KUALA LUMPUR: The estimated RM4 billion a year to be saved from targeted fuel subsidies could play a crucial role in reducing Malaysia's fiscal deficit and reallocating resources to essential sectors like healthcare, education and infrastructure, industry players said.
SME Association of Malaysia secretary-general Chin Chee Seong said this, in turn, indirectly benefits small and medium enterprises (SMEs) by fostering a more stable and supportive economic environment.
"Given the potential savings of RM4 billion annually for the government, it is crucial to implement the targeted fuel subsidy program as soon as possible.
"However, for SMEs, it is even more important that the government commits to a fair and accurate system to ensure they are not adversely affected by this change," he told Business Times.
According to Chin, the savings will create economic stability which is crucial for consumer confidence and drive economic activity that benefits SMEs.
"By optimising government resource allocation, this approach can also boost consumer confidence, foster innovation and competitiveness among SMEs, and ultimately contribute to a stronger and more resilient SME sector in the long term," he said.
Chin said implementing a targeted fuel subsidy is essential for several reasons, particularly for SMEs.
"For SMEs, fuel costs are a major operational expense. A well-implemented targeted subsidy programme can help stabilise these costs, enabling better financial planning and sustainability. This stability is crucial for maintaining competitive pricing and healthy profit margins," he emphasised.
Chin further highlighted that the programme could also provide financial assistance to those who require it most, rather than distributing it widely.
"This approach promotes fairness and reduces waste, ensuring that subsidies are not disproportionately benefiting wealthier groups, but instead, reach those who truly need them," he added.
Chin noted that the association is currently engaged with the government on the timing of the subsidy rationalisation.
"Our main concern is whether the government can execute a fair and accurate system to ensure the benefits of SMEs are not compromised," he clarified.
Chin said the engagement is crucial to make sure that the implementation process is transparent and effectively targeted, preventing any undue financial burden on SMEs while maintaining their competitiveness and sustainability.
Chin observed that fuel subsidies play a crucial role in aiding members in handling operational expenses and ensuring pricing stability.
"This results in decreased costs, competitive pricing maintenance, profit margin enhancement, and cash flow improvement, all contributing to the financial stability and growth potential of SMEs," he highlighted.
Meanwhile, UniKL Business School economic analyst associate professor Dr. Aimi Zulhazmi Abdul Rashid emphasises that the subsidy restructuring aims to streamline government expenditure.
The initial savings of RM4 billion are being directed primarily towards eligible and affected Malaysians, excluding non-Malaysians, foreign workers, the T20 group and other indiscriminate beneficiaries.
"When successful, it will be expanded nationwide and cover other fuels such as RON95, diesel and bulk subsidised goods now.
"At this stage, the government will be able to see savings in expenditure, reduce the deficit of national debt, and restructure the country's expenditure sustainably to place Malaysia in the group of 30 world countries with a strong economy, targeted in the Madani Economic Plan previously presented by Prime Minister Datuk Seri Anwar Ibrahim," he said.