KUALA LUMPUR: A better targeted subsidy is intended to ensure the positive effects go to the right groups and also free the government's fiscal space.
Finance Minister II Datuk Seri Amir Hamzah Azizan said reforms in Malaysia are focused on getting the basic right whereby servicing and delivering back to the population is prioritised.
In that form, he said one of the key roles for the ministry is to make sure that the fiscal capacity of the government exists.
"And part of the issue that we have had in the past is that we have been doing a lot of our interventions through subsidised methodologies. And subsidies were a very generic form of intervention to facilitate rebalancing or levelling up of society.
"Unfortunately, if you do not target the subsidies well, the fiscal burden to the government will enlarge. One of the key reforms we are doing in Malaysia is actually to get the basic right. If you want to intervene, support and lift society in the right form, it is by making sure that the targeting is done better.
"You see that Malaysia is going through those changes by doing subsidy rationalisation so that the intended good effect goes to the right groups and free fiscal space," he said in a panel discussion at the Global Forum on Islamic Economics and Finance.
He said a freed fiscal space allows the government to invest in more important things for the future, among which include improving the basic infrastructure in the country.
A better fiscal capacity also would be able to get Malaysia's education system up in better form so that more talents are available to meet industry's requirements.
He said innovation comes into play as a tool that can be utilised to enable reforms in Malaysia.
"If you look at the financial markets in Malaysia, the Islamic segment of the financial market holds a big area that priority can be better spent in terms of unleashing that potential.
"The Prime Minister also talked about wakaf' initiative, where philanthropy is the root of an element that allows us to think about a better risk-reward balancing mechanism.
"If we can deliver a much better Islamic wakaf mechanism and include more people, we can lift standards of living within societies in Malaysia," he said.
Last week, cabinet agreed to kick off the country's fuel subsidy rationalisation programme with a targeted diesel subsidy, saving the government around RM4 billion a year.
The Finance Ministry then announced a diesel subsidy aid programme involving a monthly allocation of RM200 for eligible individuals as well as agriculture and commodity smallholders.
The eligibility criteria for the Budi Madani programme require applicants to be Malaysian citizens and own a private diesel vehicle registered with the Road Transport Department.