The Impact of Selected Subsidy Program on Household Poverty in Rural Area in Sabah
Lina Encharang1*, Kassim Mansur2, Mori Kogid2
1 Faculty of Business, Economics and Accountancy, Universiti Malaysia Sabah (UMS), Kota Kinabalu, Malaysia
2 Faculty of Business, Economics and Accountancy, Universiti Malaysia Sabah (UMS), Malaysia
*Corresponding Author: [email protected] Accepted: 15 September 2022 | Published: 1 October 2022
DOI:https://doi.org/10.55057/ijaref.2022.4.3.20
_________________________________________________________________________________________
Abstract: This study examined the impact of three different categories of subsidy on poverty in eight rural districts in Sabah in 2009 until 2016. The three categories of subsidy are selected consumer items (sugar, wheat flour, cooking oil-1kg in polybag, and rice), petrol and diesel, and liquefied petroleum gas (LPG) subsidy. Poverty is dependent variable, meanwhile selected consumer items, petrol and diesel, and liquefied petroleum gas (LPG) subsidies are used as independent variables. Random effect is chosen to examine the stationary of the data. From the test it was found that dependent variable has positive relationship with independent variables, which the increasing of subsidies will increase of number of poverty in household.
There are many other factors that contribute to the positive relationship between poverty and subsidy. The delivery system of subsidy in rural areas is the main issue in this subsidy program.
Leakages and middleman are main issue in the delivery system. Thus, as a recommendation a new approach is needed to make sure this subsidy program is more effective and reach the target group.
Keywords: Poverty, Subsidy, Rural Area, Transportation, Linkage, Leakage
___________________________________________________________________________
1. Introduction
According to the Statistic Department, the poverty rate in Sabah is the highest compared to other states in Malaysia. Since Independence in 1957, rural development has been the core focus of the Malaysian economic policies. This is because the rural sector plays an important role in the country’s economic growth, social and political development. Sabah has a potential to be developed as one of the important industries in Malaysia. Many potential industries can be developed in rural areas in Sabah especially in tourism and agriculture. However, up to this day the rural economic developments in Sabah are still not encouraging (Lim, G. N., and Mansur., 2015).
On the other hand, in 2009 the government through the Ministry of Domestic Trade, Cooperatives and Consumerism made a new policy that will particularly help those people in rural areas. It will provide subsidy on selected price controlled goods in rural areas of a few Malaysian states including Sabah. The main reason of this project has been implemented by the government is because of the accessibility difficulties due to demographic factors and road condition in rural areas. These accessibility difficulties caused the transportation cost to skyrocket, which in turn made the prices of the goods, and services are increase too. The
transportation modes to rural areas are very limited thus requiring ample time to transport the goods or provide services. The biggest allocation for these subsidy projects is given to Sabah and Sarawak. The selected price controlled goods are Liquefied Petroleum Gas (LPG), petrol Ron 95 and diesel, and selected consumer items (rice, white sugar, cooking oil (Polybag/sachet 1kg), and wheat flour).
The main objective of this project is to lessen the burden of people in rural areas. In the remote areas the difference of the princes of the goods is more likely to triple than in cities or towns.
This project will also help alleviate people in rural areas from poverty. Compared to urban areas, poverty rate in rural area is higher which is 12.4 percent (Department of Statistics Malaysia, 2019). In Sabah’s rural area, poverty rate is 35.8 percent compared 14.0 percent in urban areas (Sabah Development Corridor’s Blueprint, 2008) The second objective is to ensure that subsidized goods reach the target groups and the goods are available at a government controlled price or at the same price given to the consumers in the city. Finally, yet importantly, the purpose of this project is to ensure supplies of subsidized goods are sufficient based on the needs of the target groups. According to Jain, S., Gangal, and V. K. (2020), subsidies are allocated to poor and disadvantaged citizens based on income, age, physical or mental disability to meet a basic living standard and quality of life.
In terms of subsidy project implementation, the Ministry of Domestic Trade, Cooperatives and Consumerism assigns relevant local companies to transport the selected price controlled goods to the rural areas in a few districts in Sabah. The particular companies are called “transporter”
and the selected rural areas are called “point of sale”. The point of sales is located in almost every village in rural areas and those villages that do not have point of sale could get the selected price controlled goods from the nearest point of sales. The entire selected price controlled goods will be listed on the board with the subsidized prices in order for the consumers to become aware of the price and the items that are available at the point of sale.
The retailer or the owner of the point of sale is responsible in displaying the board to avoid profiteering. The standard prices of the items are set by the Ministry of Domestic Trade, Cooperatives and Consumerism and it is standardized for all point of sales since transportation cost of the items are paid by the government to the transporters.
The project mainly focuses in rural areas. The areas selected by the Ministry of Domestic Trade, Cooperatives and Consumerism were adviced and recommended by every District Offices. A total of 4,629 point of sales (POS) have been selected in all rural areas in Sabah.
The transporters will transport all the items to all the point of sales that have been assigned to them. Every month, the transporters will submit their total transportation cost claims to the Ministry of Domestic Trade, Cooperatives and Consumerism. The transportation costs of the items are varying on the volume of the items and the distance of the point of sale.
In this study, the focus will be on the impact of three different subsidies on household’s poverty in rural areas in Sabah. Since the poverty level in Sabah is the highest in Malaysia, it is essential to analyse and study what kind of government spending should be given to the rural areas that will reduce poverty. Government has spent a large amount of allocation on these three subsidy categories for many years. However, poverty is still an issue in rural areas especially in Sabah.
2. Literature Review
Poverty
Poverty has been a major issue locally or internationally. The world leaders are very determining to reduce and eventually eradicate this pressing social issue. Poverty eradication is a crucial goal and an important development indicator in all countries. The development is when the ill-being transforms to well-being. This transformation can be seen when people have more freedom of choice and action, security, physical abilities, enough for a good life, and good social relations. Some researchers use another word which ill-being is bad quality of life, and well-being is good quality of life (Ehrenpreis, 2006).
Poverty Measurements
Many economists use income poverty, also known as “consumption – poverty” in poverty measurement. Up to this day, poverty remain a major of measurement in many countries.
When the household or individual is depressed because of insufficient income and unable to access to resources in order to get better foods or nutrition, materials, amenities, standards and services, they can be considered poverty. The second measurement of poverty is lack or little wealth and low quality of assets like house, clothing, transport, electricity appliances and so on. It also includes low quality access to services.
Besides that, Liu, E., and Wu, J. (1998) also stated that income is always chosen by the researchers as a single indicator to measure poverty because non-income indicator is immensely complex and difficult to quantify. The actual income needs to be taken into account as many factors can affect it such as tax, market price, cost of living, and many others. Many studies choose statistical techniques to measure poverty as it is quantitative and has a better approach due to its great scale and secrecy. In addition, almost all poverty research uses quantitative measure or statistical data because it includes a great sample, therefore providing more reliable information. The statistical data can be obtained from the government or any relevant international organizations.
Another common measurement of poverty is Amartya Sen, which means about “what we can or cannot do and can or cannot be”. This measurement takes account of human capabilities like skills and physical capabilities and self-respect in society as well. In some countries like the United States, the government still officially uses “subsistence” as a poverty measurement.
However, this measurement is still being fully accepted as it only focuses on human needs as physical things rather than human needs in social aspects (Ehrenpreis, 2006). Below are some categories of poverty commonly used in many countries:
(i) Absolute Poverty
Absolute poverty is also called “extreme”, “severe” or “hardcore” poverty in other countries. At this poverty range, the people are cannot afford or access most of the basic human needs such as clean water, proper sanitation, health services, accommodation, food, and education. The former president of the World Bank, Robert McNamara stated that absolute poverty characters have high mortality, undernourishment, illiteracy, illness, and live filthy atmospheres (Loungani, 2003).
According to Ravallion et al. (1991) absolute poverty is defined differently by different communities in different countries. The differences of the definition is because of the different standards of living among the countries. Two categories can be used to define absolute poverty. The first one is using international standards by choosing a basket of
goods with minimum cost. Meanwhile, the second category is using the lowest poverty line among other countries. This indicator is a more accurate way to measure the poverty line of the absolute poverty.
(ii) Relative Poverty
This poverty range can be defined as an individual or households who cannot live at a minimum level of living standards of most of the population. The minimum levels of living standards vary in most countries especially between developed, developing and third world countries (“Poverty”, n.d.). British sociologist, Peter Townsend defines relative poverty as unable to participate in the society due to economic conditions as a barrier (Sen, 1985). Meanwhile, Adam Smith contended that poverty is the inability to afford (Sen, 1983). The relative poverty is more common in high-income countries (Ravallion et al., 1991).
Subsidy
According to Oxford Advanced Learner’s Dictionary, 9th Edition, 2005, subsidy is money that is paid by a government or an organization to reduce the costs of services or of producing goods so that their prices can be kept low. Direct and indirect subsidies are existing in almost all industries. (Bull et al, 2006)
According to FAO (2003) and Westlund (2004) there are a few guidelines in assessing subsidies: (i) policy objective of the subsidy; (ii) the subsidy program descriptions; (iii) scope, coverage and duration; (iv)annual amounts; (v) sources of funding; (vi) administering authority; (vii) subsidy recipients; and (viii) the mechanisms of transfer. As stated by Youssef, (2008) subsidies granted by the government to help the needy come in the form of basic consumer goods and services such as food items and transportation. Meanwhile, Sumaila et al., (2010) identified three categories of subsidies: (i) ‘beneficial’ or ‘Good’; (ii) ‘capacity- enhancing’ or ‘bad’; and (iii) ‘ambiguous’ or ‘ugly’ subsidies.
(i) Beneficial subsidies
Beneficial subsidies are programs that lead to the economic growth and to achieve positive impact for the sustainable development. Mostly subsidies benefit more private sectors and very little to the public sector. There are few types of beneficial subsidies.
The first one is subsidy programs that give benefit to the public and appropriately managed. Second is research and development (R&D) which is a subsidy program that can improve strategies, technologies and approaches towards development. The last one is subsidy programs that improve community resilience and sustainable development.
(ii) Capacity-enhancing subsidies
Capacity-enhancing subsidies can be defined as subsidy programs that lead to disinvestments. It is including capital inputs and infrastructure investments to reduce cost and increase profit. Fuel subsidies are one of the subsidy programs that fall under this category. In Malaysia, one of the examples is the Malaysian government providing petrol subsidy at RM1 per liter, a RM0.92 subsidies to coastal fishers starting in June 2006. The other subsidy programs in these categories are lending programs below market rate, renovation programs, development projects, support services and other economic incentive programs.
(iii) Ambiguous subsidies
These subsidies categories are defined as subsidy programs where impacts remain underdetermined. Besides that, it can lead to positive impacts or negative impacts.
There are few program examples in these subsidies categories include income support programs, unemployment allowance, worker adjustment programs, and other direct payment to respective person. In addition, the other example that are more specific to rural areas are rural community development programs. The main objective of the programs is poverty alleviation and food sufficiency. With participation of local communities, government or private agencies, and NGOs, the livelihood development policy objectives can be achieved. Income generating activities are one of the aspects in community development programs.
3. Methodology of the Paper
Static panel data analysis was done to determine the impacts of consumer items subsidy, petrol and diesel subsidy, and liquefied petroleum gas (LPG) toward poverty in eight rural areas in Sabah. Panel data was used in this study because of unavailability of data for time series. The impact was investigated using panel data on rural poverty in eight districts and amount of subsidies allocations given by the government from 2009 until 2016. Panel data was used in this study to control the variables that cannot be observed or measured like subsidy impact on health and education. Panel data was best suited for this study because it included variables at different levels of analysis. For example, in this study, it examined the impact of three different subsidies on poverty in eight districts in Sabah. In addition, panel data was also applicable for multilevel of modelling (Torres-Reyna, 2007).
The study used the following independent variables: selected consumer items subsidy, petrol and diesel subsidy, and liquid petroleum gas (LPG) subsidy. Meanwhile, household poverty in rural area was used a dependent variable for this study. Poverty indicator in this study was Poverty Line Income (PLI), where it is household’s monthly income provided by the Economic Planning Unit, Prime Minister's Department (UPE, JPM). Poverty Line Income (PLI) Per capita of a household is the total monthly income of all household members in a dwelling, divided by the number of members of the household.
The National Economic Action Council and The Economic Planning Unit (EPU) revises the Poverty Line Income in every two (2) years. In Malaysia, there were three categories of poverty mainly extreme/absolute poverty, poverty, and relative poverty. Extreme or absolute poverty is defined as a household whose monthly income is under the Food Poverty Line Income (FPLI). It is based on daily calorie needs per individual. Food Poverty Line Income in Malaysia (FIPL) is RM 415 per month. Meanwhile, Poverty Line Income (PLI) for poverty category is divided into three regions, RM720 for Peninsula Malaysia, RM830 for Sarawak, and RM720 for Sabah. Meanwhile, Poverty Line Income (PLI) for relative poverty was RM1,000 for rural areas and RM1,500 for urban areas.
Besides that, in Malaysia, household poverty was monitored through integrated database system called e-kasih system. It was created at the national level to help plan, implement and monitor poverty programs.
eKasih is only for Malaysian citizen household income that less than RM1,000 per month for rural area and RM1,500 per month for urban area. Those registered and approved under eKasih
system are eligible to receive some poverty aid programs. Household poverty data in this study is collected from e-kasih system that only focus on household poverty in rural areas in Sabah.
There are other variables that influence poverty in rural areas such as education and health.
However, there is no available data on these that are specific to rural areas in Sabah. The impact of the subsidy programme is still significant because the total amount of subsidy spent is huge compared to the number of poor households in rural areas.
Model Selection
For analytic reason, there are few models have been done which are Pooled Ordinary Least Square (POLS), Fixed Effect (FE), Random Effect(RE) and the respective test to determine which models are suitable such as, Redundant Fixed Effect Test, Lagrange Multiplier (LM) Test and Hausman Test. Result from Pooled OLS (Appendix B) shows that only variable Petrol and Diesel is significant while result from Fixed Effect shows all variables are significant.
Next, the test of POLS verses FE using Redundant Fixed Effect Test was ran whereby null hypothesis is POLS while alternative hypothesis is FE. Result from Redundant Fixed Effect Test shows that null hypothesis is rejected at 1%. Thus, FE is better than POLS.
In addition, the RE estimation has been conducted. The result shows all variables are significant. Next, we test for POLS verses RE using LM test whereby null hypothesis is POLS while alternative hypothesis is RE. Results from LM test suggest that null hypothesis is rejected at 1%, therefore, RE is better from POLS. Given that both FE and RE are better than POLS, a further l test between RE and FE using Hausman test is conducted. Null hypothesis is RE model is better while in alternative hypothesis, FE is better. The results from Hausman Test shows that there is a failure to reject null hypothesis, thus RE model is better compared to FE.
As a conclusion, RE is better. However, the results are further improved by introducing robust standard error namely Panel Corrected Standard Error (PCSE) to address the problem of autocorrelation in the RE Model. Figure 5.2 shows the RE estimation with PCSE. PCSE is chosen in this study because PCSE, because its regression estimate is robust not only to unit heteroscedasticity but also against possible contemporaneous correlation across the units, CD, and homogeneity issues that are common in panel data. (Bailey and Katz, 2011)
Table 2: Summary of Estimation of regression result
I II III IV
LPG 0.000299 0.000244*** 0.000244*** 0.000244**
PD 6.34E-05** 2.32E-05*** 2.38E-05*** 2.38E-05**
CONS 0.000115 0.000227** 0.000226** 0.000226*
CONSTANT 1248.759 1494.123 1490.194 1490.194
MODEL POLS FEM REM REM (PCSE)
Redundant FE test
153***
LM Test 166***
Hausman Test 0.71
observation 64 64 64 64
Adjusted R2 0.547
Note: *,**,*** indicate significant at 1%, 5%, 10% significant level respectively.
There are many factors that contribute to the positive relationship between government subsidy program and poverty. In most previous studies, the common issues on government subsidy program are leakages, negative spill over effects, inefficient transfer to eligible recipients, smuggling, and many more. These issues are not only happening in Malaysia but in other countries as well. That is very crucial for the government to apply better approach in subsidy program, for example reduce middlemen involvement in subsidy delivery system or direct subsidy delivery system. In other countries, most of subsidies are given directly to the recipients or self-targeting subsidy programs. This subsidy program method is more efficient and effective to deliver subsidy to the poor people or reach the target groups. (Alderman, H.,
& Lindert, K.,1998).
In addition, irrelevant subsidy program might contribute to the positive relationship between poverty and subsidy. This is because this subsidy program is the same in all states in Malaysia including states in Peninsular Malaysia. Not all policies are “one fits for all”. Most rural areas in Sabah do not have proper roads and some areas are inaccessible by road. However, petrol and diesel subsidies are still given to all the rural areas in Sabah regardless if areas have the need or not especially when not all households in rural areas own a vehicle for easy transport due to affordability. In most of rural areas in Sabah, the road conditions are not as good as in the city. That is why four-wheel drive vehicles are more suitable in rural areas, which costs higher than common vehicles. Furthermore, if many people in rural areas have their own transport, the subsidy program is irrelevant because they can go to the nearest town or city to get their supply and they will no longer need middlemen or called transporter to supply them the items that are included in this subsidy program.
Ineffective monitoring system is also a big issue in subsidy programs in some countries.
Ineffective monitoring system leads to many issues such as smuggling, leakages and false claim from middlemen. Government has lost a lot of money when these issues keep on occurring. The money that the government spends has not reached the target or eligible recipients. In Malaysia, this issue has been highlighted in Parliament Public Account Committee (PAC)’s Reports, Ministry’s website and news.
In order to address the issue of leakages in subsidy program in Malaysia, the National Audit Department is requested to conduct a comprehensive study on the subsidized diesel supply system since it is in line with the government's efforts to stop smuggling and reach non-eligible recipient. In 2013 alone, the government distributed 8.61 billion liters of subsidized diesel and it is very important to ensure the subsidised diesel to reach and benefit the eligible recipient (Enforcement Agency Integrity Commission, 2014).
A good subsidy program should have positive spill over effects. In economic principal, return of investment is essential and should be taken into consideration when any organizations especially government organizations want to make decision on any policies. For example, transportation infrastructure linkages that link rural areas with urban areas will provide spill over effects to both areas, which will encourage more economic activities, better access for basic daily needs, open up more job opportunities, allow better access to other services such as education, telecommunication, healthcare, finance and so on. (Idrisa et al., 2019).
Jha, S., & Ramaswami, B. (2010) mentioned that subsidy program especially the price difference between subsidised goods will encourage people to make illegal profits. The study also mentioned the various audit and inspection systems to monitor such illegal activities in government subsidy programs. Therefore, targeted subsidy program is a better method toward
eligible recipients or the poor and not waste government money subsidising the non-eligible.
In addition, targeted subsidy program will achieve higher proportion benefits to the poor, on average around 25 percent more than program without proper targeting. Rentschler, J. (2016).
Agricultural subsidies have given good impact on food security and poverty. However, there are negative sides of this subsidy if some people especially the elites use this subsidy program as a platform to steal public money for personal interests. For example, in agricultural subsidy there are politicians, government officials, suppliers that have power to divert subsidy from the eligible recipients or divert subsidy away from intended use lead subsidy program to failure. However, this subsidy program is difficult to reform or stop because of the pressure from some groups such as political parties (Dorward, A., & Morrison, 2015).
Another study done by Jain et al., (2020) stated that subsidies are necessary for poor household that live in rural and backward areas especially LPG subsidy to uplift socio-economic aspects.
The study mentioned a few approaches on how to deliver subsidy to the eligible recipients which will supply free LPG connections or direct supply piped cooking gas to the households and transfer subsidies directly to eligible recipients’ bank accounts. The study also stated that effective delivery system is the most crucial in any subsidy programs to ensure that the subsidy is received by eligible recipients and benefit them as well as give spill-over effects to other aspects like environment and economy growth.
In Indonesia, according to the study done by Khairi et al., (2018) subsidy plays an important role to increase standard of living of poor people. The objective of the study is to examine how energy subsidy will reduce poverty and improve the welfare of the poor. The conclusion from the study is that subsidy distribution must be fair because there is still high percentage of the subsidy benefit that non-poor. In some studies, it is also mentioned that subsidy does not give significant impact to the poor because the subsidy distribution is poorly targeted.
Some past empirical studies reported that government subsidy and grant are negatively related to the level of poverty in both urban and rural areas, and none of the results is significant. This was attributed to the grant and subsidy being too small to have significant impact on reducing the level of income inequality and poverty (Alamanda, A.,2020). In this study however, the amount of government subsidy is large compared to the number of poor households in rural Sabah. Leakages in government subsidy and poor infrastructures contribute to positive relationship between subsidy and poverty.
For example, social aid, subsidy, and grant expenditure, among other types of government expenditure, have no significant effect on alleviating poverty and income inequality in Indonesia. Expenditure on infrastructure is the most effective and productive and exerted the most beneficial impacts on low-income households. Policy makers should therefore give priority on where and how to spend the money. There are a few reasons why other government expenditures failed to reduce income inequality and poverty. First, the average share of government spending on infrastructure is relatively too small to have a significant impact on alleviating poverty and income inequality. Second, issues in targeting and categorizing the rural poor face serious barriers in ensuring that government grant, social aids and subsidies benefit mostly the low-income group (Alamanda, A.,2020).
All these issues are highlighted in Parliament Reports, newspapers and government websites, where in that report, news and websites portrayed how serious the subsidy program issues in Malaysia are. As summary, the issue of subsidy programs in Malaysia based on the resources
is integrity and how it poses as a challenge in program implementation. This is because, integrity problem can lead to smuggling, false claim, misuse of power, and many more.
The three reports from Parliament Public Account Committee (PAC) reported three different subsidy programs which are:
i. DR7/2016 - Program Subsidi Benih Padi Sah
ii. DR4/2016 - Isu Penyelewengan Dan Penyeludupan Diesel Bersubsidi iii. DR14/2019 - Pengurusan Subsidi Gas Petroleum Cecair (LPG)
All the three reports are about leakages of government subsidy programs. The estimated LPG subsidy leakage alone is RM1.717 billion during the three -year audit period from 2015 to 2017 due to the consumption of LPG subsidized by the government that benefit non-target groups. The reports highlighted a few factors that contribute to the leakages of government subsidy programs which are:
i. The appointment of subsidy suppliers does not have any agreements or specified processes and method of subsidy implementation by the government to the companies involved.
ii. There are no clear policies and procedures on subsidies.
iii. There is no monitoring mechanism to monitor subsidies whether it reached the targeted groups or not.
iv. There are no studies and data on the consumption of subsidized goods by state, category and number of consumers which makes subsidy implementation difficult.
v. There is no data on the leakage of subsidies smuggled to neighbouring countries.
In order to address the issue, the Malaysian government is slowly switching to bulk aid and bulk subsidy targeted assistance to targeted subsidy to ensure that aid and subsidy will reach the targeted recipient and to minimise leakage, wastage and injustice (Economic Planning Unit in Prime Minister’s Department, 2016).
It can be concluded that in most subsidy studies, leakage is a very common issue and it makes subsidy program fail to achieve its objective in many countries. This leakage in subsidy program is worsening income distribution because it will affect national income that supposed to receive by eligible recipient and this could contribute to poverty.
4. Conclusion, Limitation and Future Research
Generally, data availability on rural area is very limited especially on income, health and education. There are other factors that contribute to the household poverty number in rural areas such as health, education, infrastructure, linkages and etc. Besides that, there are other subsidy programs in rural areas but there is no available data published according to the district.
The published data is only the total subsidy allocation based on the categories of subsidy.
The study is about government policies that have been implemented in rural area, with the focus on the consumer items subsidy, petrol and diesel subsidy, and liquefied petroleum gas (LPG) subsidy programs. The main objective of the study is to identify the impacts of consumer items subsidy, petrol and diesel subsidy, and liquefied petroleum gas (LPG) subsidy toward poverty in rural areas in Sabah. Most of subsidy programs have failed to reduce or eradicate poverty.
The study recommends that other ways or policies can be implemented to develop rural areas and gear towards sustainable development that will benefit people in the long run. Dube (2003)
recommends that to enhance the required infrastructures, rural areas must be given sufficient allocation. This kind of subsidy is not needed when people are more independent and unreliant on government aids.
Well-being in rural areas can be improved if better and efficient policies are implemented. The government has to know where they invest the money, what it is being used for, and what the impact of the has made on the economy. Efficient and effective government policies will give positive impact to the well-being of the people in rural areas mainly create employment and business opportunities, increase people’s income, improve education level and health, and alleviate standard of living. Lack of economic activities in rural areas is one of the factors people especially the young generation migrate to the city to look for a better job opportunity.
The traditional economic activities like traditional agriculture can be switched to agribusiness, and be directly active in setting up cottage industry in rural areas. Many ventures can be operated in rural areas to kick start a sustainable economic activity at home ground since the rural communities have land. Additionally, the capital and expertise can be pooled.
The recent Malaysian economic policy called Key Economic Growth Activities (KEGA) mentioned high value and sustainable investment, improving outcomes through quality monitoring, poverty or low income groups, rural areas, leakages, and infrastructure, especially in rural areas. The transportation system was also mentioned in the Malaysia new economic approach and is very much related to the subsidy programme. The government is thus able to reduce spending on the subsidy programme since transportation system has accordingly improved, especially in rural areas. Poor road condition and poor access to basic infrastructure and facilities resulted in a huge gap in development between urban and rural areas. Further, the economic potential of rural areas is under-optimised. Poverty issues need to be addressed urgently and appropriately in order to reduce the dependency of the poor on government assistance and subsidy.
References
Alamanda, A. (2020). The effect of government expenditure on income inequality and poverty in Indonesia. Info Artha, 4(1), 1-11.
Alderman, H., & Lindert, K. (1998). The potential and limitations of self-targeted food subsidies. The World Bank Research Observer, 13(2), 213-229.
Bailey, D., & Katz, J. N. (2011). Implementing panel corrected standard errors in R: the pcse package. Journal of Statistical Software, 42(CS1), 1-11.
Bull, G. Q., Bazett, M., Schwab, O., Nilsson, S., White, A., & Maginnis, S. (2006). Industrial forest plantation subsidies: Impacts and implications. Forest Policy and Economics, 9(1), 13-31.
Dorward, A., & Morrison, J. (2015). Heroes, villains and victims: agricultural subsidies and their impacts on food security and poverty reduction. In Handbook on the globalisation of agriculture. Edward Elgar Publishing.
Dube, I. (2003). Impact of energy subsidies on energy consumption and supply in Zimbabwe.
Do the urban poor really benefit?. Energy Policy, 31(15), 1635-1645.
Enforcement Agency Integrity Commission (2014), Jumlah Diesel Subsidi Meningkat 199%
Bagi Tempoh 14 Tahun. Retrieved from http://www.eaic.gov.my/en/node/219 on 21 August 2022.
Ehrenpreis, D. (2006). What is poverty? Concepts and measures (No. 9). International Policy Centre for Inclusive Growth.
Economic Planning Unit in Prime Minister’s Department (2016): Mitigating the Impact of Energy Subsidy Reform: Malaysia’s Experience.
FAO (2003) Report of the Expert Consultation on Identifying, Assessing and Reporting on Subsidies in the Fishing Industry, Rome 3-6 December 2002, FAO Fisheries Report no 698, FIPP/R698 (En), Rome: FAO.
Households Income Surveys, Department of Statistic, Malaysia (2019). Retrieved from https://www.dosm.gov.my on 08 April 2022
Idrisa, S., Mansurb, K., Ladinc, M. A., Noordind, R., & Ismethh, A. F. (2019). Transportation Road Networks in Sabah Rural Area and Poverty Eradication: East Coast Sabah Study. Transportation, 8(6).
Jain, S., & Gangal, V. K. (2020). Impact Of LPG Subsidy On Socio-Economic Upliftment: A Study In Uttar Pradesh
Jha, S., & Ramaswami, B. (2010). How can food subsidies work better? Answers from India and the Philippines. Answers from India and the Philippines (September 1, 2010).
Asian Development Bank Economics Working Paper Series, (221).
Khairi, M. W., & Aidar, N. (2018). Pengaruh subsidi energi terhadap kemiskinan di Indonesia.
Jurnal Ilmiah Mahasiswa Ekonomi Pembangunan, 3(3), 359-369.
Lim, G. N., & Mansur, K. (2015). Understanding Poverty and Vulnerability by Utilizing the Sustainable Livelihood Approach: A Comprehensive Study among Rungus Ethnic in Sabah, Malaysia. Malaysian Journal of Business and Economics (MJBE), 2(1).
Liu, E., & Wu, J. (1998). The measurement of poverty. Research and Library Services Division, Provisional Legislative Council Secretariat.
Loungani, P. (2003). Back to Basics-The Global War on Poverty: Who's Winning?. Finance and Development-English Edition, 40(4), 38-39.
Ravallion, M., Datt, G., & Walle, D. (1991). Quantifying absolute poverty in the developing world. Review of Income and Wealth, 37(4), 345-361.
Rentschler, J. (2016). Incidence and impact: The regional variation of poverty effects due to fossil fuel subsidy reform. Energy Policy, 96, 491-503.
Sen, A. (1985). A sociological approach to the measurement of poverty: a reply to Professor Peter Townsend. Oxford Economic Papers, 37(4), 669-676.
Sumaila, U. Rashid
Sumaila, U. R., Khan, A. S., Dyck, A. J., Watson, R., Munro, G., Tydemers, P., & Pauly, D.
(2010). A bottom-up re-estimation of global fisheries subsidies. Journal of Bioeconomics, 12(3), 201-225.
Torres-Reyna, O. (2007). Panel data analysis fixed and random effects using Stata (v. 4.2).
Data & Statistical Services, Priceton University.
Westlund, L. (2004). Guide for Identifying, Assessing and Reporting on Subsidies in the Fisheries Sector (No. 438). Food & Agriculture Org..
Youssef, M. H. (2008). Role of food subsidies on poverty alleviation in Egypt. Retrieved May, 20, 2010.
