KUALA LUMPUR (Oct 10): The government will trial its central database (Padu), a key tool in the implementation of targeted subsidies which is slated for 2024, on one million households in November, said Economy Minister Rafizi Ramli.
The database will identify households by their income, location and commitments to get a view of their net disposable income in order to calculate how much to give in subsidies, he told reporters at the World Bank event on Tuesday.
“Padu has reached a completion rate of 60%. The plans for a trial run slated for November, and we will use one million households for the use case. If the system is ok, then we are ready to go live in January,” Rafizi added.
Echoing the World Bank's views, Rafizi highlighted that redirecting high-priced subsidy items to expand social assistance, without additional expenses, could potentially reduce poverty by 2.0 to 5.6 times.
“Direct transfers are also estimated to be four times more cost effective at reducing inequality than subsidies. This is on top of the fiscal savings that will be accumulated for other more efficient uses. Only through doing this could the poverty and inequality rates that stayed largely unchanged (or even increased) for the past 10 years finally start to decline again.
“For the subsidies, on how we implement it, best to wait for the final decision this coming Friday,” said the minister.
Earlier this month, Rafizi was quoted as saying that the government will unveil a "concrete move" away from a blanket subsidy system in the coming budget. He said Malaysia expects savings of approximately US$1 billion (RM4.73 billion) to US$2 billion a year from a shift to a targeted subsidy system aimed at reducing its fiscal deficit.
Apart from that, Rafizi said, Padu serves not only as a tool for targeted subsidies but also for optimising social assistance, ensuring accurate allocation and preventing benefit dilution or unfair distribution. Additionally, it provides a foundation for advancements in GovTech, Digital ID, and product-building.
“We took the easy road of introducing blanket subsidies to keep prices artificially low, and adding even more subsidies when the people got angry. We did not take the harder, but necessary, road of building the national database, biting the bullet to introduce a targeted subsidy system, and looking at the other side of the equation: Wages.
“What we will need are people, who understand what we are trying to do, to work with us and build the necessary momentum for these reforms to endure. We should not let uncertainty and unpopularity stand in the way of robust policies; we must take a stand, hold true to our beliefs, and never waver. That is the only guarantee for enduring reforms,” Rafizi added.