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Malaysia’s diesel subsidy cut hailed as positive economic move but fears of voter backlash linger
- The phasing out of diesel subsidies is expected to save Malaysia hundreds of millions of dollars annually
- An MP has warned PM Anwar Ibrahim of a political blowback, reminding him that a similar move by a previous government led to electoral losses
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A phasing out of blanket diesel subsidies announced by Prime Minister Anwar Ibrahim has stirred anxiety among small businesses whose margins depend on low fuel prices but the move has been lauded by economists for potentially saving the state hundreds of millions of dollars each year.
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Anwar has vowed to hack back at Malaysia’s onerous subsidy bill and move to a targeted subsidy regime to raise the incomes of those who need it most. The country’s subsidies, including for diesel, cooking oil and rice, and social assistance are set to cost over US$11 billion this year after the first phase of measures is implemented. Anwar has yet to announce a start date for the measures.
The move will save about 4 billion ringgit (US$852 million) annually, Prime Minister Anwar Ibrahim said in a televised address on Tuesday night (May 21), saying the blanket subsidy is no longer sustainable as it benefits the “ultra-rich”.
“Any targeted subsidy should not burden the majority of the people,” he added.
Much of Malaysia’s cheap diesel has been poured into luxury sport utility vehicles and pickup trucks that function as personal vehicles and is often smuggled across the border into Thailand.
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Older diesel-powered pickup trucks could become the go-to vehicles of many odd-job workers who may not be eligible for the new subsidy scheme as such trucks are not affected by the latest measure.
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