12MP review: Govt doubles down on introducing targeted subsidies

Prime Minister Anwar Ibrahim’s administration has doubled down on its commitment to reform the country’s current broad-based subsidy framework.

Under the 12th Malaysia Plan mid-term review tabled by Anwar in the Dewan Rakyat this morning, the federal government will be introducing targeted subsidies.

This is to retarget all types of subsidies such as electricity, diesel, and petrol as well as other social assistance.

According to the report, this radical shift is one of 17 “Big Bolds” highlighted by the review to catalyse socio-economic development until 2025.

“Efforts will be undertaken to implement targeted subsidies to ensure the right target groups benefit from the assistance provided as well as ensuring prudent fiscal spending,” it said.

In this regard, the mid-term review report said a socio-economic data repository on households called Pangkalan Data Utama (Padu) will be developed for more targeted subsidy and assistance.

“Near real-time micro data on individuals such as demography, income, and social assistance will be captured on this platform as a reference to government agencies.

“In addition, Padu will provide access to enable individuals to review and update personal data. In this regard, the government will ensure data confidentiality and security are protected.

“Padu will be leveraged as a central reference system for assistance targeting based on household disposable income.”

Potential backlash

At the initial stage, the report said the emphasis would be on subsidies for electricity, diesel, and petrol.

Savings from subsidy retargeting will be used to fund socio-economic projects and programmes to benefit the people.

While the reform would ensure subsidies will reach those who need them, the shift to targeted subsidies will be a politically risky move as many who have long enjoyed the broad-based subsidies may not continue to benefit.

The subsidies for RON95 fuel, for instance, are currently enjoyed by all Malaysians regardless of income and a targeted mechanism based on household disposable income is likely to cause some backlash.

Previous administrations since the tenure of Abdullah Ahmad Badawi tried to tackle the issue of fuel subsidies.

However, the attempts did not succeed due to various reasons including strenuous public pushback and lack of data, especially for Malaysians who work in the informal sectors.

The six-day special sitting of the Dewan Rakyat, which began today, will focus on the tabling of the 12MP mid-term review.

The review is being carried out to evaluate the achievements of the five-year plan in its first two years (2021-2022) and the direction for the next three years (2023-2025) to achieve a sustainable, prosperous, and high-income nation, taking into account current domestic challenges and global trends.

The 12MP was tabled by former prime minister Ismail Sabri Yaakob on Sept 27, 2021, with an estimated development allocation of RM400 billion.

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