MALAYSIANS have become so pampered that the reduction or removal of subsidies on items stirs much unhappiness, and even ire, towards the government.
Many of us are unaware that these subsidies, especially diesel and petrol, are non-existent in many oil-producing countries even.
It doesn’t help that politicians make populist promises of overnight price reduction on essential items including diesel and petrol if they’re voted into power.
Previous leaders kept Malaysians happy with these subsidies despite knowing it’s finite lifespan because none of them wanted to be unpopular.
Politicians are notoriously short-sighted. They don’t work out long-term plans because they don’t care about the financial drain on our coffers.
Staying elected for five years is their selfish consideration. What happens in 10 or 20 years isn’t their problem. As the popular Malaysian saying goes, belakang kira.
Then, there was the constant gloating about our inflation being among the lowest in the world, but what’s conspicuously left out is that this is result of heavy subsidies by the government.
The diesel subsidy bill alone has risen 10-fold from RM1.4bil in 2019 to RM14.3bil in 2023.
Many Malaysians are not aware that our fuel prices are among the lowest in the world. Even cheaper than oil-producing Saudi Arabia.
Malaysia’s diesel is the second cheapest in Asean after Brunei, but it has also led to smuggling causing billions of ringgit to be lost.
Among other basic items, the country also heavily subsidises the prices of cooking oil and rice, but our subsidy bill has risen to record levels in recent years amid surging commodity prices.
Even the price of sugar is being kept artificially low and under the ceiling price due to incentive payments made by the government to the sugar industry, resulting in Malaysia, a non-sugar producing country, having among the lowest sugar prices in the world. Consequently, our diabetes rate is among the highest in the world.
The New Straits Times quoted the Galen Centre for Health & Social Policy calling for the removal of sugar as a gazetted item under the Price Control and Anti-Profiteering Act 2011 to bolster preventive health efforts and harmonise policies which directly impact the wellbeing of Malaysians.
Its chief executive Azrul Mohd Khalib said Malaysia currently has one of the lowest sugar prices in the world, which has a direct implication for the continued and uncontrolled spread of diabetes in this country, causing cardio-renal-metabolic diseases such as chronic kidney disease and cardiovascular disease, which cause premature death.
“Seven million Malaysian adults aged 18 years and above are estimated to be living with diabetes by 2025. The rate of diabetes is among the highest in the world. More than five million or 16 per cent of the adult population are living with chronic kidney disease, many of whom are also diabetic.”
Yes, the government’s reduction in subsidies for diesel may lead to the rising cost of living.
So, it’s essential for the government to use its resources to explain simply why it has ended up with a RM1.5 trillion (US$318bil) debt pile.
The blame can partially be placed on the losses from the multibillion-dollar 1MDB scandal – scrapped the blanket diesel subsidy recently as it seeks to deflate a ballooning subsidy bill that costs nearly RM80bil last year alone, according to the South China Morning Post.
The subsidy cut, which doesn’t apply to Sabah and Sarawak, is reportedly expected to save the government RM4bil annually.
The government has also indicated that fuel subsidies have not been equal. Those driving bigger cars enjoy more fuel subsidies than those with smaller ones, thus a targeted subsidy scheme is required.
Malaysia may be an oil exporter, but the subsidy reportedly costs the country more every time oil prices rise – money which can be directed towards other beneficial projects.
According to a CGS-CIMB research reported in The Star, it’s estimated that for every US$1 (RM4.18) per barrel average increase in oil price, the government will need to pay around RM780mil in fuel subsidies (based on the price of RON95 petrol and diesel at RM2.05 and RM2.15 per litre respectively).
That cost would realistically be higher now, especially with the ringgit depreciating against the US dollar since 2023.
The World Bank Malaysia has rightly said that the implementation of rationalised diesel subsidies signals reform seriousness by the Malaysian government and sets the stage for RON95 petrol reforms, believes economist Apurva Sanghi.
Apurva, who is the World Bank lead economist for Malaysia, said the success of RON95 reforms depends on several factors – timing, how price increases are handled and how it’s communicated to the middle class.
“Diesel reforms come on top of other recent reforms such as electricity subsidies for large-scale users and water tariff reforms.
“It sets the stage for addressing the elephant in the room – RON95 subsidies, but what will help it stick?” he said in a series of posts on X last month.
He said RON95 reforms can lead to one-time increase in prices, pointing out how it could rise between 5% to 9%, depending on global energy prices.
“Timing becomes more important. Introduce RON95 reforms when energy prices are relatively low,” he said.
Datuk Seri Anwar Ibrahim has in the past been criticised for making populist statements, but he has boldly undertaken a hugely unpopular decision. Like a skilled surgeon, he must remove the cancerous parts from the body.
The subsidy reforms must continue even if there’s backlash. There’s no general election for the next three years, so he has the responsibility to do what’s necessary to save Malaysia.
But the lesson here is that he needs to have a better narrative each time he executes a necessary but politically damaging move.
His team must prepare the nation, and even its own party lawmakers, on why these painful but necessary moves are beneficial in the long run.
They need to remind Malaysians that the government still bears around RM7bil in subsidies related to diesel in Peninsular Malaysia.
The diesel subsidy rationalisation will help establish more efficient management of subsidies, preventing misuse and ensuring they reach appropriate groups as the savings can be returned to the wider population in the form of improvements to education, health, public transportation, and other sectors that have the greatest impact on the public.
The challenge will be for the government to convince Malaysians struggling with the cost of living.
The resentment won’t go away unless the government reaches out to the people more effectively because then, half the battle would have been won.
