How removing subsidies without alternatives will negatively impact M’sia

THE unilateral sanctions by the US and its allies on commodity superpower Russia has caused daily essential prices to skyrocket and raised the national subsidy bill.

Malaysia’s capacity for subsidies has been constrained by the large debt accumulated from 40 years of rampant corruption, mismanagement and the 1Malaysia Development Bhd (1MDB) political scandal.

After the 15th General Election (GE15), subsidy removal will be the primary agenda for the political alliances that emerge victoriously.

Subsidy removal without proper alternatives in place, however, decreases the overall purchasing power among the working class and self-employed households. A reduction in purchasing power will also have a negative impact on the nation.

Firstly, the decline in purchasing power will reduce household spending on nutritious food. This means Malaysians will reduce their intake of protein foods such as milk, chicken, eggs and fish.

Instead, Malaysians will increase their intake of cheap carbohydrates such as rice and instant noodles. Subsequently, the prevalence of obesity- and sugar-related noncommunicable diseases (NCD) such as heart attacks and diabetes will increase.

Children, on the other hand, will suffer from nutrition poverty in the form of a high-carbohydrate, low-protein diet. Such a diet hampers crucial physical development among children involving their muscles, eyes, ears and so on.

(Photo credit: Shutterstock)

Such poor physical development among lower-income children especially will lead to poor performance in academics, sports and talent development.

“Increases inequality”

Secondly, a decline in purchasing power increases inequality among future generations.

A disproportional consumption of high carbohydrates in a high-carb low-protein diet by low-income household children has been linked to low self-esteem. Low self-esteem coupled with poor physical development reduces the future employability of low-income children to exit the vicious cycle of poverty.

Bank Negara Malaysia (BNM) previously highlighted that the rate of employability among graduates decreased in tandem with their family’s income; the unemployment rate of graduates with a family income of below RM1,000 was nearly 2.5 times higher than graduates with a family income of above RM5,000.

Thirdly, a decline in purchasing power increases household conflicts such as domestic violence and divorce. This could be seen among the bottom 60 income (B60) households during the subsidy rationalisation under the Datuk Seri Najib Razak-led Barisan Nasional (BN) administration.

Financial uncertainty and emotional circumstances force people to behave negatively towards their loved ones, which could lead to separation.

(Photo credit: Lexicon World)

Besides that, parents who are constantly worried about finances have a higher probability of beating their children for petty matters such as not switching off the TV or fan after using them.

Children suffering from domestic violence or parental divorce, in turn, have a higher probability of drifting towards aggressive behaviours, bullying and gangsterism.

“Increases national unemployment rate”

Fourthly, the decline in discretionary purchasing power increases the national unemployment rate. The decline in overall societal spending will cause petty traders and small businesses to shut down their businesses and join the unemployment pool.

Meanwhile, formal businesses will defend their profit margin through the reduction of labour costs.

The absence of a human rights protection framework for migrant workers allows formal businesses to overwork but underpay them – hence why formal businesses will replace local Malaysians with migrant workers.

The retrenchment of local workers, in turn, will increase the unemployment rate.

The current discussion on subsidy removal revolves around statistics and data without the impact analysis on real humans.

The current elected politicians in Parliament, made up of conservatives, ethno-religionists, centrists, democrats and liberals, have failed miserably to understand the impact of subsidy removal without sufficient alternatives.

A strong alternative must be the prerequisite to subsidy removal. – Sept 18, 2022


Sharan Raj is a human rights activist, environmentalist and infrastructure policy analyst. He is currently pursuing a postgraduate degree in economics, focusing on a regional currency union for ASEAN and Oceania.

The views expressed are solely of the author and do not necessarily reflect those of Focus Malaysia.


Main photo credit: Malay Mail

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