18-6-2024 (KUALA LUMPUR) Malaysian Prime Minister Anwar Ibrahim has cited the increase in fares by Singapore travel agencies and tour buses, along with the busting of diesel-smuggling syndicates at the border, as evidence that the initiative should be continued. The move, aimed at stemming fund leakages caused by unscrupulous parties, has sparked debates over the trade-offs between fiscal prudence and the potential impact on various sectors.
Speaking at an event in Penang on Tuesday (Jun 18), Anwar, who also serves as the country’s finance minister, emphasized the critical importance of targeted diesel subsidies in saving the nation financially. “All tour buses and travel companies from Singapore want to raise prices because they say they can’t get diesel subsidies, which means for decades, our subsidies went to Singapore companies, to Thai fishing boats. A lot of funds were leaking,” he stated.
The Prime Minister painted a stark picture of the subsidy’s unintended consequences, revealing that “Subsidies were benefiting 3.8 million foreigners, (diesel) taken out to Thailand and sent to Thai fishing boats … Malaysian taxpayers are paying, but foreigners are reaping the benefits.”
Anwar further underscored the discrepancy between the country’s vehicle production and diesel consumption, noting that “the number of cars produced from 2012 to 2020 was small compared to the skyrocketing increase in diesel consumption because the fuel was enjoyed by foreigners.”
On June 10, Malaysia cut most of its diesel subsidies, a move the authorities said was costing the country RM4 billion (US$853 million) annually. Anwar had previously stated that the savings from this initiative would be redirected to support lower-income groups, highlighting the government’s commitment to fiscal responsibility while safeguarding the interests of vulnerable populations.
The Prime Minister’s remarks come amidst growing concerns from various sectors, including transportation and logistics, over the potential impact of the subsidy rationalization on operational costs and consumer prices. However, Anwar’s administration remains steadfast in its belief that the move is necessary to curb the leakages and ensure that the benefits of subsidies are channeled to those who truly need them.
Critics argue that the subsidy cuts could have far-reaching consequences, particularly for industries heavily reliant on diesel, potentially leading to increased costs for businesses and consumers alike. They also raise concerns about the potential inflationary pressures and the strain on household budgets, particularly for lower-income families.
Supporters of the government’s stance, however, applaud the move as a long-overdue step towards fiscal discipline and accountability. They argue that the previous subsidy regime was unsustainable and benefited foreign entities at the expense of Malaysian taxpayers, undermining the nation’s financial stability.
