Fuel subsidies do nothing for the poor, say economists

jomo-petrolPETALING JAYA: Economists say Pakatan Harapan’s idea of reintroducing petrol subsidies, if it wins in the general election, would not help the poor.

They were commenting on PKR investment and commerce bureau chief Wong Chen’s remarks during a Facebook live discussion on the upcoming budget hosted by iMoney.my today, that it was immoral for a country that produced oil to not subsidise fuel for its poor.

“We are looking at a couple of ways on how fuel subsidy will truly benefit the poor,” Wong Chen said. “We know that we have a moral responsibility to subsidise for the poorest.”

Both Jomo Kwame Sundaram and DM Analytics chief economist Muhammed Abdul Khalid, who were also present at the event, said subsiding petrol prices was a bad idea as it would do nothing for the poor.

“In the current crisis, there is absolutely no argument for fuel subsidy unless you’re talking about prices like 200 dollars per barrel,” Jomo said. “We all know that fuel is largely enjoyed by the middle class.”

Muhammed agreed with Jomo, saying: “When you talk about the poor, they’re the ones riding bicycles or buses. Fuel subsidies help those who drive BMWs.”

Muhammed called fuel subsidies regressive, saying it only benefited those who could afford to drive their own cars in the first place.

“We should never go back to that system unless the prices are way too high. If you want to help the poor then that’s not the way.”

Jomo said a better way to help the poor would be to focus on making public transportation more attractive.

“Right now it’s not attractive. There was a strategic decision in the 1980s to promote the national car and this left the public transportation sector suffering,” he said. “It was rectified in recent periods but not enough.

“If subsidies are needed then it should be for public transportation.”

He said that some of the problems facing public transportation included safety issues in terms of operations as well as passenger safety.

“Some of the operations are very unsafe for the passengers and women are particularly concerned about safety.

“The orientation should be to rectify the neglect of public transportation.”