Selangor Times latest issue 28 Januari 2011
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Subsidy cut not needed,
MIER executive director Dr Zakariah
By Rahmah Ghazali
SHAH ALAM: An economist from
the Malaysia Institute of Economic
Research (MIER) has argued against
removing subsidies because there is no
concrete evidence to show that doing
so would distort the economy.
MIER executive director Dr Za-
kariah Abdul Rashid said he disagreed
with the World Bank’s view that
maintaining subsidies would distort
the equilibrium of supply and de-
“This is not the reality we are fac-
ing now,” he said at a luncheon organ-
ised by the State Economic Advisor’s
Office on Tuesday.
“It is uncertain that removing
subsidies would distort the economy.
By removing subsidies, it also doesn’t
necessarily mean we will increase or
improve our social welfare,” he said.
Any removal should not be done
in one go, he added.
“We need to have subsidy ratio-
nalisation to reduce the govenrn-
ment’s financial burden,” he said.
Zakariah, however, stressed that
the government should not consider
giving subsidies as a burden as it was
its responsibility to improve social
He further said that subsidies
should be reallocated and used to
improve consumer welfare and living
standards. Rationalisation of subsidies
would also increase market efficiency.
Meanwhile, state economic ad-
viser Datuk Seri Anwar Ibrahim, who
was also at the luncheon, said that
subsidies only benefited the rich who
could afford to pay more.
“They would not care about the
people, especially those who earn less
than RM1,500 per month. At the end
of the day, the poor barely survive after
spending so much money on daily
necessities,” Anwar said.
Anwar said the nation was strug-
gling financially after recording a 53.1
per cent deficit in the Gross Domestic
“And this was not even caused by
subsidies to the people. This deficit
trend has been going on for 12 years
and this is certainly not a positive
sign,” he said.
The Federal Government last year
increased the prices of petrol, diesel,
liquefied petroleum gas (LPG) and
sugar following a slash in subsidies,
while promising the subsidy adjust-
ment would have minimal impact on