PETALING JAYA: Malaysia’s handling of fuel subsidy reform reflects responsive governance and adaptive execution, said Arthur D. Little (ADL) Malaysia associate director Tan Qizhen.
He said Malaysia is managing its targeted fuel subsidy reform as a live operational programme rather than a fixed, one-off policy.
“Rather than indicating weakness, this kind of responsive adjustment is the right way in terms of Malaysia’s approach to introduce targeted subsidies schemes,” he told SunBiz.
He said the government’s adjustment of the e-hailing quota is a good example of adaptive execution.
“Initially, full-time e-hailing drivers qualified for a 300-litre monthly quota just like other motorists. After stakeholder feedback and usage data analysis, that quota was doubled to 600 litres, and then increased again to 800 litres per month for drivers exceeding certain mileage thresholds under the tiered eligibility scheme.”
He added that the key is institutionalising this responsiveness – ensuring that appeals, data updates and rule refinements continue in a transparent and timely manner as more edge cases emerge.
“Over time, this approach strengthens trust. People may accept tighter targeting, as long as they see that errors are corrected quickly and the system listens.”
With Malaysia’s MyKad infrastructure already in place, he said, registration for identity-linked schemes like Budi95 is relatively effective. “A single national ID reduces duplication and improves verification, which is a strong foundation compared to many other systems globally.”
Where the real operational lessons emerge is beyond registration, particularly around eligibility calibration and exception handling, Tan said. “Early rollout inevitably surfaces edge cases: for example, e-hailing drivers whose income patterns or vehicle usage didn’t fit neatly into initial eligibility assumptions.”
Furthermore, he said, Malaysia’s fuel subsidy reform will be sustainable if it strengthens the social contract with fewer blanket subsidies, but stronger, fairer, and more transparent protection where it’s needed.
“Whether subsidy rationalisation is sustained has far less to do with headline fiscal savings and much more to do with public confidence in the system.”
Even well-designed reforms can face backlash if inflationary pressures are unevenly felt or poorly managed, Tan said.
“Reforms must be carefully sequenced and buffered, particularly for lower- and middle-income households, to avoid reversal under public pressure.”
People need to see savings translated into tangible benefits such as targeted cash assistance, healthcare, education or infrastructure, Tan said. “When savings are not clearly felt, political and social resistance can build quickly.”
He added that targeted subsidies depend on trust in data accuracy, fairness of eligibility rules and the responsiveness of appeals mechanisms.
Tan shared that ADL’s research shows frequent errors, delays or opaque decisions can quickly undermine the legitimacy of reform, regardless of the fiscal rationale. “Issues such as eligibility errors or delayed appeals, if left unresolved, can quickly erode public confidence.”
The Ministry of Finance said diesel subsidy rationalisation under the Budi Madani Diesel Programme has saved the government about RM5 billion a year since it was implemented on June 10, 2024.
Meanwhile, the targeted RON95 petrol subsidy under Budi95, rolled out in late September 2025, is projected to save the government between RM2.5 billion and RM4 billion a year, with around RM800 million already recorded in early savings.
Combined, targeted diesel and petrol subsidies are expected to free up between RM7.5 billion and RM9 billion annually, depending on global oil prices.
