Institutional Policy and Economic Impacts of Energy Subsidies Removal in East Asia

Abstract

Energy is heavily subsidized across the globe and energy subsidies exert an extensive economic burden on many countries, particularly on developing economies. The Government of Malaysia has a clear objective and rationale for removing inefficient fuel subsidies that do not reach the intended beneficiaries and benefit only richer groups. As such, the government has embarked in the right direction of energy reforms during the period of low oil prices since 2014. The phasing out of energy subsidies in Malaysia will have a positive effect as the country starts to see budget growth through the narrowing of government debt over time. It will also have multiple effects and benefits on the economy and welfare in Malaysia in the near future. To support the government carry out the fossil fuel reform effectively, this paper aims to provide policy recommendations to the government to ensure that the ongoing reform process will bring positive changes to the economy and the fossil fuel reform gains public support through a transparent process.