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Targeted Subsidies

The new Malaysian government’s economic policies are a little bit known, but their current focus is on combating both price increases and racial polarisation while Anwar Ibrahim, the new PM is suggesting the government will use targeted subsidies to assist the poor.

The attempts by the losing parties to form a new government that would have placed the PH of Anwar Ibrahim in opposition once more caused the political barometer to rise as the Malaysian ringgit strengthened after Pakatan Harapan won more seats than its rivals.

Some sources claim that meetings between Umno members and the party leaders of former PM Tan Sri Muhyiddin Yassin were attempts to undermine Anwar’s prime ministership.

The Perikatan Nasional asserted that it must increase its support and form a new government following the historic elections, in which the Islamist PAS won more seats. But Anwar managed to win the support of the Barisan Nasional and parties from Sabah and Sarawak, the Borneo Island parties indeed, to secure a two-third majority.

Targeted Subsidies

Nevertheless, Anwar has said he plans to introduce a programme that will include targeted subsidies that would reach out to the less fortunate citizens.

Whether there will be an increase in fuel prices at the pump, which sound more credible, or there will be a new type of handouts that will be given to the targeted groups is not known.

The details are not ironed out yet and the PM has given the relevant ministerial agencies a short time to come back to him on proposals for the implementation of the targeted subsidies.

Inflation

Nevertheless, it is going to be difficult for the Anwar government to deal with inflation since it is also generated from the import of goods, the high fuel prices that impact transportation and production activities, including electricity (the subsidies on these will also be reviewed says Anwar to reduce the benefits to ‘rich’ enterprises for example) and all these, will have diverse impacts on inflation.

The opposition headed by Mr Anwar Ibrahim has for years complained that the subsequent regimes in Malaysia did not put a system in place that would help to control the rising cost of living.

The plan by the previous government was mostly to control the price of fuel at the pump which is an essential part of the cost price index that helps to calculate inflation.

This will involve dumping a lot of money in subsidies at the fuel pump etc. Anwar intends to reduce the subsidies, it seems, and use the extra savings from RON95 to hand cash to the poor.

He made it clear that subsidies must be targeted and should not be enjoyed by the wealthy, a debate that has always been on the table without any resolutions by the previous regimes.

“Subsidies must be targeted, otherwise those subsidies are enjoyed not just by the low-income group but also the wealthy,” says Anwar in a recent media statement.

He also says incentives will be considered for industries that no longer benefit from subsidies, while he wants electricity subsidies to be re-examined, as the benefits received by the poor and the rich are almost the same.

“In my view, this is unreasonable,” he says.

But he did not elaborate further on what the actual plan is and how the subsidies will be distributed in the future.

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