PETALING JAYA: Measures to help businesses manage rising costs linked to the Middle East conflict should go hand in hand with structural reforms aimed at strengthening long-term economic resilience, say economists.
Socio-Economic Research Centre executive director Lee Heng Guie said businesses need to diversify supply chains and focus on digitisation and automation to improve resilience.
He said while large corporations may be able to absorb higher costs, small and medium enterprises can risk being squeezed out if support is not extended.
“Subsidy support should be targeted, particularly towards smaller businesses which are more vulnerable to cost shocks,” he said, adding that businesses must also adapt to a new economic reality shaped by repeated global shocks and geopolitical conflicts.
“Policy measures must take into account the duration of the energy shock, fiscal capacity and the needs of key industries,” he added.
Agriculture economist Prof Datuk Dr Nasir Shamsudin said targeted fertiliser and diesel subsidies are among the most effective short-term intervention measures for the agricultural sector.
“Providing input vouchers, concessional financing and efficient distribution systems will also enable farmers to sustain production and avoid reducing fertiliser use, which could result in lower yields and tighten food supply,” said Prof Nasir of the Putra Business School.
He said Malaysia must invest in precision agriculture and domestic input production in the long-term.
“This helps to reduce dependence on energy intensive imports.
“Strengthening logistics, cold-chain infrastructure and regional cooperations within Asean will further enhance supply-chain efficiency and resilience,” he said.
While subsidies for RON95 petrol and diesel have helped consumers, Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said prolonged price pressures could force the government to reassess its subsidy approach.
“Retargeting subsidies based on income level could be a low-hanging fruit,” he said, noting that higher-income groups tend to consume more fuel.
Mohd Afzanizam added that businesses could be supported through soft loans to ease working capital pressures, alongside tax incentives to encourage the adoption of fuel-efficient or electric vehicles.
Prof Dr Yeah Kim Leng said reforms can include diversifying towards renewable energy sources, cultivating new trade partners through free trade agreements and strengthening supply chains.
He said another measure could be investing in domestic agricultural productivity to reduce food import dependence.
“A balanced strategy must be done in tandem, which can include providing immediate relief to vulnerable groups, food assistance and fuel subsidies.
“Micro, small and medium enterprises could be further supported by temporarily lowering tariffs on essential imports, soft loans and guarantees for working capital, alongside possible wage subsidies if economic conditions worsen,” said Prof Yeah.
He also said domestic spillover effects from the conflict could be increasingly harder to contain if global oil prices remain above US$100 per barrel for more than two months.
