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Malaysia: Government Tinkers to Eliminate a Subsidy Culture

When a minister warned that Malaysia could suffer a ‘Greek tragedy’ if subsidies are not cut, the nation suddenly woke up to the inevitable but politically unpopular move once again. As where the government stands, it is no longer an issue of should or should not, but how to implement subsidy cut gradually and retain critical social safety net for the poor. There are few key perspectives to consider.

As expected, it is never strictly an economic issue. Government has been seeking broad public buy-in before making any concrete move. According to Free Malaysia Today:

Malaysia's government is unlikely to start unwinding its costly subsidy regime this year ahead of key state polls and risks losing further credibility with investors if a decision is deferred. […] PM Najib has already delayed a planned fuel hike in May due to fears of upsetting voters, especially poorer majority Malays who form a critical votebank.

For Eastern Malaysia states where poverty rate is still a serious concern, citizens there have long relied on subsidies and they may not share the sentiments from the government. Like SabahKini argued:

We deserve more privileges and benefits, and cannot be deprived by the government on their part being unable to provide us all this. […] The government must find ways to provide subsidies to help the people. They are merely creating higher poverty rate, especially in Sabah where the people are already poor (23.4%).

There are also parties who argue that we need to look at the big picture, as hidden subsidies and wasteful spending also contribute to huge deficit. Bakri Musa said:

If Idris Jala (Minister in PM's Department) had been diligent and fearless in analyzing the twin problems of ballooning deficit and increasing spending, he would begin with the obvious and massive petroleum subsidy, then flush out the hidden subsidies represented by non-competitive bids of government contracts, and then get rid those money-losing GLCs (government-linked companies).

Anil Netto also concurred by saying:

Many Malaysians blame the country’s financial woes on the government, with the general response being if the government really wants to save money from subsidies, it should first plug ‘leakages’ in government expenditure and curb rampant corruption. Billions have been poured into unproductive government projects with little to show.

There are also calls to conduct a more comprehensive study to ascertain the purpose of subsidy cut and how to use the available funding eventually. epolicy said:

If the purpose of removing the subsidies is to fund the deficit spending of the government, then my answer is not to do it. The only valid reason for removing the subsidies is to enhance the competitiveness of the economy. This means that no sector of the economy is given undue advantage with the benefit of government money.

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