Diesel Subsidy Rationalisation Signals Malaysia's Economic Reform Commitment - Experts

By Muhammad Faiz Baharin

KUALA LUMPUR, June 10 (Bernama) -- The implementation of the diesel subsidy rationalisation starting today is seen as a clear signal to investors and international bodies that Malaysia is serious about economic reform and more efficient resource allocation, according to experts.

Dr Nur Hairani Abd Rahman, Senior Lecturer at the Faculty of Business and Economics, University of Malaya, described the government's decision as an important step that no previous leader had dared to take, given its sensitivity.

She said this bold move demonstrated the government's commitment to fiscal responsibility and the long-term sustainability of the country's economy.

"This measure can help reduce the budget deficit and redirect funds to more productive economic sectors or support social development by channelling these funds to social sectors such as welfare, education, and healthcare.

"However, the government needs to manage this transition carefully to avoid backlash, particularly negative reactions or dissatisfaction from the public, as fuel prices directly affect the cost of living," she told Bernama.

Nur Hairani said that cash transfers and targeted subsidies through the fleet card method to the most vulnerable population were steps that could mitigate the impact and indirect or unforeseen effects following the rationalisation exercise.

Meanwhile, economics expert at the Malaysia University of Science and Technology (MUST) Prof Emeritus Dr Barjoyai Bardai viewed the diesel subsidy rationalisation as possibly the government's initial step or pilot project towards something larger, namely the rationalisation of petrol subsidies.

He said the targeted subsidy involving only diesel, excluding Sabah and Sarawak, showed that the government was cautious and not hasty in implementing subsidy rationalisation.

"So I see this as an experiment where the government can use the implementation model as a guide and gain more experience to achieve savings or eliminate petrol subsidies, which will undoubtedly be more complex with higher cost implications," he said.

Asked about claims from certain quarters that the implementation of the subsidy rationalisation effective today was 'premature,' Barjoyai said the plan to do away with petroleum subsidies had actually been 'delayed' for more than 16 years.

"There is no need to wait any longer for the so-called perfect time. We don't need to be idealistic and wait for the best system and time. Instead, we should implement it first, and gradually it will become a comprehensive and complete system," he said.

Meanwhile, economic analyst Assistant Prof Dr Abu Sofian Yaacob hoped that large companies potentially affected by the implementation of targeted diesel subsidies would be more responsible and assist the government.

"What I mean by helping the government is not to raise prices or take advantage by saying diesel prices have increased, leading to higher costs of goods or services, and thus raising prices for consumers to cover the increased diesel costs.

"These companies already have their own profit margins. In my opinion, if there is an increase in costs, it may be less than 30 per cent, so it is possible for industry players to absorb the cost increase first, as there will still be profits, but the margins will only be slightly reduced," he said.

Abu Sofian also hoped for more comprehensive explanations to be given to the public regarding the implementation of targeted diesel subsidies, especially about who was qualified or no longer qualified for the benefit.

He also suggested that the Ministry of Domestic Trade and Consumer Affairs establish a special body to specifically manage matters and complaints related to profiteering following the implementation of targeted diesel subsidies.

Yesterday, Finance Minister II Datuk Seri Amir Hamzah Azizan announced that the retail price of diesel at all pumps in Peninsular Malaysia would be set at the market price of RM3.35 per litre based on the Automatic Pricing Mechanism formula.

He said the targeted diesel pricing and subsidy implementation would save the country RM4 billion annually, while strengthening its financial position in the long term.

Amir Hamzah added that diesel prices would be announced weekly by the Ministry of Finance, and the government would continue to monitor the situation to prevent price instability.

The diesel subsidy rationalisation, however, does not involve users in Sabah and Sarawak.

-- BERNAMA