Former sec-gen of finance: Fuel and cooking oil subsidies are counterproductive

Following the news that the government is expecting to allocate RM 8 billion on fuel and cooking oil subsidies this year, a former top civil servant has spoken out, calling to the government to rethink their decision.

Mohd Sheriff Kassim, former secretary-general of the finance ministry, told Bernama that subsidising fuel and cooking oil will only lead to the smuggling of the commodities to neighbouring countries.

He explains that if retail prices of fuel and cooking oil in areas like southern Thailand, Sumatra, and the Philippine islands off Sabah were to follow market trends, this will create a huge price difference. 

With the subsidies in place, fuel and cooking oil will be much cheaper than in neighbouring countries, therefore, giving smugglers the opportunity to make a quick profit from cross-border trade by land and sea.

Also read: Up to RM 8 billion allocated for fuel and cooking oil subsidies for 2021

As it is, authorities are already facing the problem of rampant smuggling of diesel to southern Thailand due to such subsidies.

Other than that, Sheriff notes that the subsidy will also benefit the high-income group.

Instead of price subsidies, Sheriff believes that targeted income subsidies would better benefit the low-income group.

“The best way to help the poor is to subsidise their income without wasting government funds.”

He further suggested the government to come up with a bigger income subsidy plan for the really poor, including petty traders who have lost their incomes because of the measures to contain the Covid-19 pandemic.