reality, subsidy rationalisation is a change of the nation’s economic ideology and principles, which will see Malaysia undergoing a drastic systematic switch, from an aggressive government intervention system to a full market economy.

Concurrently, Malaysia’s social security system will also undergo landscape changes under the new subsidy system as all the blanket subsidies that we enjoy thus far: fuel, electricity, goods and even our public healthcare, are a form of social safety net provided by the government to ensure a minimum quality of life.

Changes to the subsidy system would mean changes to the social safety net framework that many have relied on to survive thus far.

Moving forward, Malaysians would no longer be protected under the economic shield and hallucination created by the government for decades, ie; stable fuel price, affordable essential goods and reasonable living expenses, as well as universal social safety net.

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