They said the success of targeted diesel subsidies would be the benchmark for the government’s commitment to restructuring its aid for more prudent spending, benefiting the target groups in the long run.
Ahmed Razman Abdul Latiff, Putra Business School’s director of business development, praised the government’s introduction of targeted subsidies, saying many countries no longer use blanket subsidies due to their inefficiency and exposure to leakage.
“Blanket subsidies cause much of government expenditure to go to those who do not deserve them, such as foreign nationals and T20 citizens. They also facilitate leakage, wastage and smuggling.
“Government expenditure needs to be reduced to ensure that the nation’s income is sufficient for future investment,” he told FMT.
Razman also said that if the implementation of targeted diesel subsidies goes well, the government should review its subsidy for cooking oil, which can currently be purchased in the open market at RM2.50 per packet.
“If it does not, the government will continue to incur losses,” he said.
Economic analyst Aimi Zulhazmi Rashid said besides diesel and cooking oil, the government should speed up the implementation of a targeted subsidy for LPG.
“The subsidies Malaysians currently enjoy are being uniformly distributed to all residing in the country, from tourists to foreign workers, without taking into account their family income or wealth.
“In effect, blanket subsidy levels rise as the nation’s population grows, forcing the government to spend more every year and burdening national finances,” he said.
Last week, Prime Minister Anwar Ibrahim announced that the Cabinet had approved targeted fuel subsidies, which will start with diesel in the peninsula – a move expected to save RM4 billion a year in aid of the government’s target demographics and help restructure public finances.
Anwar, who is also finance minister, likewise announced an incentive to curb drastic rises in the prices of goods and services, offering diesel subsidies to traders using commercial diesel vehicles.
The subsidy will involve 10 types of public transport vehicles and 23 types of goods transportation vehicles under the diesel subsidy control system.