Subsidy rationalisation protects MSME margins and Malaysia’s investment appeal if done gradually with targeted support, says MITI.
KUALA LUMPUR: Subsidy rationalisation can help safeguard the profit margins of micro, small and medium enterprises (MSMEs) and preserve Malaysia’s competitiveness if implemented gradually, in a targeted manner and accompanied by comprehensive support measures.
The Ministry of Investment, Trade and Industry (MITI) said the resulting fiscal savings should be channelled transparently and strategically towards the automation of MSMEs, while strengthening electric vehicle (EV) infrastructure and the development of green energy.
According to the ministry, the funds should also be used to enhance local talent and accelerate the transformation towards high-value-added industries.
“This approach will ensure Malaysia remains competitive within ASEAN and continues to be a preferred investment destination amid an increasingly challenging global economic transition,” it said in a written reply published on the Parliament website yesterday (June 29).
The ministry was responding to a question from Datuk Dr Nik Muhammad Zawawi Salleh on whether subsidy rationalisation would reduce the profit margins of MSMEs and undermine Malaysia’s competitiveness in attracting investment, EV manufacturing relocation, exports and the China+1 strategy within ASEAN.
MITI also said that under the China+1 strategy, investors are able to leverage the regional economic networks and supply chains already established by Malaysian companies across the Asia-Pacific, without having to build new business relationships and supplier networks from scratch.
It said the existing ecosystem facilitates the establishment or expansion of operations, improves supply chain efficiency and enhances Malaysia’s investment competitiveness, while accelerating operational integration, broadening access to regional and global markets, and reducing the time and cost of implementing investments.
“Therefore, subsidy rationalisation is not expected to have a significant impact on the China+1 strategy, as the strength of the existing supply chain ecosystem plays a far more significant role in influencing investors,” it said.
