Give income-based subsidy vouchers, says economist

 

Retail king Ameer Ali Mydin says subsidising cooking oil for all income groups should be scrapped.

PETALING JAYA: An economist has suggested that Putrajaya give households subsidised purchase coupons proportionate to income in moving towards targeted subsidies.

Center for Market Education CEO Carmelo Ferlito said the easiest way to make targeted subsidies was to provide the relevant goods and services at market price and then distribute proportional vouchers according to the different income segments.

“This would also help create a market for the vouchers. For example, if I belong to the B40 group (bottom rung of the income ladder) and receive a voucher for public transportation but live near my workplace, I do not need the voucher.

“So, I may sell it to someone whose voucher has insufficient value for his or her need. This will create a vibrant market and a bottom-up solution,” he told FMT.

Carmelo Ferlito.

Ferlito felt this would help distribute the vouchers in a more efficient way.

“At best, the government can look at average subsidies for the various income brackets. But the situation on the ground is different, and the emergence of a market for vouchers can help to allocate the subsidies to those who actually need them,” he said.

On Tuesday, domestic trade and cost of living minister Salahuddin Ayub said proposals for a two-tier system as well as subsidised purchase coupons for packet cooking oil will be discussed at the National Action Council on Cost of Living meeting next week.

He said the two-tier cooking oil pricing was proposed by the Malaysian Palm Oil Board, while the coupon system proposal was made by his predecessor.

Ameer Ali Mydin.

However, prominent retailer Ameer Ali Mydin urged Putrajaya to stop subsidising cooking oil entirely and dump proposals for a two-tier price system or subsidised purchase coupons.

Contending that an average family needs only 5kg of cooking oil a month, the managing director of Mydin hypermarkets said giving consumers coupons was bureaucratic. He questioned how those in rural areas could access the coupons and redeem them.

He said it seemed Putrajaya did not understand the issue at hand, pointing out that retailers were not invited for the meeting that Salahuddin had with industry players and cooking oil manufacturers’ representatives.

“Government subsidies for cooking oil alone is RM4 billion and Putrajaya has admitted that a lot of the oil is being siphoned off. Remove the cooking oil subsidy,” he said.

Universiti Malaya’s Nazari Ismail called for a system where the wealthy contribute to a fund to help the poor cope with the increased cost of living, saying this can be in the form of zakat aid or waqf (endowment) contributions.

He said the government’s current debt levels showed it did not have the funds to continue providing consumer subsidies as this was not a long-term solution to the high cost of living.

“Government debt service charges are more than RM40 billion annually. This will increase as the government continues to provide various forms of subsidies.

“The actual prices of goods and services will continue to rise due to the nature of our economic system, which is debt-based.

“We need to start reducing our addiction to debts, especially to loans by banks,” he said. - FMT