PETALING JAYA: Malaysia should learn from the Chinese and Indonesian models as the nation’s fuel subsidy framework is suffering from a “structural flaw”, according to the emeritus chairman of the Malaysia Digital Chamber of Commerce.
Chris Daniel Wong said Malaysia faces “one nation, two realities”, with petrol being heavily subsidised for general consumption, while cost pressures faced by businesses – particularly those dependent on diesel – continue to rise.
“Unlike petrol, diesel is not merely a consumer fuel. It is the backbone of the real economy. It powers logistics, agriculture, fisheries, manufacturing, and public transportation.
“When diesel prices increase, the cost impact is immediate and widespread, feeding directly into inflation.
“In contrast, petrol subsidies largely benefit private vehicle owners, including higher income groups, with limited impact on controlling the prices of essential goods.”
Wong said other countries have already recognised this distinction and acted decisively. For example, in China, fuel pricing mechanisms are carefully managed to ensure stability in key sectors.
While retail fuel prices may fluctuate, the government intervenes strategically to protect logistics and industrial activity, preventing cost shocks from cascading through the supply chain.
The focus is clear: to safeguard production and distribution to maintain economic stability.
Similarly, Indonesia has restructured its fuel subsidy policy over the years to prioritise fuels that directly impact the rakyat’s cost of living. It has implemented targeted diesel subsidies for transport and essential industries, while gradually rationalising petrol subsidies.
This approach allows the government to control inflation more effectively, ensuring that subsidies benefit the broader economy rather than just individual consumption.
Meanwhile, Thailand, a net energy importer, has consistently implemented mechanisms to cap and stabilise diesel prices through its oil fund system.
At various points, Thailand’s diesel prices have been kept at levels comparable to, or even lower than, those in Malaysia.
This reflects a deliberate policy choice: to protect logistics and goods movement, even if it requires reallocating subsidies or cross-subsidising from other fuel categories.
“The lesson is clear: successful economies prioritise subsidising production, not consumption. Malaysia can and should learn from these models.
“By gradually rationalising petrol subsidies, particularly through targeted mechanisms that protect lower income households, the government can unlock significant fiscal savings.
“These savings should then be redirected towards strengthening diesel subsidies for commercial and productive use,” Wong said.
Several benefits from such a policy shift, including tackling inflation at its root and enhancing fiscal efficiency.
Instead of broadly subsidising consumption, resources are channelled into sectors that generate economic output and employment. It also addresses structural inequality. The current system unintentionally favours urban petrol users while placing a heavier burden on small and medium enterprises, farmers and transport operators.
Wong said a policy shift in Malaysia is not about removing subsidies but about reallocating them more strategically.
A phased approach, supported by targeted assistance and transparent communication, can ensure that vulnerable groups remain protected while the broader economy benefits.
“Malaysia cannot continue operating under a subsidy model that reinforces ‘two realities’. If the objective is to genuinely control the cost of living, then the focus must shift towards protecting diesel – the fuel that drives the nation’s supply chain.
“Balancing petrol and diesel subsidies is no longer just an option. It is an economic necessity,” Wong stressed.
