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My thoughts on Malaysia’s RON95 fuel subsidy reform
TLDR?
- Defining T15 is lowkey tricky
- No perfect rollout
- Be wary of fuel prices being politicized
1. Defining T15 is tricky
If u look at just after-tax income, you miss out on household size
A hh earning 10k with 0 kids vs hh earning 10k but with 3 kids are treated the same (as noted by @Thevesh & others)
But adjusting for family size is not enuf. A same size family earning 10k in KL vs in Kelantan are in different categories
So adjusting for both HH size & where u live is good!
But don’t go overboard with trying to capture all possible differences or you can end up with odd results:
For ex, household A with 10k income and 6k in loans has only 4k left
But household B with 6k and no loans has more at their disposal
Suddenly, hh A has better shot at that subsidy that hh B. Not very mindful!
So:
--> Adjust incomes by household size + location
That may be “good enough” for a T15 label. Don’t let perfection take an L!
2. No perfect rollout:
- Two-tier pricing at the pump? T15 could just send a B85 buddy to fuel up (as noted by @imokman)
- Floating fuel prices + cash transfers for B85? Sounds solid but databases need to be glitch-free for it to work smoothly
- Various other options but no ideal move here—it’s all about picking the least sus option. And likely, that is:
(i) Adjust after-tax incomes by household size + location for a “good enough” T15 label
(ii) Float fuel prices (but slowly)!
(iii) Provide cash transfers to B85 + keep 💪🏾ing up those databases to make sure no B85 is left out
3. Final point: Fuel prices are an easy political 🎯 in any country. Once they’re floated, in any country, an opposition could drag a gov for high/volatile prices (which are now beyond the gov’s control)
So:
...bumping up comms to explain link btwn global & local prices to public are vital. That ensures
...an appropriate and empathetic narrative prevails in the nat'l discourse, and
...a price-smoothing plan may also help, but that’s a convo for another time
End/