HomeEnglishMalaysian Subsidy Addiction: Unraveling the Impact of Diesel Subsidy Removal

Malaysian Subsidy Addiction: Unraveling the Impact of Diesel Subsidy Removal

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Kuala Lumpur – The recent removal of the diesel subsidy in Peninsula Malaysia has sparked widespread public outcry and highlighted a deep-seated issue within the nation’s economy: a chronic dependency on subsidies. Effective from June 10th, the subsidy cut resulted in diesel prices surging from RM2.15 to RM3.35 per litre overnight.

Public Reaction and Government Response

The drastic price hike has not been well received by the public. Many Malaysians, including private diesel vehicle owners, have expressed frustration over the sudden increase and the federal government’s inadequate explanation. Critics argue that government officials, including Mat Sabu, have failed to provide clear and substantial reasons for the subsidy removal, leaving many questions unanswered.

“The government’s approach to announcing the policy seemed haphazard and lacked the transparency expected in good governance,” said a private vehicle owner.

Commercial Sector’s Concerns

The commercial sector has also voiced significant concerns. Numerous commercial vehicle operators claim they will need to increase prices due to the subsidy removal, raising questions about the legality of their previous practices. Datuk Michael Loo, Chairman of the Malaysian Tipper Lorry Operators Association (MTLOA), highlighted the adverse cost implications at a recent press conference.

“I’m sorry, but is the chairman implying that operators were illegally using subsidized diesel to operate their commercial vehicles?” questioned a skeptical observer.

Additionally, there are assertions that property prices might rise as a result of the subsidy cut. However, historical data suggests that Malaysian property values have consistently increased, except during the COVID-19 pandemic. This casts doubt on the claim that the subsidy removal will significantly impact property prices, especially given the current drop in property demand from 2023 into 2024.

I get that the association’s job is to increasing the earning potential of their worker and business stakeholders…but I would argue, they have done so at the expense of all the privately operated diesel vehicle owners. The real fingers should not be pointed at the government, the real cause should be pointed at the illegal commercial operators who have abused the subsidies to the point of now passing the buck onto the private diesel vehicle owners.

Right now, every commercial operator from Sabah and Sarawak is watching the absolute mishandling of the government and also too, the private sector’s reaction in regards to rehabilitating the severe subsidy addiction in Peninsula Malaysia. The whispers currently are not of how will it work, but only when.

The Root of the Problem

The bigger picture problem is that subsidies are proven not to work for long term development and growth. It creates a complacent, over-expectant society that assumes subsidised pricing as a baseline and assumes it is the government’s job to go so far as to take care of their every wants and needs – whilst also robbing us of their competitiveness – If subsidies were so vital to our economic survival, how come our regional peers in ASEAN have been able to overtake us in economic development without it?

The simple answer is Malaysians have not developed a robust economy. We have continued to fail in developing self-sustainability in our domestic markets, and have ingrained a culture that has taken us 2 steps backwards through profiteering operators. It is concerning because most likely, these operators are most likely unaware that their actions are illegal and against the spirit of competitive edge, because of the decades old subsidy adoption policy.

The government should step in and act on pricing increases as a result of subsidy removals. This is not a consistent theme of business, and highlights the truth that subsidy reliant economies struggle to adjust in the lean and competitive global economy today.

DISCLAIMER : This statement represents the opinions expressed in a reader’s email and does not reflect the views of Sabah Media.

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