PETALING JAYA, June 4 — Consumable subsidies, like the recent announcement for an improved petrol subsidy system before year-end, are sometimes a necessity to help the poor. 

Asli Centre for Public Policy Studies chairman Tan Sri Ramon Navaratnam said subsidies in general could not be continued indefinitely because they would undermine the purposes of better economic growth. 

“The present subsidies must be seriously reviewed in light of this criteria,” he said.

“Subsidies must be carefully designed and targeted to deserving groups. 

“It is encouraging to note that the government is seeking to reuse the subsidy policy on all fronts, especially on petrol, but the abuse of diesel and other petroleum products is discomforting and frustrating to taxpayers and the poor, because the rich also benefit from it.”

Navaratnam said savings could be derived from withdrawing the subsidy from the well-to-do and address the basic needs of the poor by meeting their infrastructure development requirements.

He said the government must make every effort to study the programme of subsidy reduction by referring to successful international models. 

“Start  by first having a pilot programme. This will test the efficacy and efficiency of any new scheme to reduce subsidies,” he said.

“It will be embarrassing if the scheme misfires, because there will be more wastage and frustrations among consumers.”

Malaysia University of Science and Technology dean of Business School Dr Yeah Kim Leng said the current general subsidy system was inefficient because it benefited everybody including foreign consumers.

“It is best not to have subsidies that are used to support consumption of a product because it leads to market distortion and leakage,” he said. 

“Subsidies should be removed, but instead implement income-support or a coupon system to help the poor.”

Yeah said the subsidies were facing a lot of leakages from foreign consumers and smuggling, while benefiting the wrong group of consumers. 

He also gave an example that, on average, a household income of RM3,000 and below should be given the subsidy either through direct transfer of funds or coupons for a particular subsidy. 

“Any implementation for a subsidy will require a strong government machinery with a proper management in administrating its complexity,” he said.

“They should also implement it on a gradual basis and hope to see a complete removal of subsidy policies in the next five to 10 years.” 

On Sunday, Domestic Trade, Cooperatives and Consumerism Ministry secretary-general Datuk Seri Alias Ahmad said a new system beginning September 1 would be introduced to ensure the sale of subsidised diesel and petrol would be implemented in October or November.

A ministry spokesman said further details about the petrol subsidy may be announced some time in August or September. 

He also rebutted claims from a Chinese daily print that listed details about diesel subsidy 

“Those details provided were untrue and we are currently investigating where the publication acquired them,” he said.

“The details for petrol and diesel subsidies are currently being reviewed by the Finance Ministry,” he said.