Kicking The Subsidy Habit

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Despite decades of enviable growth, Malaysian consumers still depend a lot on subsidies. These cost the government billions of ringgit, but getting rid of subsidies can cost the government even more dearly. So, can it think long term when its hold on power is necessarily short term?

Malaysian drivers have long been enjoying gasoline subsidies which help protect them from the fluctuations of volatile global petrol prices. Every time we buy petrol for RM1.90, we are not necessarily cognisant of the fact that the real price is actually RM2.60. More than a quarter of the actual price is sponsored by the federal government1.

Any upward changes to the fuel price can result in public outcry and have political ramifications for the government. We have already seen this happen: the approval rating for then-Prime Minister Tun Abdullah Ahmad Badawi dropped from 53% in March 2008 to below 40% in September that year2, after he announced a highly unpopular 40% price hike, raising the price from a low of RM1.92 in 2006 to RM2.70.


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