On subsidies and prices

A long overdue post. One of the things that I have always looked at with some amount of worry are subsidies and prices which is why I was glad when the new Minister of Domestic Trade and Consumer Affairs said that there will be a revision on pricing regulations in Malaysia (see The Star). Subsidies are good as an interim strategy but it is not a long term solution. The more (and the longer) the government subsidises, the more the price of our products and goods becomes distorted so much so that the price does not reflect the true cost of these products and goods. But of course its not as simple as removing subsidies because people will suffer. A more effective way will be a gradual reduction of these subsidies with the ultimate intention of completely removing them within a specified time period. During this time, we should look at helping our local lads reduce their cost of production or achieve economies of scale. Anyway, those are my thoughts. Hope our new YB Menteri has a plan in mind to manage this issue as its one of those things that can bite us in the future.