Thanks to government subsidy, RON95 petrol in Malaysia is among the cheapest in the world.
THE government has allocated RM77.7bil in subsidies to ease the rakyat’s cost of living. These subsidies cover a wide range of items and services – chicken, eggs, cooking oil, flour, fuel, water, electricity and transport.
And this figure does not include other welfare assistance such as Bantuan Keluarga Malaysia.
“The government will continue to focus on programmes and initiatives that bring prosperity and benefits to Keluarga Malaysia, to ensure that no one is left behind,” Prime Minister Datuk Seri Ismail Sabri Yaakob announced in July, as reported by Bernama.The biggest chunk of subsidies is for fuel – RON95 petrol (RM27bil), diesel (RM7.5bil) and liquefied petroleum gas or LPG (RM2.6bil).
Capped at US$0.466 a litre, RON95 fuel is among the cheapest in the world, compared to Indonesia ((US$0.871 per litre), Thailand (US$1.205) and even Saudi Arabia (US$0.62) – according to prices listed on www.globalpetrolprices.com in the first week of November.
The government has allocated about RM5bil in subsidy to keep the price of chicken eggs and cooking oil low for the people’s benefit.
Then there are subsidies for food such as cooking oil (RM4bil), chickens/eggs (RM1.233bil) and wheat flour (RM40mil).
Controlling inflation
The prime minister said the subsidies given by the government has led to the country’s inflation rate being kept at 2.8%.
Sunway University professor of economics Yeah Kim Leng said Malaysia is well positioned to weather the spike in inflation globally, thanks to government efforts in providing subsidies, which help maintain ceiling prices for some consumer goods.
The escalation of commodity prices is affecting countries around the world. The high prices of energy and food will likely continue as long as the Russia-Ukraine conflict and China’s lockdown are prolonged, disrupting the supply chain of goods, he said.
Prof Yeah explained that the subsidies for basic necessities such as cooking oil and cooking gas would ensure that the low-income groups are not adversely affected by inflation.
However, he noted that the government was considering a form of subsidy only for the poor, with the potential savings to be channelled to the education and health sectors.
Malaysia’s Consumer Price Index was much lower compared with 8.5% in the United States. Other western economies are also experiencing price shocks especially in terms of food and energy, added Prof Yeah.
Prof Geoffrey Williams of the Malaysia University of Science and Technology said the country was fortunate to be an oil producer. Thus, the higher income from exporting petroleum would be able to offset the many subsidies being given out.
“The subsidy cost effects, which can be crippling in non-oil producing countries, are actually quite muted here in Malaysia,” Prof Williams said.
Budget 2023 and other aid
In July, Ismail Sabri announced RM630mil in additional cash transfers to the poor on top of the RM1.11bil under the second phase disbursement of Bantuan Keluarga Malaysia cash aid.
These cash handouts come up to RM1.74bil to help 8.6 million vulnerable and lower-income recipients to cope with the rise in the cost of living from higher food prices.
Current water and electricity tariff rates for domestic users in Peninsular Malaysia will be maintained, thanks to subsidies worth RM5.8bil from the government as the country faces sharp increases in fuel and other costs.
Even more generous assistance has been promised under Budget 2023, which was tabled on Oct 7. As Parliament was dissolved three days later on Oct 10, this means that the budget needs to be retabled.
However, the proposals announced earlier are a signal of what the government intends to do.
A sum of RM7.8bil has been earmarked for Bantuan Keluarga Malaysia which will benefit 8.7 million people. A total of RM2.5bil in welfare aid will go to 450,000 households.
There are also various subsidies for transport in Budget 2023. An amount of RM200mil has been allocated by the government to cover transport and distribution costs of essential items to ensure they reach rural residents at reasonable prices.
A RM180mil allocation is slated to improve public bus access for the people of Melaka, Kota Kinabalu and Kuching. The government will also replace 18 stage buses operated by Majlis Amanah Rakyat (Mara) for the benefit of Kedah residents.
The subsidy for air transport services will also continue with an allocation of RM209mil to benefit rural residents specifically in Sabah and Sarawak.
The My50 monthly public transport pass initiative will continue next year. This will benefit almost 180,000 users.
Up to now, the government has subsidised RM40 for the electric bills of hardcore poor households under the e-Kasih list. This subsidy has been given to those below the poverty line income of RM980. Under Budget 2023, this level will be raised to RM1,169 so that more households will benefit.
Budget 2023 will also channel RM100mil to continue supporting the Keluarga Malaysia Cheap Sale programme nationwide.
Successful policy
Prof Emeritus Dr Barjoyai Bardai, economist at Universiti Tun Abdul Razak (UniRazak), said that aid from Bantuan Keluarga Malaysia and the Employee Provident Fund (EPF) withdrawals have boosted domestic consumption and also economic growth.
This is one factor that made the World Bank revised its 2022 forecast of annual gross domestic product (GDP) growth for Malaysia – up to 6.4% from 5.5% previously.
MCA president Datuk Seri Wee Ka Siong said Ismail Sabri’s premiership has steered the country through the choppy waters of the Covid-19 pandemic and Russia-Ukraine war.
“The government’s intervention in the form of subsidies prevented the country from falling into a deep recession,” he told Astro Awani.
“It was an extraordinary time when oil prices soared due to the war in Ukraine. If not for the subsidies that (the government) has given, the inflation rate would have been even higher,” Wee said.
