AS global oil prices rise amid tensions in West Asia, Malaysia’s fuel subsidy debate has once again returned to the spotlight.
According to Nurhisham Hussein, Economic Adviser at the Prime Minister’s Office, fuel subsidies cost the government about RM1,700 every second, or as much as RM147 mil a day.
Such figures inevitably raise questions about fiscal sustainability, targeting and whether subsidies are reaching those who genuinely need them.
These are important questions. Yet another aspect of the debate often receives far less attention: the language we use when discussing government support, and the assumptions embedded within that language.
When governments provide assistance to lower-income households, the support is typically described as a subsidy, welfare programme or cash aid. Such terms are frequently accompanied by concerns about dependency, leakages, inefficiency and fiscal burden.
However, when governments support businesses, the language changes. We speak of tax incentives, investment promotion, strategic grants, industrial policy and competitiveness packages.
This distinction is more than semantics. Language shapes perception.
A fuel subsidy for a fisherman is often framed as a cost to taxpayers, while a tax incentive for a multinational corporation is framed as an investment in economic growth. One is viewed as consumption, the other as development.
Yet both involve the same fundamental reality: public resources directed towards specific groups in pursuit of policy objectives.
The real question is not whether governments should provide support. They already do. The question is why some forms of support are instinctively regarded as burdens, while others are readily celebrated as investments.
Part of the answer lies in the enduring influence of supply-side economic thinking. The argument is familiar: lower taxes and lower business costs encourage investment, expansion and job creation, generating wider economic benefits.
There is merit to this view. Businesses play a vital role in creating employment, driving innovation and generating economic activity. Governments therefore have legitimate reasons to encourage investment and enterprise.
The problem arises when this assumption becomes automatic.
Support directed towards businesses is often treated as inherently productive, while support directed towards households is required to continually justify its existence. In other words, the debate is not always about evidence.
It is also about whose support is presumed to create value and whose support is presumed to create cost.
Whether corporate incentives consistently generate wider benefits is ultimately an empirical question rather than an ideological one. The evidence, however, is more mixed than public discourse sometimes suggests.
In 2015, the International Monetary Fund, the Organisation for Economic Co-operation and Development, the United Nations and the World Bank jointly noted that their views on tax incentives had become more cautious as evidence accumulated that their effectiveness was highly variable and dependent on context.
This matters because investment decisions are rarely driven by tax incentives alone. Factors such as infrastructure quality, workforce skills, regulatory certainty and market size often carry equal, if not greater, weight.
In some cases, generous incentive packages have resulted in significant foregone revenue without delivering proportional gains in investment, employment or productivity.
The issue is directly relevant to Malaysia. Programmes such as Pioneer Status and Investment Tax Allowances, administered by the Malaysian Investment Development Authority, allow eligible companies to enjoy substantial tax exemptions.
These incentives have undoubtedly contributed to Malaysia’s industrialisation and economic transformation. They are not without justification.
However, recognising their contribution should not place them beyond scrutiny.
When discussing household subsidies, questions about targeting, effectiveness and fiscal sustainability are routinely raised. Similar questions are far less frequently asked about corporate tax incentives and other forms of business support.
That imbalance cannot be explained entirely by evidence. It also reflects an assumption that one form of support is productive while the other is inherently suspect.
None of this suggests that subsidy rationalisation is unnecessary. Blanket subsidies can be costly, poorly targeted and difficult to sustain, particularly when higher-income households consume more fuel in absolute terms.
The issue is not whether subsidies should be reviewed. The issue is whether fiscal discipline is applied consistently.
If household subsidies must be targeted, audited and justified, then corporate incentives should face the same standards. If support for ordinary citizens must demonstrate measurable outcomes, support for businesses should be expected to do likewise.
The same questions should apply to both: Who benefits? How much public revenue is involved? What value is created? Are the benefits proportionate to the costs?
This is not an argument against corporate incentives, nor against subsidy reform. It is an argument for consistency.
Public resources should be evaluated according to the outcomes they produce, not according to the social status of their recipients.
A fuel subsidy for a delivery rider and a tax incentive for a multinational corporation may serve different purposes, but both represent policy choices involving public money. Both deserve scrutiny. Both deserve evidence-based evaluation.
Malaysia needs an honest conversation about subsidies. It also needs an honest conversation about incentives, exemptions and tax expenditures.
Modern economies require support for both households and businesses. The challenge is ensuring that each is assessed with the same degree of rigour, transparency and intellectual honesty. ‒ June 17, 2026
Dr Mohd Zaidi Md Zabri is a Research Fellow at the Centre for Islamic Economics, Kulliyyah of Economics and Management Sciences, International Islamic University Malaysia.
The views expressed are solely of the author and do not necessarily reflect those of Focus Malaysia.
Main image: Unsplash/Nahrizul Kadri
