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June 24, 2024

The Prime Minister’s Diesel Subsidization Announcement

malaysian prime minister
Malaysian Prime Minister Anwar Ibrahim explained that subsidies have not been abolished. PHOTO: REUTERS
June 24, 2024

On May 21, Prime Minister Anwar Ibrahim announced new fiscal rationalization measures on Malaysia’s longstanding diesel subsidies. Reducing government financial support to lower fueling costs of diesel-powered vehicles will mean changes to the national Subsidized Diesel Control System (SKDS) as it stands. This will affect expenses regarding personnel transportation and goods shipment for everyday Malaysians as well as U.S. companies across industries with operations in the country.

The Prime Minister and relevant ministries have yet to lay out a precise timeline to implement the subsidy rationalization but emphasized that the subsequent tax policies will help expand national revenue and strengthen the Ringgit. The administration has made clear that measures will be taken to prevent a sudden drastic cost increase for goods and services affected by the subsidy rationalization.

These changes will take place in peninsular Malaysia first and later for Sarawak and Sabah, as the Borneo states are much more heavily reliant on diesel-consuming products. Small-scale traders, farmers, and fishermen will also be granted exceptions and other forms of aid on a case-by-case basis. U.S. companies with local suppliers and ancillary operations in both peninsular and eastern Malaysia should take note of the varying degrees of this changing policy, as reductions on diesel subsidies will have effects at all stages of the production chain.

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