AN endowment programme can be a long-term solution to address Malaysia’s ballooning subsidies, which could cost taxpayers close to RM80 billion this year, an economist has suggested.

Barjoyai Bardai of Universiti Tun Abdul Razak said the government could demand large conglomerates and the super-wealthy in Malaysia to contribute to the funding scheme.

“Our subsidies are the largest ever given by any country, and of course the cash aid is just a short-term plan.

“There needs to be a ‘correction’ so that our situation now will not be compared with Sri Lanka, where subsidies were given without control and the loans taken have finally led it to bankruptcy.

“Note, Sri Lanka’s debt is much smaller than ours,” Barjoyai told The Malaysian Insight.

An endowment programme, he said, would be a “specialised source” to ensure sustainability in funding cash aid for the hardcore poor, B40 and even M40 groups.

The rate of contribution from each wealthy contributor to the endowment fund need not be high, he added.

“One way is by obligating government-linked companies (GLC) – such as Petronas or Khazanah – as well as large companies such as Maybank and Sime Darby, listed companies and the nation’s rich to contribute just 1% of their annual profit into the scheme.

“Use the money for investment and the returns can be spent on the poor and needy groups. Grant tax exemptions or postponements for those who contribute.

“If in the first year we can get RM100 billion, in 10 years we could get RM1 trillion, and that is more than enough to accommodate the bill for our subsidies,” Barjoyai said.

Malaysia’s unsustainable subsidy programme is the elephant in the room, even as the government announced that the projected expenditure of RM77.3 billion this year will be the highest in the country’s history.

Finance Minister Tengku Zafrul Abdul Aziz also said subsidy expenditures could reach RM80 billion this year.

Besides subsidies to maintain food ceiling prices, it also covers cash aid to needy groups, fuel subsidies, and propping up the agricultural sector.

Zafrul acknowledged that the government needed to study “the holistic cessation of subsidies” to re-channel the savings to those in dire need.

Other economists agreed, as Malaysia would otherwise be headed for bankruptcy.

University Putra Malaysia (UPM)’s Associate Professor Ahmed Razman Abdul Latiff added that the government should also put technology to use in the redistribution of subsidies.

He agreed with continued assistance for the neediest groups, and suggested a smartphone app that issues digital coupons or vouchers for buying groceries.

“One-off payments each month can be helpful but are not an ultimate solution, as prices will keep on increasing.

“Assistance need not be in cash form, but can be substituted with vouchers using a mobile phone app.

“The vouchers would be for specific items such as eggs, chicken, or packets of cooking oil. The app can record where the purchase was made.

“This is to prevent subsidised items from being sold to unintended recipients, to prevent leakage.

“There have been cases where vendors smuggle subsidised goods, or sell them to third parties at a higher price,” the UPM business development manager said.

Sunway University Business School professor of economics Yeah Kim Leng reiterated the importance of targeted subsidies to avoid leakages.

“For example, RON95 petrol. At the moment the T20 segment can enjoy filling up their cars with cheaper fuel when they have extra means. The B40 and the M40 might not have the extra spending power but they still have to pay for the fuel.

“If we can ensure that the T20 pay more (because they are more capable) we could channel the subsidies to those in need,” he said.

However, Yeah stressed that the government must also ensure supply meets demand, so prices do not escalate.

“This would need co-operation from ministries to ensure that action is being taken to guarantee supply. While subsidies are helpful, there must be the supply.

“The government needs to ensure this.”

Renewed focus on the government’s unsustainable policy comes with the removal of subsidies for 2kg, 3kg and 5kg bottled palm oil cooking oil, effective July 1.

Besides this, the government also set a new standard retail ceiling price for chicken capped at RM9.40/kg, an increase of 50 sen.

The new ceiling price for chicken eggs in the peninsula has also been increased to 45 sen each (grade A), 43 sen each (grade B) and 41 sen each (grade C).

However, the government has decided against raising the electricity tariff for consumers on the peninsula.

It also announced additional cash handouts of RM100 per household and RM50 for bachelors in the B40 group. – July 4, 2022.