Malaysia has a long history of subsidising energy, including gasoline, diesel, liquefied
petroleum gas (LPG), kerosene, natural gas and electricity, but has been making
progress recently in reforming energy pricing. The drivers for change are numerous. The
cost of subsidies had been pushed higher by the combination of persistently high
international energy prices and fast-growing energy demand. For example, the number
of cars on Malaysia’s roads more than doubled between 2000 and 2013, contributing to
the budget allocation for energy subsidies growing from around Malaysian ringgit
(MYR ) 4-5 billion ($1.3 billion) in the early 2000s to MYR 29 billion ($9 billion) in 2013.
There has also been growing recognition that subsidies have created serious problems,
such as the smuggling of subsidised fuel (especially gasoline and diesel) for sale in
neighbouring countries at higher prices.