Subsidy removals: is the government digging its own grave?

KUALA LUMPUR – Political observers could only react in bewilderment after the government decided to remove subsidies on several crucial goods beginning next month, a move set to result in a bleak end of the year for millions of Malaysians already reeling from high inflation.

With Barisan Nasional’s (BN) popularity not necessarily at the highest level, analysts warned the government could be staring down its own barrel if it pushes on with the contentious policy that may have a significant bearing on the results of the coming general election (GE).

This is unless significant measures are taken to allay the impact of its announcement on the rakyat.

Their comments come after Domestic Trade and Consumer Affairs Minister Datuk Seri Alexander Nanta Linggi revealed yesterday that subsidies on bottled cooking palm oil products, as well as the ceiling price control on chicken and eggs, would be removed effective July 1.

This is on top of the impending surcharge on electricity consumption rumoured to come into effect next month. 

Speaking to The Vibes, Universiti Utara Malaysia academician Prof Mohd Azizuddin Mohd Sani said he was baffled upon discovering the government’s intention of removing subsidies that are considered basic essential goods for the public, and said it should expect strong reaction from the masses.

He drew comparisons to the 2008 GE, when the collapse of the global and local economy then saw BN defeated in five different states, namely Kedah, Kelantan, Penang, Perak and Selangor.

The supposed reason behind the removal of subsidies is due partly to inflation. But if you remove subsidies to counter this inflation, then it will have an immediate impact on the people’s livelihood.

“Obviously, people are bound to be angry. The bigger question now is what will the government do to counter this? Because as things stand, it could have a significant impact on the election.

“When you talk about policies affecting millions, certainly there will be a reaction. It doesn’t matter if they (BN) try to hold off the election as long as possible, if the voters are raging, I don’t think it will change anything.”

Utilise Petronas, introduce GST instead

Talks of subsidy removals have floated for months, with The Vibes reporting as early as March this year that the Malaysia Productivity Corporation (MPC) under the International Trade and Industry Ministry is pushing for its rationalisation. 

Apart from the aforementioned cooking oil, poultry, and eggs, subsidies for other goods supposedly being considered for removal are RON95 fuel, as well as agricultural products like sugar and rice.

For Azizuddin, the recent announcement makes little political sense, as he noted that the government still has a strong economic foundation and could have carried on with the subsidies.

Among others, he said that the government could have depended on Petronas for funds if the need arises, seeing how the current high levels of fuel prices globally would mean the national oil and gas company is making significant profit.

Separately, he said the government could also instead just reintroduce the more effective goods and services tax, although the move may seem controversial.

The implementation of the value-added tax system in April 2015 has been identified as one of the key factors that contributed to BN’s shocking loss at the hands of Pakatan Harapan (PH) in the last GE. 

As for PH and other opposition parties, Azizuddin said if they play their cards right in championing the people’s plight, they would be able to win the coming national polls due in a year.

“The key is they must offer an alternative to removing subsidies. If they are just going to ride on public sentiment, I don’t think they’d go anywhere and voters won’t be convinced. It would be best if the opposition could offer this in writing in their election manifesto.”

Subsidy rationalisation points to delayed election

Like Azizuddin, Universiti Malaysia Sabah political analyst Lee Kuok Tiung was similarly perplexed by the government’s subsidy removal move, describing it as a huge political gamble and risk.

Definitely, the policy will be a huge burden to consumers, effectively affecting all Malaysians. These are basic necessities. I’m not just talking about the B40, but everyone will be affected.

To avoid provoking the ire of voters, Lee said, it would be wise for the government to introduce a counter-mechanism such as in the form of more monetary aid.

He added that subsidy removal effective July is a huge indication that GE15 might not be held in the coming months and could be postponed to a later date.

“If they had decided to dissolve Parliament soon, they wouldn’t be making such unpopular announcements like this. With this latest development, they will probably only discuss the possibility of an election earlier at the end of this year,” he said.

As for the opposition, Lee said now is as good a time as ever for PH to issue a strong statement by offering a firm rebuke against the government if it is to collect any brownie points among the voters.

“It might create some uneasiness among those in Putrajaya, and might affect the ongoing memorandum of understanding between the two parties. But if they want to win the popular vote, then this is something they would want to consider.”

Yesterday, PH’s presidential council slammed the government over the impending price increase of basic goods and demanded a contingency plan to address the cost of living issue within 24 hours.

In response, Prime Minister Datuk Seri Ismail Sabri Yaakob announced additional allocations for the Bantuan Keluarga Malaysia (BKM) financial aid to address the rising cost of living faced by Malaysians.

The government, he said, has decided to increase the BKM cash handout by RM100 for households and RM50 for single individuals from the B40 group. – The Vibes, June 23, 2022