Pakatan’s fuel subsidy plan impractical, economists say

By Syed Jaymal Zahiid
Kelana Jaya MP Wong Chen argued for fuel subsidies to be reinstated by a Pakatan government. — File picture by Choo Choy May

KUALA LUMPUR, Oct 17 — Economists have labelled Pakatan Harapan’s plan to reinstate fuel subsidies as impractical, adding on to previous criticism against some of the Opposition’s fiscal plans that critics say are more populist than pragmatic.

Former assistant secretary-general for economic development at the United Nations, Jomo Kwame Sundaram, and author of a popular book on income inequality, Muhammed Khalid, told a live Facebook pre-Budget 2018 forum organised by iMoney that a blanket fuel subsidy only benefits the rich and the middle class.

“At this current price there is no argument for fuel subsidies..if the prices go above 200 dollars a barrel then I am prepared to consider it because of the exceptional circumstances but not in the current situation,” Jomo said in response to Kelana Jaya PKR MP, Wong Chen.

“Really there is no justification for fuel subsidies, and really, we all know it is only enjoyed by the middle class and not the poorest as you have argued,” the economist added.

PH has made fuel subsidy a key campaigning issue and has featured consistently in its past Budgets.

Wong Chen upheld the proposal at today’s forum, saying it would be “immoral” for Malaysia as an oil exporting country not to provide fuel subsidies for the poorest.

While he acknowledged that idea may be costly the Kelana Jaya MP argued spending on fuel subsidies would decrease in the future as technology progresses.

“The oil issue is very complicated. We know that electric car is coming, we know that combustion engine could be replaced, we know that technology changes really one point the reliance on oil consumption drops,” he said.

Wong Chen cited the increase use in ride-sharing services by providers Uber and Grab as proof that more people are dumping cars, and with it demand for fuel.

The PKR leader also argued that a blanket fuel subsidy was practical since targeted assistance would be nearly impossible to implement.

But Muhammed disagreed. The former Khazanah Research Institute economist said subsidies should only be for the poor, and fuel subsidies in the past had instead helped the better off.

“I support what the YB said, the poor must be assisted with subsidies. But subsidising fuel is the worst thing you can do because it is regressive..the poor people at the kampung, the ones that use the bicycle or motorcycle, they’re not gonna benefit that much,” he said.

The Najib administration scrapped fuel subsidies altogether in 2015 to reduce its huge debt. Fuel subsidies were costing taxpayers up to RM25 billion yearly, according to government estimates.

Jomo also said subsidising fuel would only encourage people to own cars when society should be moving towards using public transportation to reduce pollution and congestion. However, the economist acknowledged the problems plaguing the country’s public transport system.

“What we should be doing is make public transport much more attractive but unfortunately it is not attractive..and although some of this have been rectified but it is not enough.

“We should seriously move towards using public transportation and if subsidies is needed, than it should go into better public transportation,” he said.

Malaysia has one of the highest motorisation rate in the world.