Malaysia SMEs Concern over RON95 Petrol Subsidy Cuts
The Malaysian government’s plan to rationalize RON95 petrol subsidies has sparked significant concern among small and medium enterprises (SMEs). The Small and Medium Enterprises Association of Malaysia (SAMENTA) highlights that the move will impact SMEs more severely than the diesel subsidy cuts. SAMENTA President Datuk William Ng warns that most vehicles, including commercial ones, will face increased costs. Subsequently, this will reduce consumer purchasing power.
Ng urges the government to avoid abrupt removal of the RON95 subsidy. He advocates for a gradual approach, allowing SMEs time to adapt to the higher operational costs. He emphasizes that a sudden cut could cause goods prices to soar by 30% to 50%. Moreover, this would add to the existing financial pressures on SMEs. Over the past three years, costs for raw materials, rental, and wages in the food and beverage sector have already surged by 40% to 70%.
Currently, SMEs make up 97.4% of business establishments in Malaysia. Any significant cost increase will likely be passed on to consumers. Thus, exacerbating the financial strain on both businesses and the public. The Economy Ministry is still studying the subsidy issue, aiming to fine-tune the proposed targeted RON95 subsidy for smoother implementation and effective aid distribution.
The Consumers’ Association of Penang supports subsidy rationalization, viewing it as a step towards fiscal prudence. Association President Mohideen Abdul Kader points out that Malaysia’s fuel subsidies, including diesel, cost RM60 billion annually, which could otherwise fund significant improvements in healthcare and infrastructure. He asserts that blanket subsidies are unsustainable and that financial aid should target vulnerable groups.
Ron95 Subsidy not just concerns SMEs in Malaysia but politics too
Political implications of subsidy cuts also loom large. Prime Minister Anwar Ibrahim faces pressure following a state by-election loss, reflecting voter dissatisfaction with current economic policies. Anwar has emphasized that subsidies should benefit the needy rather than the wealthy or foreigners. The targeted diesel subsidy, effective since June, aims to save RM4 billion annually, supporting Malaysia’s goal to reduce its fiscal deficit and debt levels.
However, subsidy cuts risk inflating costs. Analysts predict that a controlled price increase for RON95 could help manage inflation. Currently, RON95 retails at RM2.05 per liter, significantly lower than its market price of RM3.35 per liter. Analysts warn that a free market float could spike inflation, stressing the importance of a measured approach.
Ultimately, Malaysia’s RON95 subsidy rationalization represents a critical balance between fiscal responsibility and economic stability. While it promises substantial savings for the government, the impact on SMEs and consumer prices requires careful consideration to avoid exacerbating economic hardships.
