Corruption In Supply Chains And Targeted Subsidies

Analysts are urging caution that there should be no rush in introducing targeted subsidies as the main issue here is intricate challenges and corruption that affects the local supply chain system

Corruption In Supply Chains And Targeted Subsidies
Photo by Mahdiar Mahmoodi / Unsplash

Anwar Ibrahim made his first economic policy statement as Prime Minister during the weekend, saying the government will introduce the much debated targeted subsidies and this will happen the soonest possible but there is caution from analysts who urge tackling systemic issues affecting the local supply chains.

He has also urged government agencies to come up with the right solutions for targeted subsidies to reach the poor and needy as well as some specific industries. The review of subsidies will also look at the across the board electricity benefits for the industrial sector.

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While agreeing with Anwar's statement on the need to introduce targeted subsidies, analysts are urging caution.

"I agree with Anwar's statement overall. But I would be cautious for two reasons.  One,  removing the overall subsidies might raise inflationary pressures.  

"Two,  when the rich and industries are affected,  I don't know if they might launch a campaign against him," says an analyst to Business News.

Lowering prices and targeted subsidies

In plans to review its government subsidies programme, aiming to direct money towards low-income groups, Anwar says (Sunday Nov 27) it should also prioritise its policies towards the rising cost of living.

While subsidies at the pump for example has been there for years, it has also been an ongoing problem for all.

"However, we may need to recognise that lowering prices might not always be good for the nation as businesses might not be able to turn a profit that could be used to expand their operations and hire more staff.

"We need to establish that first. The main issue here is prices have been rising at a rapid pace especially for food related items, building material, and services related prices," says another analyst to Business News.

The analyst says the problem need to observe the intricacy of the supply chains.

"Not to mention, pent up demand due to the reopening of the economy that would exacerbate pressures on prices.

Therefore, it is a systemic issue. Along the supply chain, there could be malpractices among the businesses and related parties such as hoarding, price manipulation and the existence of corrupt practices through cartels.

"As a result, the new administration would need to pay attention to the specifics of how prices are established," the analyst says.