Subsidised cooking oil: ID system will create black market - economists

The government’s potential plan to introduce special identification cards for those really deserving of purchasing subsidised cooking oil will create a black market, said economists.

They viewed that a special identification for those worthy of subsidies would not only open up avenues for abuse, but the government may need to fork out a hefty amount to ensure irresponsible quarters do not misuse the system.

As such, an expert proposed for Putrajaya to implement a “purpose-vouchers” system instead.

Research and Innovation provost at Malaysia University of Science and Technology Geoffrey Williams did not mince words when he told Malaysiakini that the mechanism the government is mulling was “a terrible and, potentially, very damaging policy”.

Williams expressed concerns that those with such identifications could sell the discounted cooking oil at a premium price in a grey market or sell their identifications in return for cash.

“In the worst cases, criminal groups will steal these identifications and create a black market.

“Unfortunately, this is not always an unintended consequence of a certain policy, it is often exactly why the policy is designed in this way in the first place.

“It is very common, for example, in totalitarian countries and socialist systems and corrupt systems, where access to preferred supplier status is sold by middlepersons,” he said.

Sharing similar sentiments was Universiti Malaya’s Nazari Ismail.

While admitting that the introduction of special identification cards is the most realistic measure at the moment, Nazari said it will be an uphill battle for the federal administration to ensure that the system is not abused.

“(The government must) guarantee that those who deserve the subsidy will still receive it.

“Because we all know, some people are bent on taking advantage of the system.

“In the past, for example, we know of foreigners taking advantage of fuel subsidies, which are meant only for locals,” he said when contacted.

‘Social control policy’

Williams took a swipe at the government, asserting that it is not economically justified and is a violation of the people’s rights by monitoring their spending through its move to offer discounts based on identification cards.

He expressed disappointment that the policy designed to address the issue pertaining to the cost of living will eventually become a “policy of social control”.

“It will expand over time for selected items to many more items, which lobby groups claim should be controlled.

“It also means that the government is controlling you to spend on products, brands or outlets they choose which you may not want. So, you lose the freedom of choice in the most basic aspects of your life, you are not free to choose what you eat for example.

“Requiring an identification (card) to buy necessities creates huge market distortions, supply shortages and higher prices. It restricts consumer choice and undermines individual liberties,” he stressed.

‘Purpose-vouchers’ system

Another economist Carmelo Ferlito called on the government to forgo its plan to use an identification system.

Instead, Ferlito, who is also chief executive officer of the think tank Center for Market Education, proposed for the government to allow the provision of goods and services at market price and subsequently assist the lower income bracket groups with “purpose-vouchers” calculated according to different income groups.

“While the government can only work on averages and aggregates, providing purpose-vouchers rather than cash aids would allow the emergence of voucher markets, allowing for more targeted distribution of aid,” he said.

Such a measure, he said, will reduce costs for the government and empower consumers with a higher degree of freedom of choice.

“I think by allowing the creation of a voucher market through a ‘purpose-voucher’ system, it can spontaneously generate a better allocation, although not perfect.”

On Monday (Oct 2), Deputy Domestic Trade and Cost of Living Minister Fuziah Salleh revealed that the government is mulling the introduction of special identification cards to ensure that only the deserving groups get to purchase subsidised packet cooking oil.

Fuziah said the measure was necessary because, under the open market system, even the well-to-do are buying subsidised products.

Therefore, a special identification for those worthy of subsidies would prevent the problem.

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