13/05/2026

WEDNESDAY | MAY 13, 2026

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Ditch income-based aid for vouchers, govt urged

Ű BY HARITH KAMAL newsdesk@thesundaily.com

PETALING JAYA: Malaysia should abandon rigid income-based subsidy models and move towards a flexible purpose-voucher system that channels aid directly to households based on actual needs, an economist said, warning that the current approach risks creating distortions, inefficiencies and unfair outcomes. Centre for Market Education (CME) chief executive officer Dr Carmelo Ferlito said blanket classifications based largely on income bands fail to capture the real financial pressures faced by many households, particularly as the government prepares to roll out more targeted RON95 fuel subsidies. He said subsidy reforms must focus on protecting vulnerable groups without distorting market prices or creating excessive bureaucracy. “Malaysia needs a subsidy system that protects those who genuinely need help without undermining price signals. “The problem is not the desire to support people. The problem is designing a support mechanism that is too rigid, too bureaucratic and too detached from the real circumstances of households,” he said. Under CME’s proposal, subsidised goods such as fuel would continue to be sold at a single market price, while aid would instead be distributed directly to eligible recipients through vouchers earmarked for essential

ultimately be guided by three principles: maintaining a single market price, delivering targeted aid through purpose-vouchers and ensuring support is based on actual household needs rather than rigid classifications. “The goal should not be to suppress prices. “The goal should be to protect vulnerable households while allowing prices to continue performing their essential role: coordinating decisions, revealing scarcity and guiding responsible consumption,” he said. The proposal comes as the government refines its income classification framework, including categories such as T5, T10, T15 and T20, ahead of the planned implementation of more targeted petrol subsidies amid mounting fiscal pressures. Officials are currently reviewing appropriate income cut-off points as part of broader efforts to align subsidy rationalisation measures with household realities and long term fiscal sustainability. targeted vouchers to eligible groups, for example RM200 or RM400 worth of fuel assistance per month, instead of subsidising the pump price,” she said. Consumers, she added, would need to adapt to market-based fuel prices, with assistance provided separately through vouchers. Public acceptance will be critical, as many Malaysians remain accustomed to blanket subsidies. The proposal comes as the government refines its income classification framework, including detailed breakdowns of high income groups such as T5, T10, T15 and T20. Officials are reviewing where appropriate income cut-off lines should be set, as part of broader efforts to align subsidy rationalisation with household needs and fiscal sustainability. Ida emphasised that while vouchers could make subsidies more equitable, implementation must ensure inclusivity. “The system must capture vulnerable groups such as the elderly, persons with disabilities, and those in remote areas to avoid exclusion,” she said. She concluded that the reform’s success will depend on both robust data management and public trust. “Targeted vouchers can work, but Malaysians must be convinced that the system is fair, transparent and truly meets household needs,” she added.

may face vastly different living costs and financial obligations. “For example, one person earning RM8,000 may work from home and have limited transport costs, while another person earning the same income may travel long distances every day or support several dependents. “Treating these two individuals in the same way because their income is similar misses the point. Need is not captured by income alone,” he said. Ferlito also described blanket subsidies as fiscally costly and economically distortive, saying a purpose-voucher model would offer greater transparency and more precise targeting. “General subsidies are fiscally expensive, socially imprecise and economically distortive. “A purpose-voucher system is not perfect, but it is a better institutional compromise. “It allows the government to help people without pretending that prices can be politically engineered without consequences.” He said subsidy reforms should PETALING JAYA: A voucher-based subsidy model could help Malaysia deliver more effective and targeted assistance, but its success depends heavily on the accuracy of government data, according to Putra Business School economist Assoc Prof Ida Md Yasin. She said the idea is positive as it allows support to be directed based on actual needs – such as transport or essential consumption – rather than suppressing market prices. However, she cautioned that the system’s effectiveness hinges on the quality of household data collected. “Both approaches, whether vouchers or income categories like B40, M40 and T20, ultimately rely on databases capturing income, expenditure, dependents and other household information. The effectiveness depends on how accurate and comprehensive the data is,” she explained. Ida noted that income alone is no longer sufficient to determine eligibility, as households with similar earnings may face very different financial obligations depending on family size, dependents and living conditions. She argued that a purpose voucher system could reduce leakage and strengthen fiscal sustainability by improving efficiency in subsidy distribution. Still, she highlighted gaps in ensuring vulnerable groups are properly captured in government databases.

o Subsidy reforms must protect vulnerable without distorting market prices, says expert

flow more efficiently to those who value it most. “If someone is eligible for assistance but does not need the full amount, the ability to sell or transfer the voucher allows the support to move towards those who value it more. “This is not a weakness of the system; it is precisely how flexibility can improve targeting. The market can do a better job than a centralised approach,” he said. Ferlito said the vouchers should be digitally traceable and purpose specific, with safeguards against fraud, hoarding and abuse, while retaining enough flexibility to avoid becoming another form of rigid price control. He argued that income alone is an unreliable benchmark for determining eligibility for assistance, as households with similar earnings

needs including fuel, food and transport. Ferlito said maintaining one market-based price would improve transparency, reduce confusion at the point of sale and minimise opportunities for abuse and manipulation. “The market price should remain one, while support should be individualised. “Once we start creating different prices for different people, we create administrative complexity, distortions and incentives for manipulation,” he said. He also proposed allowing purpose-vouchers to be traded within a regulated framework, enabling recipients who do not fully require the aid to transfer or sell vouchers to others with greater need. According to Ferlito, such flexibility would allow assistance to

Subsidy coupons could sharpen targeting efforts, says economist Ű BY QIRANA NABILLA MOHD RASHIDI newsdesk@thesundaily.com “Under such a system, the government would provide

LAND LOSS ... Minister in the Prime Minister’s Department (Federal Territories) Hannah Yeoh points at a flood reservoir area in Jinjang where land lots have been alienated to developers, during a flood mitigation press conference at Kuala Lumpur City Hall yesterday. – BERNAMAPIC Anwar congratulates Vijay on Tamil Nadu win

KUALA LUMPUR: Prime Minister Datuk Seri Anwar Ibrahim has extended his warmest congratulations to his friend and South Indian cinema icon Chandrasekaran Joseph Vijay on his election as Tamil Nadu chief minister. Anwar, in his Facebook post yesterday, said that for many years, fans had watched Vijay defeat corrupt politicians and various villains within the span of a three hour film, often punctuated by a short interval. “The people of Tamil Nadu have now entrusted Vijay with a responsibility far greater than any role performed on screen.

Vijay, who was sworn in as chief minister on Sunday, has expressed appreciation to Anwar for extending his congratulations, while reaffirming his commitment to strengthening ties between Tamil Nadu and Malaysia. In a statement shared on social media, Vijay said he was “deeply honoured” by the warm wishes conveyed by Anwar and thanked the Malaysian premier for his “gracious gesture”. He also pledged to foster greater cooperation and further strengthen the longstanding friendship and cultural bonds between Tamil Nadu and Malaysia.

“ Oru Viral Puratchi – the ‘one finger revolution’ – is now on the cusp of creating history,” he said. Anwar also said that Malaysia and Tamil Nadu share deep historical, cultural and people-to-people ties across generations. “I look forward to working closely with Chief Minister Vijay in the years ahead,” he said. Vijay, 52, who recently transitioned from a prolific acting career to full-time politics, led his party Tamilaga Vettri Kazhagam to a significant victory in the state elections, following in the footsteps of several legendary film figures in Tamil Nadu’s political history.